What is Small Business?

Small business includes micro, small and medium sized businesses (MSMB) or enterprises (MSME)  – or more simply SMB's or SME's.  Both terms relating to the size of a business operation which is generally defined by either turnover or headcount.


So what size small business or enterprise fits into each category? 

This depends on the country and in some countries also the industry. In general, smaller economies have smaller businesses falling into these categories than in larger economies. 

The size is defined either by the number of employees, annual sales, assets or any combination of these. In some countries like the US and China it varies from industry to industry. SME's make up a significant part of the Global Economy and the vast majority of businesses in most countries.

According to U.S. Census Bureau Data from 2016, there are 5.6 million employer firms in the country:
  • 5.58 million had fewer than 500 employees
  • 5.50 million had fewer than 100 employees
  • 4.98 million had fewer than 20 employees
Around the world SME’s are important drivers of economic growth, innovation, and diversity. To encourage their growth many countries grant SME’s tax concessions and financial incentives.
Most SMEs are in industries that don't require large initial capital investments and there are a growing number of online businesses.

Small Business Definition - European Union (EU)

The European system takes into account a business’s headcount, turnover and its balance sheet.

Company Category
Staff Headcount
Balance Sheet Total
 <€ 50 m
<€ 43 m
<€ 10 m
 <€ 10 m
<€ 2 m
 <€ 2 m

*From the European Commission Definition

Small Business Definition - UK

There is no standard for defining SME's in the UK. The most generally accepted classification is the one used by the EU.

Small Business Definition - US

In the U.S., the definition of an SME varies by industry and even within sectors.

For example 

  • In manufacturing, an SME is defined as having 500 employees or less, whereas in wholesale trades an SME has 100 employees or less. 
  • In Mining, Quarrying and Oil and Gas Extraction, an SME in Copper Ore and Nickel Ore Mining can have up to 1,500 employees whereas Silver Ore Mining can only have up to 250 employees.

Small Business Definition - Canada

In Canada the term SME refers to businesses with fewer than 500 employees and less than $50 million in revenue.

A small goods-producing business will have fewer than 100 employees with a small service-based business will have less than 50. 

A micro-business is defined as a business with fewer than five employees.

Small Business Definition - China

China's definition of an SME varies by industry. Here are some examples:

Heavy Industry
< 1000
≤ $58 m
Wholesale Trade
< 200
≤ $58 m
< 300
≤ $14 m
< 300
≤ $14 m
Information Transmission
< 2000
≤ $145 m

About the Author Patrick Millerd

Passionate about helping small and medium size businesses achieve success - reducing the number of SMB's that fail. Helping SMB owners find their path to financial and personal freedom. Every day a learner and excited by all the opportunities available today.

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