February 17


What is a Small Business?

By Patrick Millerd

February 17, 2019

small business, small business definition, small or medium business, Small or medium enterprise, SMB

Small business is a term that generally includes micro, small and medium sized businesses (MSMB) or enterprises (MSME)  – or more simply SMB's or SME's.  Any of these terms being related 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. 

In addition to the number of employees and annual sales the size can be expanded to include assets or any combination of these. In some countries like the US and China the size of a small business varies from industry to industry. SMB'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 small businesses are in industries that don't require large initial capital investments. With the growth of the internet there is now 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 SMB is much more comprehensive and varies by industry and even within sectors of an industry.

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 SMB 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

So it can be seen from the above that the concept of a small or small medium business varies widely around the world by country and in large countries by industry or sector. 

Patrick Millerd

About the author

I support small and medium-sized business (SMB) owners to drive profitability and cash flow, managing the financial health of their business through understanding and using their numbers.
Helping them build a complete management system that puts them in control.

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