Small and medium enterprises

Small and medium enterprises or small and medium-sized enterprises (also: Small and Medium-sized Enterprises; acronym in the plural: SMEs; small and medium businesses or small and medium-sized businesses, acronym: SMBs; and variations thereof) are companies whose headcount or turnover falls below certain limits.

The abbreviation "SME" occurs commonly in the European Union and in international organizations, such as the World Bank, the United Nations, and the WTO. The term "small and medium businesses" or "SMBs" is predominantly used in the USA.

In most economies, smaller enterprises are much greater in number than large companies. SMEs are often said to be responsible for driving innovation and competition in many economic sectors.

Europe

EU Member States traditionally have had individual definitions of what constitutes an SME. For example, the traditional definition in Germany had a limit of 255 employees, while, for example, in Belgium it could have been 100.

In July 2011, the European Commission said that it would open a consultation on the definition of SMEs in 2012. In Europe, currently there are three broad parameters which define SMEs — micro-entities are companies with up to 10 employees; small companies employ up to 50 workers, whilst medium-sized enterprises contain up to 250 employees^[1].

United States

In the United States, the Small Business Administration sets small business criteria based on industry, ownership structure, revenue, and number of employees, which in some circumstances may be as high as 1500 though is typically capped at 500.^[2]

Both the US and the EU generally use the same threshold of fewer than 10 employees for small offices (SOHO).

India

In India,

i. A micro enterprise is an enterprise where investment in plant and machinery [original cost excluding land and building and the items specified by the Ministry of Small Scale Industries vide its notification No. S.O. 1722(E) dated October 5, 2006 does not exceed Rs. 25 lakh;

ii. A small enterprise is an enterprise where the investment in plant and machinery [original cost excluding land and building and the items specified by the Ministry of Small Scale Industries vide its notification No. S.O. 1722(E) dated October 5, 2006] is more than Rs.25 lakh but does not exceed Rs.5 crore; and

iii. A medium enterprise is an enterprise where the investment in plant and machinery (original cost excluding land and building and the items specified by the Ministry of Small Scale Industries vide its notification No. S.O. 1722(E) dated October 5, 2006) is more than Rs.5 crore but does not exceed Rs.10 crore.

The definition of MSMEs under the services sector is as follows:

i. A micro enterprise is an enterprise where the investment in equipment does not exceed Rs.10 lakh;

ii. A small enterprise is an enterprise where the investment in equipment is more than Rs.10 lakh but does not exceed Rs.2 crore; and

iii. A medium enterprise is an enterprise where the investment in equipment is more than Rs.2 crore but does not exceed Rs.5 crore.

The Indian Micro and Small Enterprises (MSEs) sector plays a pivotal role in the overall industrial economy of the country. It is estimated that in terms of value, the sector accounts for about 39% of the manufacturing output and around 33% of the total export of the country. Further, in recent years the MSE sector has consistently registered higher growth rate compared to the overall industrial sector. The major advantage of the sector is its employment potential at low capital cost. As per available statistics, this sector employs an estimated 31 million persons spread over 12.8 million enterprises and the labour intensity in the MSE sector is estimated to be almost 4 times higher than the large enterprises.^[3]

South Africa

In South Africa the term is SMME for Small, Medium and Micro Enterprises. Elsewhere in Africa, MSME is used for Micro, Small and Medium Enterprises.

Canada

Industry Canada defines a small business as one that has fewer than 100 employees (if the business is a goods-producing business) or fewer than 50 employees (if the business is a service-based business), and a medium-sized business as fewer than 500. In New Zealand a SME has to be 19 people or fewer.

See also

• Small business
• Small and medium enterprises in Mexico

References

1. ^ European Commission (2003-05-06). "Recommendation 2003/361/EC: SME Definition". http://ec.europa.eu/enterprise/enterprise_policy/sme_definition/index_en.htm. Retrieved 2009-04-05. 
2. ^ United States Small Business Administration. "Size Standards". http://www.sba.gov/category/navigation-structure/contracting/contracting-officials/size-standards. Retrieved 2011-08-21. 
3. ^ "Home Page for Ministry of Agro & Rural Industries". Msme.gov.in. 2007-05-09. http://msme.gov.in/msme_aboutus.htm. Retrieved 2010-12-09.