22 Oct

Call it a Small Business, No a Mid-Sized Business, No a Large Corporation

defining small business and SMB is more complicated than it looksThe need for clear and consistent terminology to define “what is a small business?” has been obvious for a while now. Let’s go over some of the existing definitions.

The U.S. Small Business Administration adheres to its definition of under 500 employees.  That is, except in the case of about a zillion exceptions for various industries (so many that the SBA needs a 42-page PDF document to explain all the size definitions). 

Other countries’ governmental agencies overseeing small businesses use their own definitions of small.  In the U.K. a small business means under 50 employees, as it also does in the European Union.   Some countries go even smaller.  In Australia, for instance, the government defines a small business as having under 20 employees.

Not only are governments all over the ballpark when it comes to defining what is a small business, but so is just about everyone else.

For instance, non-profits and NGOs are referring with increasing frequency to microbusinesses or microenterprises, as they are sometimes called.  Microbusinesses are defined generally as having 5 or fewer employees

And then you have the commercial marketplace, which adds yet another layer of complexity.  Vendors that sell to small businesses have developed their own lexicon for  what constitutes a small business.  

Some include single-person businesses.  Others consider those a separate category that sometimes gets lumped under the definition of SOHO or home office — I’m not sure which is more vague.  Other terminology for single person businesses includes the self-employed and the newest term, “personal business,” which I first heard used by Steve King in the Intuit Future of Small Business Report.

Some vendors, such as Microsoft, consider a small business as being up to 50 employees.  Others consider anything under 100 employees as a small business, and others still consider anything under 500 a small business.

And then you have my favorite term of all, SMB, which stands for small and mid-sized businesses.  In recent years the acronym SMB has come to refer to that no-man’s land stretching from  small businesses, all the way up to large corporations.  However, when the term SMB is used these days, it increasingly has taken on the meaning of the somewhat larger end of small businesses.  Usually the SMB category starts at 50 or 100 employees and then goes to the upper limit of 500, 1,000 or even 5,000 employees, depending on which company happens to be doing the talking.

IBM’s approach to the SMB market demonstrates even further categorization.  IBM has divided up SMBs into two groups.  One group is 100 to 1,000 employees.  The other group is 1,000 to 5,000 employees, a group that IBM has dubbed SMB-LE (or SMB large enterprise).  Note this IBM sales presentation which defines SMB-LE.  Read more at:  IBM Gets Clearer on the SMB Market.

All of which proves once again that one person’s definition of a small business, is another’s definition of a mid-sized business, er … no, I mean, a large business.  

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  1. Steve said on October 22nd, 2007 at 5:26 pm

    This is so true! We wholesale a “small business” phone system from Talkswitch, and, the definition to us would be

    Reply
  2. Steve said on October 22nd, 2007 at 5:27 pm

    This is so true! We wholesale a “small business” phone system from Talkswitch, and, the definition to us would be under 20, most customers under 8 people. There is a massive difference between systems for your 500 person company, and, 10 people! Used to be in retail, and, it was funny. People would call us up and say Nortel was quoting them a small business system for say 10 grand. For 4 people! Sure, to Nortel that is a small system. Not to us! Sorry for the first post, apparent, I can’t put a less than sign in the post.

    Reply
  3. Dharmesh Shah said on October 23rd, 2007 at 9:20 pm

    Great article.

    As a software vendor that sells to small businesses (generally 5-200 employees in our case), it’s very frustrating not to have a standard definition.

    Another problem is one of identification. How many small businesses think of themselves as small businesses? I think the label is something we use when marketing *to* small business, but there are lots of high-growth enterprises (like startups) that although are small businesses by most definitions, don’t think of themselves as such.

    Reply
  4. EJMalyn said on October 26th, 2007 at 8:57 pm

    This certainly was interesting reading. I was always under the assumption that the definition of a small business was a business indepently owned and operated with employees under 500.

    Reply
  5. Chris said on November 6th, 2007 at 1:23 pm

    It’s funny but everyone’s definition is different. To me, it’s under 10 employees. And I have to agree with Steve here. I used to work for a small company and those telephone providers would call with their quotes and the numbers were astronomical. It was a big joke in the office.

    Reply
  6. wilson ng said on November 12th, 2007 at 8:25 pm

    Yes, what is considered small differs.

    We are business partners for many tech companies, and sometimes it creates some issues.

    In general, as a developing country, our economy is much smaller than the US, and it was funny because classifying SMB has having a certain sales in USD, one of our top 20 companies suddenly became an SMB company category, and the manager complained why he was being visited by us and our partner, IBM’s SMB segments manager!

    It can be relative since mostly in our country, a company with 100 employees, may also have sales equivalent to an American company with 10 employees.

    In our country, less than 10 employees is micro, 10 to 49 employees is small, 50 to 499 employees is medium, and more than 500 employees is considered large.

    Reply
  7. Andy Wendt said on November 14th, 2007 at 2:32 pm

    I wonder if the definition will change over time, perhaps be officially lowered, if the US economy continues to struggle.

    Reply
  8. [...] Call it a Small Business, No a Mid-Sized Business, No a Large Corporation — Confused about what size business should be considered a “small” business? You’re not the only one. [...]

  9. [...] Call it a Small Business, No a Mid-Sized Business, No a Large Corporation Blog post on Selling to Small Businesses.com Anita Campbell October 22, 2007 [...]

  10. [...] Call it a Small Business, No a Mid-Sized Business, No a Large Corporation Blog post on Selling to Small Businesses.com Anita Campbell October 22, 2007 [...]

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