Call it a Small Business, No a Mid-Sized Business, No a Large Corporation
- 11 Comments
- October 22nd, 2007
The 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.