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Small Business Definitions
Are you defined as a small business, SOHO, a small small business, an SME, SMB, SMME, mid-sized enterprise or what? You can be forgiven for not knowing exactly where you slot in. What prompted this research is the fact that many CRM products that are ostensibly designed for SME's are priced Have you ever gone to download a trial version of what seems a suitable small business CRM (Customer Relationship Management) software application, or any application for that matter that was pitched at small businesses? You fill in their form as required, but when you get to the drop-down section asking you your company turnover and it STARTS from $50 million, you get the feeling that you are at the wrong place. Your little company only turns over $5 million pa, so the doubt creeps in - maybe this product is to heavy-duty and expensive for you. You might even feel that you have been misled. The following definitions of small businesses from around the world might help you decide where yours slots in. SMALL BUSINESS DEFINITIONS Firstly, there are no universally accepted small business definitions. What is regarded in the US as a small business by definition, would often be regarded as a medium sized business elsewhere in the world. Small business definitions differ vastly in smaller countries like New Zealand and South Africa to their bigger counterparts in the US and the EU. There are no single small business definitions mainly due to the wide diversity of these businesses. One of the defining characteristics of the SMB market is its diversity; there are no neat, "one-size-fits-all" solutions to the business and administrative problems faced by SMBs. The SMB market may also be defined in terms of vertical markets (retail, distribution, manufacturing, etc) and horizontal markets (by size, hardware and software installed, services used, IT staff size, etc). There are an estimated 15 million SMBs worldwide, of which only perhaps 2% have implemented CRM software. That makes this market the "Holy Grail to go after," stated Bruce Cleveland, senior vice president of SMB and OnDemand at Siebel, at a news conference. Siebel, however, seems to simply pigeonhole SME's as all companies with less than $500 million in revenue. Not $50 million or even $5 million! They have also identified that SME's often prefer to do business at a local level, with a vendor in their geographical region. They have set up a dedicated SME division accordingly. This is potentially good news for us small businesses, as, firstly, more and
more CRM products are going to come onstream specifically designed for smaller
businesses. Some of the big CRM software developers at first thought they could
simply water down their mid and enterprise market CRM offerings by 'greying
out' some features and removing others. This did not work, so many are now actually
programming CRM software solutions from the ground up for the small business. Interestingly, The Small Business Act states that a small business concern is "one that is independently owned and operated and which is not dominant in its field of operation." According to the SBA, a Small Business is defined as one that:
There is an SBA small business size standard for every private sector industry in the U.S. Economy. The SBA uses the North American Industry Classification System (NAICS) to identify the industries. Size Standards (usually stated in number of employees or average annual receipts) represent the largest size that a business (including its subsidiaries and affiliates) may be to remain classified as a small business for SBA’s programs and for Federal contracting programs. UK Small Business Definitions. The best description of the key characteristics of a small business remains that used by the Bolton Committee in its 1971 Report on Small Firms. This stated that a small firm is an independent business, managed by its owner or part-owners and having a small market share. The Bolton Report also adopts a number of different statistical definitions. It recognised that size is relevant to sector - i.e. a firm of a given size could be small in relation to one sector where the market is large and there are many competitors; whereas a firm of similar proportions could be considered large in another sector with fewer players and/or generally smaller firms within it. In broad terms, the SMB (Small, Medium Businesses) market can be defined as businesses employing between 20 and 499 employees. However, in South Africa, SMBs are also associated with small office, home office (SoHo) organisations. Similarly, it recognised that it may be more appropriate to define size by the number of employees in some sectors but more appropriate to use turnover in others. Across Government, it is most usual to measure size according to numbers of full-time employees or their equivalent. Section 248 of the Companies Act of 1985 states that a company is "small" if it satisfies at least two of the following criteria:
For statistical purposes, the UK Department of Trade and Industry applies the following definitions:
However, in practice, schemes which are nominally targeted at small firms adopt a variety of working definitions depending on their particular objectives. In February 1996, the European Commission adopted a communication setting out a single definition of SMEs. The Commission intends to apply this across Community programmes and proposals. The communication explains that existing SME definitions in Community programmes may continue to be used until A small business may be defined as a business with a small number of employees. The legal definition of "small" often varies by country and industry, but is generally under 100 employees. These businesses are normally privately owned corporations, partnerships, or sole proprietorships. Small businesses are common in many countries, depending on the economic system
in operation. Typical examples include: small shops, hairdressers, lawyers,
solicitors, accountants, restaurants, guest houses, photographers and so on. In New Zealand they tend to be defined as businesses that employ fewer than 20 staff. Some interesting recent SME statistics include: In New Zealand 96.8% of enterprises employ 19 or fewer Full Time Employees
(FTEs)
If you can provide input on YOUR countries small business definitions, please let me know! Back to SmallBizCRM Home Page.
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