So you’ve seen the term SMB and you’re wondering, ‘OK what does that mean?’.
There are tons of business acronyms out there, and some of them are kinda annoying and generic. And, lets be honest here, SMB is one of those.
Enough with the tease…. What is an SMB?
What does SMB stand for?
SMB stands for Small or Medium-sized Business. It can be referred to as small or mid-sized business. This generally refers to any business with under 1000 employees. However, a small business is seen as any firm with under 100 employees, whilst a medium sized business is any business employing between 100 to 1000 people.
Once you go beyond this range, you start entering the realm of corporate enterprises.
Put simply, most businesses will fall under the blanket term of SMB. This might mean a local restaurant, a small marketing agency, a software startup or even a well funded tech firm.
SMBs represent 99% of all businesses in the U.S., create 60% of all jobs and account for half of U.S.’s GDP annually.
Variations in definitions of SMB
According to the Small Business Administration (SBA) in the USA, a small business has between one and four full-time equivalent (FTE) employees, and a medium business has between five and 999 FTEs.
Some sources even define the SMB as any business with under 500 employees.
So if you hear the term mentioned, in general it is referring to a business with under 500 employees. Although the true extent of an SMB can be much greater.
SMBs are unaffected by their revenue, and remain SMBs even if they turn over billions. So long as their full time employees remain under the threshold.
Are SMBs typically startups?
As we’ve seen, an SMB isn’t necessarily a startup. It can be any business of any age, with between one to 1000 employees. So that mom and pop store in town, or a chain of local restaurants with less than 100 employees across 6 locations – that is also an SMB.
Of course most startups are, by definition, SMBs at the start.
They are normally smaller entities which end up being bought out or acquired by bigger corporate firms or venture capital backed entities. This is often when these companies go from being a startup or a scrappy SMB, to a multinational corporation.
Enterprise vs SMBs?
While many see companies as successful once they reach the huge sizes of a corporate structure, for example like Amazon or McDonalds, the truth is that SMBs keep most countries running.
Small business tends to support communities better than corporations, and they also often pay more in tax revenue. Look at the issues with companies like Amazon, Facebook and Tesla and how they tend to avoid paying their taxes or cause huge environmental problems.
By contrast, small and medium sized businesses tend to serve local communities much better and often pay their due taxes without needing to do dodgy offshore financial routing.
Although enterprise companies often pay well and have lots of potential for career growth, SMBs and smaller firms often offer a better business culture and are much more relaxed. SMBs also tend to be more flexible in how they do their business. Often with less reliance on shareholders or board members, an SMB can be more nimble in how it does business.
But of course, big corporations become key to a nations economy and, in some senses, they become ‘too big to fail’. And this can be where the problems arise as struggling corporations are bailed out by government to avoid the loss of jobs or impact to the national economy.
In summary
The SMB or small to medium sized business is a key part of the global economy. Chances are you work for or own an SMB, and these businesses are the ones that make the world go round…!
