SMB, SME/ “Mid-Market” and large enterprise… What’s the difference, and why does your business size classification matter?
As you probably realize, these acronyms are size classifications for companies – and your business most likely fits within one of the classifications. Although it may not seem like a big deal, understanding how others classify your business can make a difference, especially when it comes to choosing technology solutions that best fit your particular business.
Depending on whom you ask, there are several definitions and key differentiators that influence the classification into which your business falls. The widely accepted definition of each business size classification is based on the number of employees and annual revenue – and even those classification ranges can vary. For example, “SMB” includes the general term of small business, but a small business can be broken down, further.
In addition to size and revenue, your buying habits and technology needs also typically align with a particular business size classification. Many technology solutions are built with these classifications in mind, or at least have features and pricing that correlate to the business classifications. Understanding which category your business falls into can help you define your objectives, specify capabilities, and then match those to the right technology solutions.
Here are some defining characteristics of the most commonly used business classifications:
SMB (Small and Medium-Sized Businesses)
- Employees: 0-100 is considered a small-sized business; 100-999 is considered a medium-sized business. Note that these size specifications may be defined differently by some government organizations, such as the Small Business Administration (SBA) which uses the size specifications as part of its process for granting small business loans and for consideration of awarding Federal contracts.
- Annual Revenue: $5-$10 million
- IT Staff: Typically one or a few
- IT skills: Modest. Employees usually learn on the job.
- Location: Limited geographical boundaries (but may have more remote workers due to outsourcing)
- Limited CapEx
- Main considerations for technology purchases include price (because of limited CapEx) and ease of use (because of less experienced IT staff). SMBs prefer the pay-as-you-go subscription model for software purchases
- The 28 million small businesses in the US account for 54% of the country’s sales
SME (Small and Medium Enterprises). Also known as the “Mid-Market”
- SME is a more globally-used term than SMB, and is the official market phrase for internationally-based enterprises such as the United Nations, World Bank, World Trade Organization and the European Union.
- Employees: The European Union has defined an SME as a legally independent company with 101-500 employees
- Annual Revenue: $10 million- $1 billion
- IT staff: A small group to several employees
- IT skills: Generalist skills. Employees often lack specialty skills
- Location: Likely to have more than one office location, and more remote employees
- Some CapEx
- Main considerations for technology purchases include capabilities, functionality, and reporting
- If the middle market were a country, its GDP would rank it as the fourth-largest economy in the world
Large enterprise determining features:
- Employees: Over 1000 employees
- Annual Revenue: Over $1 billion
- IT Staff: Full time IT staff, including several specialists
- IT Skills: A wide variety of broad and specific skills
- Location: Several office locations domestically and internationally
- Large CapEx
- Main considerations for technology purchases include guaranteed up-time, advanced features, and security
- In 2012, large enterprises employed 9 million people in the US (51.6% of all employees)
As I mentioned, whether you are considered an SMB business, an SME, or a large enterprise influences many things, such as how financial decisions are made, the way your technology needs are framed, and how solution providers treat you during the sales process. When dealing with SMBs, for example, solution providers are often trained to focus on the cost savings and ease-of-use of the solution and are aware that budget is usually a key factor influencing your decision. A vendor considers it highly likely that the purchaser of the solution (you) will be the one using the solution on a daily basis. In the case of the enterprise, the provider won’t focus as much on price and ease-of-use as it might security and advanced features, for example. Keeping this information in mind, if your individual circumstance strays from the norm, you should inform the vendor so they can give you the specific information you need. Let’s say you are an SMB business and happen to have multiple locations or a large CapEx, your solution provider may be able to offer you a product or feature that they normally wouldn’t mention to a smaller business.
Whether you are searching for advanced solution features, a cost-effective option, or an easy-to-manage platform, knowing how your business is classified, the norms for that classification, and how your needs compare to those “norms,” are all key to helping you adequately compare technology solution vendors and then decide which solution is the best fit for your business.
One of the most important technologies that businesses currently use is their phone system; it’s relied upon daily to communicate with customers via voice calls, video conferencing, and more. The latest innovation in the business phone industry is Unified Communications, a term that refers to unifying all streams of communication into a single platform to foster smarter analytics for business decision-makers as well as increase workforce productivity by improving user experience. Like other technologies, knowing your business size classification can help you to understand what you need from a communications solution and the benefits it can bring your organization, enabling you to ultimately make a smarter decision.
For help choosing the right phone system based on your company size classification, check out these tips.