Should the Size of Your Business Matter?

Environment ⯀  

Is your business an SMB, SME or a large enterprise? This is a question that many people rarely think about because at the surface it doesn’t matter after all business is business.

Unfortunately, the size of your organization does matter to a lot of stakeholders outside your company, and the category in which a business is placed will affect a lot of things in the long run.

SME, SMB, and Large Enterprises

Depending on who you ask, the factors that put a business in a certain size category include the number of employees, annual revenue, and the number of assets. To most people, small businesses would be shops and sole proprietorships while a company with 50 employees is a large enterprise to them. However, the Small Business Administration defines;

1. Small and medium-sized businesses [SMB] as firms with between 0 to 100 employees, annual revenue of 5 to 10 million and limited geographical boundaries.
2. Small and Medium Enterprises [SME] as internationally based companies such as World Bank, EU, and United Nations with 100 to 500 employees. SMEs have annual revenue of 10 million to 1 billion dollars and offices in different countries.
3. Large Enterprises have more than 1000 employees and annual revenue of over 1 billion dollars. They use specialized skills regarding staff especially IT, and they have a significant CapEx.

Why Size Matters

According to the above definitions, it is clear that most businesses fall under small and medium-sized businesses. The question then ultimately is: Why does it matter where the business is categorized?

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Advice and Guidance

Every good business person must seek guidance and read a lot of advice about running a business. It is therefore important to know where your business is so that you can get the right information. For example, if an expert is talking about how to develop small businesses and you think your business is more expansive than that, the advice is clearly not beneficial to you. If you are not clear on the definitions of those three categories, you may follow the wrong advice intended for bigger businesses.

Financing

The main reason why the Small Business Administration defines every category is to make it easy for them to make decisions regarding who to give government loans and how much. Of course, large corporations are given more money because of their capacity to pay while small businesses with minimal credit record miss out on such funding.

Policies

Whenever business policies are being made such as taxation, rebates, and other obligations, the legislators typically put businesses in the above three categories. It is unfortunate, but the truth is a lot of sole proprietorships are affected negatively by the policies made in light of how SMBs are behaving economically. One must know the policies that govern their category so as not to go against the law.

Vendors

During a sales process, the service providers will treat every category differently because of individual needs even though it’s quite the stereotype. When vendors are selling products to large enterprises, they emphasize advanced features, security measures, and quality more than price because such a company can afford it. Successfully selling to SMB's, on the other hand, is different because they have to consider financial constraints and workforce limitations so the vendor will offer them something more affordable and easy to use even though the standards may be a little low. Marketing strategies will also be different in each category because of finances, business model and other factors.

While it is clear that the size of your business does matter to many other people, there is no reason the businesses cannot compete at an equal level. A whopping 54% of all businesses are SMBs that can use powerful marketing tips like branding, geolocation strategy and personal digital marketing dashboards to give big companies a run for their money. The secret to business success is making customers happy whether you are a large corporation or small companies and that should be the primary focus at the end of the day.

By  Robert Cordray

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About the Author - Robert Cordray is a former business consultant and entrepreneur with over 20 years of experience and a wide variety of knowledge in multiple areas of the industry. He currently resides in the Southern California area and spends his time helping consumers and business owners alike try to be successful. When he’s not reading or writing, he’s most likely with his beautiful wife and three children.