SMB vs. SME Introduction
Many people often get confused when differentiating between SMB vs. SME. Do you know the differences between these two businesses?
When we leave the acronym as SMB vs. SME, some people may not know what we are talking about, not until we define these acronyms.
SMB simply means small and medium-sized business while SME is small and medium enterprise. How do we differentiate between these two?
We made it easier for everyone by explaining what these businesses mean, their similarities, and their differences.
SMB vs. SME Classifications
Here are some defining characteristics of these business classifications:
Small and medium-sized businesses
Employees: 0-100 is the category of a small sized business, while 100-999 is a medium-sized business. However, some people can define this differently.
Take, for instance, some government organizations, such as the Small Business Administration (SBA) make use of the size specifications for granting small business loans.
The size could be used for considering the award of Federal contracts.
- Annual Revenue: $5-$10 million
- IT Staff: Typically one or a few
- IT skills: Employees usually learn on the job.
- Location: It has limited geographical boundaries. It may outsource work or have more remote workers.
It depends on pay-as-go subscription for its software purchase.
Small and medium enterprises
When comparing SMB vs. SME, you should learn more about Small and medium enterprises(SME). SME can be referred to as a “Mid-Market.”
Differentiating SME from SMB could be a little confusing. However, the SEM definition is internationally recognized and used than SMB.
SME is the official market phrase for internationally-based enterprises. These organizations can include the European Union, United Nations, World Bank, and World Trade Organization.
- Employees: The European Union defines any small and medium enterprise 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
When it comes to considering technology purchases, SME includes reporting, functionality, and capabilities.
While we compare SMB vs. SME, we should differentiate the two from large enterprise, whose features include:
- 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: It has numerous office locations domestically and internationally
When it comes to technology purchase, it handles security, advanced features, and guaranteed up-time.
Why You Should Differentiate SMB vs. SME
Small Business VS. Large Business: Does Company Size Makes a Difference?
Whether you want to differentiate SMB vs. big companies to start a business, many things are influenced that determines which of the business you can start.
How solution providers handle your request, financial decision steps, or the way technology demands are framed have more to do with how business.
When you work with SMB, the solution providers may focus on saving costs of business and making use of the easy solution.
The reason for this is that they depend more on budget. Budget is their determining factor during most of the business projects.
A vendor believes that a consumer is the one who makes use of its solution daily. However, things get different when it comes to enterprise-level companies.
Providers do not focus more on price and ease-of-use when it comes to SMEs, as it might on advanced features and security.
With this information in your mind, when an individual circumstance deviates from the norm, it is important that they let the vendors know to offer the specific information consumers need.
How does this work? Take, for instance, if you operate an SMB with different locations, a solution provider may offer you a feature or product that they would not tell smaller businesses.
SMB vs. SME against big companies
When we compare SMB vs. big companies, we often bring the big companies to their comparison. These big companies are powerful and has financial strength compared to SMB or SME.
Business people who have the idea of starting an SME business, have leverage over these big companies in some aspects.
They are closer to customers.
While SMB vs. SME businesses have closeness to customers as benefits, we would talk about SME here. The business deals more directly with customers to meet their needs.
SME offers established bonds and more individualized service to their customers, just like SMB. When you understand the business, it becomes easier to connect better with customers.
They are more flexible.
The simpler structure and size of SME make them more flexible than the big companies. They have the ability to adapt to any changes.
Their closeness to customers makes it easier to deal with them when there are changes in the structure. They know the market better because of the way they relate with customers.
SMB vs. SME vs. big companies see the latter lose out when it comes to understanding how to deal with changes faster.
If you are a good businessperson, you have more opportunities to detect changes faster than big companies.
They can make decisions faster
Decisions are easily carried out in SMEs. This is because of the small group or persons involved in it. Resolutions happen faster than big companies that have to deal with complex decision-making.
It is easier to link the staff to the company
The closeness or proximity to SME’s management allows staff to be linked to SME companies faster. In big companies, red tapes are everywhere.
Connecting with big companies can be a little walk in the forest. SME improves the motivation and production of its staff.
Everyone knows each other
In terms of SMB vs. SME vs. big companies, the latter suffers when it comes to bonding. Staffs bond faster in smaller groups or companies.
This increases their performance and teamwork. Problem solving becomes easier because of the accessibility of think tanks in the company.
Communication will be easier
The closeness of company and staffs in SME enhances better communication. Everyone can communicate with ease.
This ensures that things are done faster as a team.
They have more difficulties to funding
SME does not have similar disadvantages compared to big companies. SMEs lack the financial power that big companies possess.
This means that external funding is challenging to get. This leaves this type of company in worse or limited conditions.
It is easier for big companies to get external funding, including the use of listing on stock markets.
Difficulty to reach a large number of customers and earn their trust.
SME and SMB find it hard to reach a larger number of customers. To earn the trust of customers can be challenging too.
Big companies can easily make use of different advertising means to reach more people. They have more money to spend on marketing compared to SMEs.
SME has a smaller number of customers and has to fight larger competitors to stand out in the crowd. This can affect it because of the trust level with the potential customers.
The costs are higher
SMEs have enormous impediments when it comes to benefiting from the economy of scale. The costs are higher and adjusting prices to suit consumers is not easier.
Prolonged periods of crisis
Even though SMB vs. SME are flexible, they are not great at taking care of crises. The lack of financial strength can be a major problem for these smaller businesses.
They suffer long periods of crisis, especially during inflation or depressions. They struggle to survive and often have to close down my deals.
Low bargaining power with suppliers and customers.
Big companies can generate more money compared to SMEs. When it comes to negotiating with customers and supplies, the bargaining power is low.
Achieving a beneficial condition for an SME or SMB may not be as easy as they are written online.
Access to less skilled personnel.
When it comes to access to skilled personnel, SME has limitation compared to the big companies. This can be a challenge to business owners.
The advancement of career is low with SME. This is the reason why it is often difficult to attract well-prepared or talented personnel to such a business.
They will have more difficulty in accessing technology
For financial reasons, it is also difficult for SME to access advanced technology. This leads to their obsolescence.
The good news is that SME has its technology market that tends to fill in the technology gap.
SMB Advantages and Disadvantages
Owning SMB may not be as simple as it appears, even though it is a small and medium-sized business. We have listed some of the things you should know about SMB.
Advantages of SMB
As an entrepreneur, you remain your boss and make your decisions. You have control over every aspect of the business.
You have the power to decide the hours you want to work, what to pay, and when to take a vacation. The freedom to handle the business can outweigh the potential risks.
The financial gain is something that SMB business owners enjoy without limitation. When you have your business and decide what to pay to your employees and yourself, you control your money.
SMB has developed some of the richest entrepreneurs in the world. The financial control that it offers to owners allows them to become better money managers.
SMB allows you to be involved in every aspect of your business. You decide what happens from product design to sales to business operation and customer response.
This is something that big companies do not have the privilege to enjoy. This control is very satisfying for people who are driven by passion and creativity.
SMB offers owners the status of being in charge of a business. The idea of being a boss is attractive to many entrepreneurs.
There are the pride and prestige of being an owner of a business.
You have the opportunity of building your equity in SMB. This can be sold, passed on, or kept. We have seen entrepreneurs have multiple businesses.
Sometimes, they sell some of these businesses and make more money from them, especially successful businesses.
SMB allows you to create opportunities for contributions. You can help the local economy when you grown your SMB.
While a few are innovative, others are not, but they have success stories because of fewer red tapes or authorities.
Since, owners of these types of businesses are independent and able to take decisions faster, they often make great decisions that favor both their businesses and the local economy.
Disadvantages of SMB
While SME and SMB are amazing businesses, they do have their cons. We have listed some of the cons of SMB when you compare it to big companies.
Running an SMB can be fun at the beginning when things have not gotten complicated. However, when you start making more decisions, you start losing your time to the business.
You tend to work more than those running big companies. You struggle to meet up many responsibilities as a business owner.
You are Jack-Of-All-Trades in your business, leaving you to do more than is required of you. This can put a strain on families and personal life.
As a business owner of SMB, you cannot eliminate risks. No matter how much you have minimized risk and liability, you are vulnerable to risks.
Business owners suffer financial risk, especially for small businesses that have not been structured to withstand risk.
As a business owner, you should consider regulatory requirements, product liability, and employee disagreements.
You can suffer these risks as owner of an SMB owner.
Small and medium-sized businesses can suffer from uncertainty due to some external factors. This includes the economy, competitors, or shifts in consumer demand.
These factors can stall business growth and productivity.
When running an SMB, you have more financial commitment to make compared to those in big companies.
Many businesses suffer huge losses because of the many things they have to do at once.