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What is an SME? Here’s an SME definition

3-minute read

What is an SME? Here’s an SME definition
Jessie Day

Jessie Day

27 May 2020

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SMEs – or small and medium-sized enterprises – are the heart of the UK economy and make up 99.9 per cent of the nation’s business population. But what is an SME and how are SMEs defined?

  • What is GDPR for small businesses?
  • Small business bookkeeping: quarter of SMEs manage finances entirely on paper
  • Coronavirus support for businesses and the self-employed
  • What type of business insurance do I need?

SME definition – what is an SME?

The UK definition of SME is generally a small or medium-sized enterprise with fewer than 250 employees. The EU also defines an SME as a business with fewer than 250 employees, a turnover of less than €50 million, or a balance sheet total of less than €43 million.

Within this umbrella there are three different categories: medium-sized, small, and micro-businesses. These categories are defined by turnover and number of employees.

SMEs make up around 99.9 per cent of all businesses in the UK, so are enormously important to the UK economy. Millions of people work in SMEs – they’re a key driver of economic growth and sustainability.

What is the EU SME definition, or SME criteria?

It’s useful to consider the current EU SME definition too. This definition uses the measure of headcount explained above – SME is a business with fewer than 250 employees. It also makes definitions of the three categories of business within the SME umbrella. According to the EU definition:

  • a medium-sized business has fewer than 250 employees and either a turnover of up to €50 million or a balance sheet total of up to €43 million
  • a small business has fewer than 50 employees and either a turnover of up to €10 million or a balance sheet total of up to €10 million
  • a micro-business has fewer than ten employees and either a turnover of up to €2 million or a balance sheet total of up to €2 million

What support can SMEs get during the Covid-19 pandemic?

Whether your business needs urgent support due to the coronavirus outbreak or you’re looking for general information, read up on the help available in our coronavirus support guide for a full list of resources and tips on how to apply.

How do I start an SME?

If you’re looking to start your own business, there’s support available online and through groups like the British Chambers of Commerce. Simply Business also offers tips and how-tos at our Knowledge centre.

From a guide on Self Assessment tax returns to social distancing guidance for drivers and couriers, there are plenty of articles to help you start and run your business.

If you’re just starting out, you’ll need to sort these as a priority:

1. Work out what you’re offering

What is it that makes your new business unique? Work out what you’re offering and what separates you from your competitors, whether that’s a unique product or service, competitive pricing, ‘value adds’, or any other unique selling points.

2. Do your research

Research is important in the early stages of a business. You’ll need to think about what your competitors are doing and analyse their strengths and weaknesses. You’ll also need to think about how to find the right suppliers, how to deliver your products or services, and crucially, how to market yourself to new customers.

3. Build a business plan

A business plan is the foundation for a new business. It’s a crucial document, one that grows and changes along with your new venture. Read our comprehensive guide on how to write a business plan.

4. Get the legal side sorted

You’ll need to choose a legal structure for your business, understand tax deadlines and responsibilities, and in some circumstances apply for a business licence.

5. Find customers

Your business plan should include details of the marketing activities you’ll conduct to get yourself in front of new customers.

SME examples (small to medium size enterprises)

Here’s a quick list of the type of business you’d expect to be SMEs. Click the link on each to read about the types of insurance they might need:

  • self-employed workers
  • contractors
  • online retailers
  • consultants
  • freelancers
  • sole traders
  • cleaners
  • hairdressers
  • caterers
  • photographers
  • shops
  • dog walkers and pet sitters
  • tradespeople

Do you run an SME? Tell us about your experiences in the comments.

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