What Are Small And Medium-Sized Enterprises (SMEs)?

The international name is Small and Medium-sized Entities (SME). The designation of small and medium-sized enterprises or the abbreviation SME is a size-dependent delimitation of large companies and small corporations. The number of employees, turnover and total assets are decisive here.

The term small and medium-sized enterprises (SME for short), called small and medium-sized enterprises (KMB) in Belgium and Austria, is a collective name for companies. The categorization is based on the number of employees, sales revenue or total assets. This classification does not take place through the selected legal form or the ownership structure. Companies that cross borders are called large corporations.

Qualitative and quantitative characteristics of SMEs

Small and medium-sized enterprises have both qualitative and quantitative characteristics. The qualitative features include Complete independence from the corporations, the unity of liability and ownership so that a close connection is created between the economic existence of the owner and that of the company. Further qualitative features are the union of the entrepreneur, the investor and the manager in one person, the pronounced innovation activity and the low degree of formalization, including flat hierarchies, personal contact between employees and entrepreneurs and proximity to the customer.

Since these characteristics are difficult to measure, quantitative aspects are used to distinguish SMEs from large companies and corporations. The decisive criteria of turnover, number of employees and total assets play a role here.

The differentiation of the SMEs

According to the Commission, SMEs are differentiated between micro, small and medium-sized enterprises and have set the following upper limits as to size criteria across the EU:

In the case of small businesses, the number of employees is less than 10, sales and total assets are between € 2 million and even less.

In small businesses, employees are less than 50, and sales and total assets are € 10 million or less.

In medium-sized companies, the number of employees is less than 250, sales are € 50 million and below, and the balance sheet total is € 43 million and down.

The rules are that the number of employees must never be exceeded. In contrast, only one thing must be met for the turnover and total assets criteria so that a respective categorization takes place.