Small- and medium-sized business (SMB) is a major category of business that is typically defined by private, independent ownership, limited size and geographic scope, and lower employment and revenue totals compared to larger organizations. SMBs can also be known as small- and medium-sized enterprises (SME).
Despite their relatively smaller size, SMBs play a major economic role, as they make up the vast majority of registered businesses in the United States. Because of their community-level presence, they may also provide important services to areas that larger companies deem unprofitable or unimportant to their mission.
There is no one clear definition on what is a SMB, as the standards can vary depending on the type of business, the industry it operates in, and the country it is registered in. Finding this information and using it to evaluate SMB prospects is crucial to successful sales and marketing efforts.
In the United States, the U.S. Small Business Administration (SBA) defines a small business according to two main qualifiers:
Exact threshold requirements will be different for each business, but in general, the SBA defines an SMB as any business with under $47 million in annual receipts and under 1,500 employees. Within these guidelines, SMBs can operate in a wide variety of different industries, such as:
Despite their differences, SMBs tend to share similar challenges and characteristics in how they operate. Notable qualities of SMBs include:
SMBs are more likely to have sole owners or smaller ownership teams, which means that decision-making authority is concentrated in the hands of fewer people, as opposed to extensive hierarchies of managers and executives. Because of this more concentrated ownership structure, SMBs tend to be able to make faster, more agile decisions, without lengthy studies, approval processes, or sign-offs needed.
Due to their smaller size, scope, and revenue, SMBs typically work with much smaller budgets than larger enterprises, which can limit their ability to make capital improvements, expand, hire employees, advertise and market, purchase critical supplies, pay vendors, and more.
Because SMBs work with fewer resources than larger corporations, they have to make the most of what they have. This means they not only have to innovate and do more with limited resources, but they also can’t afford to take unnecessary risks or waste money on potentially ineffective or frivolous expenses—making them more conservative in their decision-making.
SMBs can play outsized roles in their communities, due to owners and employees that are more likely local residents with dedicated stakes in the neighborhood. The services they provide and the relationships they build can become key parts of the fabric of these areas, and are crucial to their ongoing success.