I was recently involved in a conversation today where there appeared to be some confusion on how best to categorise sole trader vs. micro-business vs. small business vs. a medium sized business, as these business types are typically wrapped up with either the SME or Small Business tag which to be honest isn’t that helpful considering they represent 99.9% of businesses nationwide.
This is how I and some others see it;
– a medium-sized business (SME) has < 250 > 50 employees and either a turnover of up to £50 million or a balance sheet total of up to £43 million.
– a small business (SME) has < 50 > 11 employees and either a turnover of up to £10 million or a balance sheet total of up to £10 million
– a micro-business (SME) has < 10 > 1 employees and either a turnover of up to £2 million or a balance sheet total of up to £2 million
– a sole trader business (SME) is a ‘single person’ enterprise with (typically) a turnover up to £500k or a balance sheet total up to £500k
It’s quick to see that when the SME & Small Business tags are broken down in this manner, each sub-category has a very different set of requirements and way of working..
So what type of SME or Small Business are you?
There are an estimated 5.9 million UK private sector businesses with 1.4 million of these having employees and 4.5 million having no employees (self-employed with sole trader or limited status etc). There were 5.82 million Small Business in total (with 0 to 49 employees), 35,600 medium-sized businesses (with 50 to 249 employees) and 7,700 businesses large businesses (with 250 or more employees).
So all businesses with employers totals 1.4M and no employees 4.5M.
The 0 to 49 employee category is best understood as 4.5M business 0 employees (a.k.a. self-employed). 1-9 employees 1,155,385 small businesses (a.k.a. micro-businesses), 10-49 employees 211,295 (a.k.a. ‘big’ Small Business).
To correctly define this final section of the 0-49 small business conundrum, I feel we need a smarter definition for those ‘big’ small businesses with 10-49 employees or folks need to stop referring to the self-employed and micro-businesses as small businesses.
- Self-Employed (0 employees)
- Micro-Business (1-9 employees)
- Small Business (10-49 employees)
One final thought – I don’t believe the term SME is helpful at all.