Often misunderstood by larger companies, the small business market (or SMEs) is usually where most businesses are in an economy. The SME market is so diverse that marketers can struggle to characterise it in ways that enable meaningful segmentation. Criteria used in different countries include the number of employees, invested capital, turnover, industry type, or legal definitions.
The easiest and most common criteria is number of employees. While measures vary from full-time equivalents (FTE) to total head count (salary and wage earners) and data collection methods vary from place to place, most OECD countries class around 95% of their businesses as SME.
Other characteristics attributed to the market in official definitions in the US, UK and Australia include:
- they are personally owned and managed
- the owner/operator makes most management decisions
- they do not have specialist staff at management level
- they are not part of a larger business or group of companies with access to managerial expertise.
The key to understanding small businesses is to treat them with respect. Most small business operators are there by choice and most are smart, enterprising and passionate about what they do. They have do be to survive, to generate their own income. By contrast, the most common mistake larger companies make in selling to SMEs is condescension - deliberately or unwittingly assuming they won't understand or won't require the same degree of business rigour or professionalism that larger companies do. Treat them like any other business - with the respect deserved of a customer who can help make you successful.
Source: MED (2005), SMEs in New Zealand Structure and Dynamics [291kb pdf]