What is an SME in a Company

What is an SME in a Company

The term SME is well known to any of us, although we often cannot define precisely what it is. In this article, we will shed some light on the exact definition of this term so as not to make mistakes when naming it.

SMEs: Definition

It is the acronym for small and medium-sized companies, accounting for 98% of the total business. We can say that they are the real engine of our country and a significant generator of wealth and employment. When defining, we must consider two factors: the amount of money they bill each year and the number of employees they have.

According to Turnover: A small company has a turnover of equal to or less than 10 million euros per year. On the other hand, a medium-sized company is one whose turnover does not exceed 50 million euros per year. 

According to the Number of Employees: A small company does not have more than 50 workers, while a medium-sized company does not exceed 250 employees. It is also necessary to point out that there is a new business model that is the one that corresponds to companies that have up to 5 workers. In this case, we are talking about microenterprises.

SMEs in Numbers

There are inadequate facilities when undertaking or launching any business activity, and the costs are always too high. However, this does not impede having managed to weave extensive network employment.

In 2021, according to the Ministry of Industry, Tourism, and Trade records, there were 3,361,898 SMEs. Of these, 81.9% carry out their activity in the services sector, and within this, 21% correspond to commerce. 

It should be noted that, in 2020, a disastrous year for the economy due to the pandemic, 321,749 companies began their economic activity, and 366,548 ceased their activity during the same year. That is, there was a more significant number of discharges than discharges.

SME Challenges

In addition to the well-known difficulties encountered by SMEs in our country, we should also note that it is usually more difficult for them to obtain financing, much more so than for a large company, which usually has more alternatives to bank financing. 

Competing with large corporations, which invest millions in all their key areas, is one of the main challenges faced by SMEs. In the same way, competing in terms of production costs is the main obstacle for an SME compared to a large company.

On the contrary, smaller companies make it easier for them to change their business model and adapt to what customers demand. 

Also, the relationship with customers is much closer, and they usually reward you by building loyalty in the relationship. Therefore, SMEs will continue to be the economy’s main engine despite all the difficulties.

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