We hear the term SME quite a lot when talking business, and most of us know that SME stands for Small to Medium sized enterprise. I wanted to know at what point does a small business become a medium business? What I found in my search was an article from the MYOB blog which brought another classification into the mix. Did you know that there is actually a third category called a micro business?
“A Micro Business typically has one to five employees and an annual turnover of less than $2 million. A Small Business you may have six to 10 employees and a turnover of between $1 million to $3 million. A Medium Business may have more than 11 employees and more than $3 million in turnover.”
When I mentioned this categorisation to a group of fellow business coaches we were generally in disagreement with it, it didn’t match our perception of the word micro. In NZ you don’t generally speak of or hear of the term micro business. It’s always SME, or small to medium enterprises.
We were all of the opinion that a micro business would typically be a sole trader with no employees, perhaps even a hobby business, and probably not even turning over $100,000 per year. Nowhere near $1 million, let alone $2 million.
The term micro means very small, i.e. tiny, or minute. $2 million is not tiny for most of us, and many small businesses struggle to get anywhere near that. Therefore to say that a business with annual turnover of up to 2 million dollars is a micro (tiny) business, seems ludicrous. That’s a fairly decent turnover by most people’s perspectives.
But then, we’re a nation of tiny businesses, so perhaps our perception is clouded by that.
New Zealand has a multitude of small businesses according to Statistics NZ – 97% of NZ businesses are considered small. But when you look a bit closer, approximately 90% have 5 or less employees, and therefore would be considered micro businesses, and nutting it down even further, 70% are sole traders.
A Google search of the term ‘microbusiness’ is fairly consistent in saying that a business with up to 5 employees would be considered micro. By comparison, a medium-sized business or mid-sized business has fewer than two hundred employees. When you look to dictionary.com, one of micro’s definitions is “very small in comparison with others of its kind.”
I guess if you’re comparing it with multi-national conglomerates, which are at the other end of the scale, then yep, a business with up to 5 employees is tiny, or micro.
I started this exercise thinking that I wanted to interview business owners who had successfully transitioned from being a small business to being a medium business. I want to know what they think it takes. But I’m just as interested in interviewing those who’ve transitioned from micro to small. What an interesting journey that is.
Who do you know who would fit the bill, someone who would be willing to share their story and inspire micro businesses everywhere?
Which category are you in?