Is Your Business Considered an SMB?

Does your company fit the description of a small and medium-sized business (SMB)? This guide breaks down the main characteristics of an SMB.

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Running a small to midsize business has all sorts of challenges. You constantly struggle with the budget. You’re always wondering if you’re the right size or if you should start hiring. You’re always prioritizing product development. You wonder if your marketing dollars are being well spent.

SMBs can be exciting but frustrating at the same time. How do you know whether yours is one? Well, considering that 99.7% of companies are SMBs, according to the Small Business Administration, you almost certainly are. But just in case you’re unsure, this guide will help you understand them more.


What is a small and medium-sized business (SMB)?

Although the definition of a small and medium-size business (which goes by the SMB abbreviation) is somewhat subjective and depends on the industry, it generally applies to companies that make less than $50 million annually for small businesses and between $50 million and $1 billion for medium-size businesses.

A small business typically has less than 100 employees, while a medium-size business has more than 100 but less than 1,000.


6 characteristics of SMB businesses

SMB companies are many and varied — even the size differs depending on the industry. However, SMB organizations tend to share the following six characteristics.

1. More creative

SMB businesses are smaller and therefore more nimble than large firms. As a result of limited resources, they must be more creative. There’s an emphasis on innovation at these organizations, whereas larger companies are invested in tried-and-true approaches that have worked for them in the past but may be at risk of becoming obsolete.

2. More flexible

An SMB’s smaller size also gives it more flexibility. Like steering a large cargo ship compared to a small motorboat, it’s harder to implement change in larger firms. SMBs are open to change and can respond to new opportunities. They adopt new technology and approaches more readily than a large organization, which lacks a range of movement in these areas. SMBs have less red tape in decision-making and little bureaucracy to hold up change.

Typically, there’s only one person who says “yes” or “no,” compared to a large organization where multiple individuals and departments must sign off on a change.

3. Potential to act quickly

Thanks to their flexibility, SMBs can act more quickly than large firms. Decisions can often be made within a day instead of dragging on potentially for weeks in a large organization, which must go through certain processes and approvals. As a result, SMBs can react quickly to changes in the market or new opportunities that large companies would have to pass on.

4. Practical solutions valued

Large organizations have the resources to put together long-term roadmaps and plot goals that tend to be vague and broad. SMBs are focused on the near term and thus value practical solutions that have an immediate impact above all else.

These organizations pivot to solve problems and define clear problems through daily practices and analysis. They seek solutions to create a competitive advantage in months or even weeks, instead of years.

5. Capital constraints

SMBs have limited access to capital compared to larger organizations and must be more frugal with budgets. This can be a benefit in that it requires more creativity, but it also inhibits their ability to attract the top talent or establish the necessary marketing and advertising efforts to increase brand recognition.

Capital is the No. 1 advantage of large firms, which can swamp the competition with advertising campaigns and well-financed product development, not to mention scoop up the best talent. Small business taxes can also take up a lot of time and resources of SMBs compared to large organizations.

6. More conservative

Because of a lack of capital and resources, SMBs are more conservative with their budgets. They can’t afford to take big risks that will cripple the organization financially if they don’t pan out. Often, a single owner is making the decision and they may seek to not lose rather than win, missing out on opportunities as a result.


Are you an SMB? Most likely, yes

Unless you’ve got thousands of employees and a billion-plus dollars in revenue, you almost certainly fall into the SMB category. But sometimes that’s a good thing — maybe becoming a multi-billion-dollar corporation isn’t what you want to do.

Sometimes, it’s good to be innovative and pull in enough money to thrive without becoming a big, bloated multi-national company. After all, it’s not about how big you get, it’s what you accomplish.

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