7 Things You Need to Know About SMEs

SME stands for small and medium-sized enterprises, which are businesses that have fewer than 250 employees and a turnover of less than 50 million euros. SMEs are the backbone of the European economy, accounting for 99% of all businesses and providing two-thirds of all jobs. In this article, we will explore what SMEs are, why they are important, and how they can benefit from various support programs and initiatives.

KEY TAKEAWAYS

SME stands for small and medium-sized enterprises, which are businesses that have fewer than 250 employees and a turnover of less than 50 million euros

SMEs are the backbone of the European economy, accounting for 99% of all businesses and providing two-thirds of all jobs

SMEs face many challenges and barriers in their daily operations, such as access to finance, markets, skills, innovation, and regulation

SMEs can benefit from various support programs and initiatives offered by the EU and its member states, such as the SBA, the ESIF, the COSME program, the Horizon Europe program, the EEN, the EIC, the Digital Europe program, the Single Market Program, and the European Green Deal

SMEs can network with other SMEs or stakeholders in Europe by using the EEN or joining online platforms, communities, or events that connect them with potential partners, customers, suppliers, investors, or experts

What are SMEs?

SMEs are defined by the European Commission based on three criteria: number of employees, turnover, and balance sheet total. The following table shows the thresholds for each category of SMEs:

Category	Number of employees	Turnover	Balance sheet total
Micro	<10	≤ €2m	≤ €2m
Small	<50	≤ €10m	≤ €10m
Medium	<250	≤ €50m	≤ €43m

These criteria are applied to the whole business group, not just the individual entity. This means that if a company is part of a larger group, it may not qualify as an SME even if it meets the criteria on its own.

Why are SMEs important?

SMEs are vital for the economic and social development of Europe. They contribute to innovation, competitiveness, job creation, and social cohesion. According to the European Commission, SMEs:

Represent 99% of all businesses in the EU
Employ around 100 million people, or 67% of the total workforce
Generate 57% of the EU’s gross value added (GVA), which measures the contribution of each sector to the economy
Account for 56% of private sector investment in research and development (R&D)
Are more resilient to economic shocks and crises than larger firms

How can SMEs benefit from support programs and initiatives?

SMEs face many challenges and barriers in their daily operations, such as access to finance, markets, skills, innovation, and regulation. To help them overcome these obstacles and unleash their full potential, the EU and its member states offer various support programs and initiatives, such as:

The Small Business Act (SBA), which is a comprehensive policy framework that aims to create a level playing field for SMEs and promote their growth and competitiveness

The European Structural and Investment Funds (ESIF), which provide funding for regional development, social inclusion, employment, education, research, innovation, and environmental protection

The COSME program, which supports SMEs’ access to finance, markets, internationalization, and entrepreneurship

The Horizon Europe program, which funds research and innovation projects that address global challenges and support industrial competitiveness

The Enterprise Europe Network (EEN), which offers advice, information, and matchmaking services to SMEs looking for business partners, funding opportunities, or innovation support

The European Innovation Council (EIC), which supports breakthrough innovations with high-risk and high-impact potential

The Digital Europe program, which invests in digital technologies and skills that enhance the competitiveness and sustainability of SMEs

The Single Market Program, which facilitates the free movement of goods, services, people, and capital within the EU

The European Green Deal, which sets out a roadmap for making the EU’s economy more sustainable and climate-neutral by 2050

TIP

One of the most important tips for SMEs is to embrace digital transformation and adopt digital technologies and solutions that can improve their efficiency, productivity, competitiveness, and sustainability.

A Statistical Report on the Global Demand for Small and Medium-Sized Enterprises

Small and medium-sized enterprises (SMEs) are businesses that have revenues, assets, or a number of employees below a certain threshold. The definition of what constitutes an SME varies from country to country and from industry to industry. However, SMEs generally play an important role in the economy, as they employ vast numbers of people, foster innovation, and contribute to the gross domestic product (GDP) of their countries.

In this report, we will examine the global demand for SMEs in different regions and sectors, based on the latest data available from various sources. We will also discuss some of the challenges and opportunities that SMEs face in the current market environment.

Global Demand for SMEs

According to the World Bank, there are about 400 million SMEs in emerging markets, accounting for about 90% of all businesses and more than 50% of employment. The demand for SMEs is driven by several factors, such as:

The growth of the middle class in developing countries, which creates more demand for goods and services provided by SMEs.
The digital transformation of the economy, which enables SMEs to access new markets, customers, and suppliers through online platforms and e-commerce.
The diversification of the economy, which encourages SMEs to enter new sectors and niches that are not dominated by large corporations.
The innovation potential of SMEs, which allows them to adapt quickly to changing customer needs and preferences, as well as to create new products and solutions.

The global demand for SMEs varies by region and sector. According to a report by McKinsey & Company, the regions with the highest demand for SMEs are Asia-Pacific, Latin America, and Africa. These regions have large populations, high economic growth rates, and low levels of SME penetration compared to developed markets. The sectors with the highest demand for SMEs are consumer goods and services, information and communication technology (ICT), and manufacturing. These sectors have high growth potential, low entry barriers, and high customer demand.

Challenges and Opportunities for SMEs

Despite the high demand for SMEs, they also face many challenges in the global market. Some of these challenges are:

Access to finance: SMEs often have difficulty obtaining loans or other forms of financing from banks or investors, due to their lack of collateral, credit history, or business plan.

Access to skills: SMEs often have difficulty finding and retaining qualified workers, especially in technical or specialized fields.

Access to markets: SMEs often have difficulty reaching new customers or expanding into new regions or countries, due to their lack of resources, networks, or knowledge.

Access to technology: SMEs often have difficulty adopting or upgrading their technology infrastructure, due to their lack of funds, expertise, or awareness.

However, these challenges also present opportunities for SMEs to overcome them and grow their businesses. Some of these opportunities are:

Leveraging digital platforms: SMEs can use digital platforms such as social media, e-commerce, or cloud computing to access new markets, customers, and suppliers, as well as to improve their efficiency and productivity.

Partnering with other stakeholders: SMEs can partner with other stakeholders such as governments, NGOs, or large corporations to access finance, skills, markets, or technology. For example, governments can provide subsidies, tax incentives, or regulatory support for SMEs; NGOs can provide training, mentoring, or advocacy for SMEs; and large corporations can provide supply chain integration, distribution channels, or innovation collaboration for SMEs.

Innovating constantly: SMEs can innovate constantly by creating new products or services that meet customer needs or solve social problems. They can also innovate by improving their processes or business models to reduce costs or increase value.

SMEs are vital for the global economy, as they provide employment, innovation, and growth. The demand for SMEs is high in emerging markets and in sectors such as consumer goods and services, ICT, and manufacturing. However, SMEs also face many challenges such as access to finance, skills, markets, or technology. To overcome these challenges, SMEs can leverage digital platforms, partner with other stakeholders, and innovate constantly.

FREQUENTLY QUESTIONS

Q: What is the difference between SMEs and startups?
A: SMEs are established businesses that have been operating for at least three years, while startups are new ventures that are in the early stages of development. Startups typically have high growth potential and aim to disrupt existing markets or create new ones.

Q: How can I find out if my business qualifies as an SME?
A: You can use the online tool provided by the European Commission to check your SME status. You will need to enter some basic information about your business, such as number of employees, turnover, balance sheet total, and ownership structure.

Q: How can I apply for EU funding or support for my SME?
A: You can use the Funding & Tenders Portal to search for funding opportunities and submit your proposals online. You can also contact your national or regional authorities or consult the EEN to get advice and guidance on how to access EU funding or support.

Q: What are the main challenges faced by SMEs in Europe?
A: Some of the main challenges faced by SMEs in Europe include:

Access to finance: Many SMEs struggle to obtain adequate financing for their activities, especially in times of crisis or uncertainty. They often face higher interest rates, collateral requirements, or administrative burdens than larger firms.

Access to markets: Many SMEs find it difficult to enter new markets or expand their customer base, especially across borders. They may face barriers such as tariffs, regulations, standards, or language differences.

Access to skills: Many SMEs face skills shortages or mismatches, especially in digital, green, and innovation-related fields. They may have difficulties in attracting, retaining, or training qualified staff.

Access to innovation: Many SMEs lack the resources, capabilities, or networks to innovate and adopt new technologies or business models. They may face challenges such as high costs, risks, or competition.

Access to regulation: Many SMEs face complex and burdensome regulations that affect their operations, competitiveness, and profitability. They may have difficulties in complying with or adapting to changing rules or requirements.

Q: How can I network with other SMEs or stakeholders in Europe?
A: You can use the EEN to find potential business partners, customers, suppliers, or investors in Europe and beyond. You can also join online platforms, communities, or events that connect SMEs with other stakeholders, such as: