The term SME (small and medium-sized enterprise) no longer fits with aspiring businesses focusing on growth, innovation, advancement and productivity in today’s and tomorrow's world.
The world is changing. Life is changing. Work is changing. Why isn’t the way we look at enterprise changing at the same pace?
The term SME is something I’m very familiar with, having run a family enterprise for many years. Our business was referred to as being a traditional family-owned manufacturing SME (or SME metal basher). These ‘SME’ businesses represent 99% of all enterprises in the European Union.
So why is it that when I hear the term SME I wince?
It makes me think of the 1970’s and the first factory I remember going into when visiting my grandfather – I was five years old and the place was pretty dark due to small windows and poor lighting. The factory had various levels of concrete flooring, rickety old staircases, pulleys and conveyor belts, foremen wearing blue overcoats and a leaking roof where buildings had been joined together over the years.
These are incredibly fond memories and when I close my eyes I can almost hear the thudding of power presses at work, the hustle and bustle of a large workforce and the distinct smell of oil and metal being cut on semi-auto saws - the same smell that my grandfather carried on him.
So the factory that I first remember isn’t my reason for wincing at the term SME, but more the time it represented and which for me, and many others, describes businesses of the past. What’s more it takes us to back to historic management practices, and old view of manufacturing and seems to focus more on the business entity than what really matters – the people.
The European Union recommendations from 2003 defines Small and Medium Enterprises (SMEs) as being based on employing under 250 people and having a turnover of under €50 million.
I often ask business owners about the term and they respond by saying they just don’t like it – and actually find it incorrectly describing today’s businesses. No one wants to be called ‘Small’. No one seems to be clear at what point you become ‘Medium’.
They will also often say that SME makes them think of old school manufacturing rather than innovation, lean manufacturing and all of the other businesses that are now within the ‘under £50m’ category – many of which are not manufacturing but in service provision and technology. In 1997 we moved our family enterprise into a beautiful fit-for-purpose 60,000 sq. ft. production facility, a far cry from the 1920’s buildings that had been pieced together as we’d grown. That’s when we stopped being an SME in my opinion.
We do know that a significant proportion of these businesses are family or owner managed. They have the challenges of growth, skills, succession, capacity and those associated with being privately owned.
Families in Business always refers to these businesses as family or owner managed enterprises – putting the ‘people first’.
Isn’t it time to realise that many terms once used around business are no longer relevant? The term SME no longer fits with aspiring businesses focusing on growth, innovation, advancement and productivity in today and tomorrow's world.
By Dani Saveker, CEO of Families in Business