Definition of Small & Medium Scale Industries

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A small business enterprise, a seamstress.
A small business enterprise, a seamstress. (Image: Wavebreakmedia Ltd/Wavebreak Media/Getty Images)

Small and medium scale enterprises are the largest employer segment in most economies. In the United States, the Size Standards Office of a government department called the Small Business Administration defines the criteria by which a business may be considered a small and medium scale enterprise.

Size Standards

Small and medium scale enterprises, abbreviated as SME, is a relative term. A business may or may not be considered an SME, depending on the industry, revenues earned, and the region in which it is operating. In the United Kingdom and European Union, a common size standard holds true for all industries; whereas, in the United States, size standards depend on the industry.

Size Limitation

The SBA sets the limit for an American company's size for it to be considered an SME. This is done to ensure that large concerns, which are likely to be financially more stable, do not have any claims on funding targeted specifically at small and medium sized businesses.

Criteria

Apart from size and revenues, the SBA defines certain conditions which must be met for a business to be classified as an SME. According to the guidelines, a business cannot be an SME if it is a dominant player in the nationwide industry. Additionally, the business must be operated and owned privately.

Number of Employees

SMEs are commonly defined based on revenues and size, in terms of number of employees. In wholesale trade, a business employing less than 100 is an SME; whereas, in manufacturing and mining, a business may employ up to 500 people and still be considered an SME.

Revenues

In terms of revenues, an agricultural business making a profit of up to $750,000 is an SME. For other sectors, such as construction and service, the ceiling is much higher -- $33.5 million for construction and $7 million for service.

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