What is a Small Business?

Everybody seems to have a different definition of what a small business is. Whenever companies approach me to ask about how they can improve their strategies for selling to small businesses I always first have to find out how they define the market.

Some base it on employee size, others on revenues, and others still on metrics that are important to their particular industry.

In the January 2007 Small Business report by the Canadian government, they touch on what a small business is:

The size of a business can be defined in many ways, by the value of its annual sales or shipments, for example, or by its annual gross or net revenue, the size of its assets or the number of its employees. Many institutions define small businesses according to their own needs: the Canadian Bankers Association classifies a company as "small" if it qualifies for a loan authorization of less than $250 000, while the Export Development Corporation defines small or "emerging" exporters as firms with export sales under $1 million. Industry Canada has often used a definition based on the number of employees: goods-producing firms are considered "small" if they have fewer than 100 employees, while for serviceproducing firms the cut-off point is 50 employees. Above that size, and up to 499 employees, a firm is considered medium-sized. The smallest of small businesses are called micro-enterprises, most often defined as having fewer than five employees. The term "SME" (for small and medium-sized enterprise) refers to all businesses with fewer than 500 employees, while firms with 500 or more employees are classified as"large" businesses.

As will be seen, in practice, reporting on small businesses seldom adheres to any strict definition due to data limitations.