Knowing a SMB when You See One

David Byrd : Raven Call
David Byrd
David Byrd is the Founder and Chief Creative Officer for Raven Guru Marketing. Previously, he was the CMO and EVP of Sales for CloudRoute. Prior to CloudRoute, He was CMO at ANPI, CMO & EVP of Sales at Broadvox, VP of channels and Alliances for Telcordia and Director of eBusiness development with i2 Technologies.He has also held executive positions with Planet Hollywood Online, Hewlett-Packard, Tandem Computers, Sprint and Ericsson.
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Knowing a SMB when You See One

SMB vs EnterpriseLast week I heard a comment regarding the size of a small business being around ten employees. That is not a definition either I use or any credible source. However, it pointed out a need to define what we mean when we use the terms “SMB” and “enterprise”.

The Small Business Administration has a very complicated definition of what characteristics a small business should have. It defines a small business based upon number of employees, revenue and industry. A small business must be independently owned, for profit and not dominant in its field (the web may have changed that factor). In manufacturing where human resources are a major factor small can be as large as 1500 employees. Revenue range in the Services sector may not exceed $2.5 to $21.5 million depending upon services provided. Revenue for agriculture cannot exceed $0.5 to $9 million depending upon agricultural product. This is our government true to form as it makes a definition with so much variability as to be useless for the average citizen.

The European Union is more succinct. The definition of a small enterprise is less than 50 employees and less than or equal to €10 million or $13.3 million in revenue. A midsize enterprise has between 50 and 249 employees and up to €50 million or $66.5 million in revenue. Above these numbers the business is considered a “large” enterprise.

Gartner, IDC and others define a small business as having at least one employee and fewer than 100 with midsize businesses ranging in size up to 999 employees. In terms of revenues a small business is less than $50 million per year with a midsize company ranging from $50 million to $1 billion per year. This definition is perhaps the most commonly used in our industry to segment the market into SMBs and enterprises.

There are lots of stats regarding how many SMBs there are, contribution to GDP, percentage of Americans working for SMBs and more. However, one number sticks out as ANPI prepares to launch its hosted Unified Communications solution and that number is the percentage of all businesses with 19 or fewer employees. According to the US Census Bureau and Statistics of US businesses the number of businesses in the hosted “sweet” spot or fewer than 19 employees is 89.9 percent or a whopping 5.2 million businesses. If I use the most acceptable definition of SMB to size the market (999 or fewer employees), then the percentage rises to 99.8 or 5.7 million businesses. For those of you stating that your target market is SMBs, then you have the overwhelming bulk of businesses in the country in your sights.

SMBs are embracing hosted applications at a faster rate than enterprises due to the value of gaining advance applications without the need for an IT infrastructure and by not having such an infrastructure, it is much easier to make the transition. With nearly six million targets, what else are you waiting to see.



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