Entering the world of business sometimes releases an onslaught of jargon to make sense of. Some of the lingo refers to how big (or tiny) a business is; a calculation which is based on staff numbers and turnover.
It can be handy to know the scale of an organisation if you’re thinking of doing business with them. Or, if you’re looking for funding grants, knowing what category your own enterprise fits into can be essential.
What is a micro business?
Even though a huge chunk of UK businesses could fit into the micro business category, there isn’t an official definition of what one really is. It’s generally accepted that they are very small scale operations run by two people or fewer. Someone dressed in pyjamas, running things from the dining table? Micro business.
What is a start-up?
The term startup gets used a lot in business. It’s often used colloquially to describe trendy tech companies like Facebook or Airbnb.
They can be any size, but most businesses do tend to start out small and build up. In reality a business start-up is an organisation still in its early stages, typically around two years old or younger.
Different funding groups might class a startup on more or less years since inception, so it’s always worth reading the small print to see if you’re eligible.
What is an SME?
SME stands for small and medium-sized enterprises. The official definition of an SME comes from the EU, describing a business which has less than 250 employees and is turning over less than €50 million (or just short of £45 million).
It seems that HMRC use slightly different boundaries to identify SMEs who wish to claim tax relief and credit for Research and Development (R&D) projects. If you’re looking to claim SME R&D relief the bracket is slightly more lenient, classing you as SME if you have less than 500 staff, and a turnover under €100m or a balance sheet total under €86m.
A medium sized business
So an SME has a definition, but HMRC offer further clarification as to what a mid-sized business is. Their guidance describes it as one with at least 20 employees, or a UK turnover more than £10 million. Still with us? Think of it as a sub category for SME which identifies the niche where medium sized business sits.
Moving between categories
With the definitions being slightly fluid depending on context, it’s always wise to look further into the fine details. It could open up avenues of funding or networks that hadn’t previously seemed available, and might help to protect your interests from other organisations.
And of course! As your business grows, you could find yourself moving through definitions. This is great in most respects, but just keep an eye on how this might impact your responsibilities to existing agreements or investors.