What is meant by SME?

In a domestic business landscape, “SMEs” are often mentioned, but exactly what are we referring to when we talk about SMEs? In essence, what are SMEs?

Let’s see it in detail in this article.

What are and how are SMEs classified

SME stands for “Small and Medium Enterprise”. In most countries, the definition of small and medium-sized enterprises refers to companies that have a limited number of employees and a turnover or balance sheet value below a certain threshold. This threshold varies by country and business sector, but in Italy, my home country, usually SME requirements include having fewer than 250 employees and a turnover threshold of less than 50 million euros per year.

When it comes to the classification of small and medium-sized enterprises, it can be done in relation to several factors, namely:

  • size: SMEs can be classified according to their number of employees, turnover or balance sheet value. This classification is used to determine the thresholds for qualifying as larger or smaller SMEs;
  • business sector: for example, manufacturing, services, trade or technology. This classification is useful for analyzing trends and opportunities in the market;
  • ownership: e.g., individually owned, partnership or corporate enterprises. Here we have a classification that is often instrumental in identifying growth opportunities;
  • stage of development: for example, start-ups, growing SMEs, or mature SMEs. This classification is essential for identifying investment opportunities and providing appropriate support to enterprises at different stages of their development;
  • geographical region where the company’s offices or factories are located: this classification of small and medium-sized enterprises is finally important in identifying trends and opportunities present in the different geographical areas where SMEs are located.

What is the role of SMEs in Italy?

After clarifying what small and medium-sized enterprises are, let’s see what their role is in Italy’s economic and social fabric.

Indeed, small and medium-sized enterprises in Italy play a very important role in the country’s economy.

First, SMEs in Italy create the majority of new jobs and contribute significantly to the country’s gross domestic product (GDP), representing a key driver of economic growth. In particular, Italian SMEs can play a key role in the growth of less developed regions, creating jobs and increasing demand for goods and services.

In addition, small and medium-sized companies in Italy are often more flexible and agile than large companies, making them able to adapt quickly to market changes and make decisions more quickly.

Not surprisingly, Italian small and medium-sized enterprises are often the first to introduce new products or services to the market and experiment with new technologies, and there are many innovative SMEs particularly important for the country’s innovation and economic growth.

How many SMEs are there in Italy according to ISTAT, the National Statistics Institute?

We have seen what is meant by small and medium-sized enterprises, but how many SMEs are there in Italy?

According to the most recent ISTAT data (December 2021), there are about 5 million small and medium-sized enterprises in Italy.

Precisely because of their key role in the national economic landscape, small and medium-sized enterprises in Italy as in many other countries often benefit from government support aimed at promoting their growth and development, such as tax breaks, financing and training programs.

The challenges of Italian small and medium-sized enterprises

From everything we have said so far, it is clear that small and medium-sized enterprises are considered a very important part of the Italian economy indeed, as they are a significant source of jobs and contribute to the country’s economic growth and innovation.

However, when talking about SMEs, one cannot also ignore the challenges of SMEs in Italy, such as competition with large enterprises and the scarcity of financial resources, which government supports are not always able to address.

Many small and medium-sized enterprises in Italy also show difficulty in establishing strong brand positioning (link to article “what is brand positioning), when in fact branding is a key element for SMEs (link to article “what is brand positioning) and their development.

In addition, another challenge for small and medium-sized Italian companies is the consolidation of an internationalization process in foreign markets.

In light of these critical issues that I have identified working with so many companies in Italy and abroad, with my business internationalization and brand positioning services I have chosen to help domestic SMEs in particular who want to find growth opportunities abroad.

Do you want to develop a strategy to successfully emerge in international markets? Take the first step now: get in touch right away. I’m looking forward to hearing from you!