What is SME? Distinguish between the concepts of SME and Startup

What is SME? In business, SME businesses are considered to have outstanding growth, contributing a significant part to the development of the global economy. The article below will send you all information about SMEs. Watch now!

1. What is SME?

Also known in English as Small and Medium Enterprise, SME is a type of small and medium-sized enterprise. Possessing a not too large revenue, assets and number of employees, SME includes businesses of the same scale in all fields and is widely used in the global market.

Accordingly, the World Bank Group has classified SMEs based on the following criteria:

• Micro-enterprise: With less than 10 employees.
• Small businesses: Number of employees from 10 - 200 people, possessing capital of less than 20 billion VND.
• Medium enterprises: The number of employees ranges from 200 - 300 people, with capital from 20 - 100 billion VND.

2. Difference between SME and Startup

SME and Startup are two concepts that are easily misunderstood because they are quite similar, however, each type has different characteristics and business goals depending on the country and region. Below is a detailed description of the differences between SME and Startup:

3. The importance of SMEs in today's economy

SME businesses contribute significantly to the development of the economy such as solving social problems, nurturing talents, contributing to GDP growth... Below are some specific important points that SMEs This SME brings:

3.1 Contribute to economic growth

SMEs play an important role in promoting domestic and world GDP. Even at times of economic crisis, SMEs still earn profits and help GDP grow steadily, accounting for 50% of the world's total domestic product and 30% of total exports to foreign countries.

On the other hand, SME businesses often choose to operate in undeveloped areas to create local business and development opportunities, increase living standards and development gaps between areas.

3.2 Solving labor problems

Currently, SME businesses are increasingly growing and have the ability to expand in the future. Thanks to that, labor problems are gradually resolved. In Vietnam, SME has created many job opportunities for new graduates, unskilled workers... contributing to creating stable income for people, improving economic and social life. festival.

3.3 Producing a variety of goods/services

Through the process of researching and learning about customer needs in untapped market segments, SME businesses can seek opportunities to develop products/services, creating economic benefits for both businesses and local communities.

3.4 Nurturing a talented young team

Starting from small and medium enterprises, corporations such as Google, Microsoft... have grown thanks to a very young staff, helping them have more creative ideas and excellent business ideas. Therefore, SME is often considered the cradle of nurturing many talented young generations, contributing significantly to the development of the domestic and foreign economy.

4. Characteristics of SME businesses

Compared to other businesses, SMEs account for the majority of operations in most countries, creating more than 80% of total job opportunities in the market in developing countries. Rapidly growing SME business models include:

• Law offices
• Fitness centers, entertainment venues
• Dental clinics
• Private clinics
• Hotels and motels
• Restaurant
• Preschool
• Wine and beer stores
• Beverage stores
• Technical services
• Beauty salon
• Veterinary services

Currently, SME businesses always focus on creativity, innovation, adaptability and competitiveness with competitors in the same industry. However, they also encounter many problems raising capital to maintain operating efficiency. In some countries, governments and world organizations have organized business education projects and expanded SMEs' access to loans and financial support from the government.

5. Classification of SME enterprises

Besides understanding what SME is, administrators also need to pay attention to the small components of SME businesses. Normally, SME businesses will be classified based on the characteristics of the agricultural and service trade groups. Details will be presented through the following table:

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6. Opportunities and challenges of SME businesses

In the process of business development, any model must face many opportunities and challenges, especially in the current period of many competitive businesses.

6.1 Opportunity

SME businesses do not face many difficulties in finding human resources and the ability to expand their markets. Enterprises will conduct production and business based on consumer demand for each item, thereby helping businesses ensure competitiveness and expand the market.

Especially in the current period of integration, businesses also have more opportunities to expand their markets and the ability to operate flexibly in the face of economic fluctuations.

6.2 Challenges

• Difficulty accessing capital: SME businesses face many difficulties when borrowing capital, this greatly affects the ability of the business to operate, SME businesses gradually tend to borrow massively to solve problems. Tried to make up for losses but failed.
• Difficulty participating in the global supply chain: Limitations in production technology leading to low productivity and shortage of human resources cause SMEs to minimize opportunities to connect with the global supply chain.
• No clear leadership method: In many SME businesses, leaders still do not have clear business directions, which makes management ineffective, directly affecting employee morale. employees and business performance.
• Limitations in corporate governance: SME business leaders have not yet made investment policies for marketing campaigns, which will create problems in information mechanisms, limited resources and technology. administration. Thereby affecting the improvement of business sales of the organization.

7. What do SME businesses need to do to develop?

In the current competitive period, SME businesses need to devise appropriate solutions and strategies to achieve sustainable development and strengthen their position in the market. Here are some specific strategies:

7.1 Take advantage of competitive advantage

Each SME business needs to clearly understand its strengths, weaknesses, opportunities and challenges compared to competitors in the same industry. At the same time, determine the target market segment and the actual needs of the customer group to be targeted.

After that, the business will focus on developing products/services and ensuring they fully meet market needs that no competitor has implemented. In particular, SME businesses should not ignore building a reputable, quality brand image to attract and retain loyal and potential customer groups.

7.2 Set up a financial plan

In cases where mobilized capital is not large enough, SME businesses need to come up with strict and effective financial management plans. Such as:

• Plan and estimate costs and revenue for each month, quarter, and year.
• Find suitable investment capital.
• Continuously monitor cash flow and manage costs effectively.
• Refer to effective financial management tools to avoid errors and optimize profits for your business.

7.3 Clearly define corporate culture

Right from the beginning, corporate culture has been considered one of the important things in sustainable development, especially for small and medium-sized enterprises. Administrators need to build a core system, a comprehensive vision, and implement policies to create a positive working environment and recruit talented people. In particular, investing in training and development also helps businesses improve human resource capacity and becomes a premise for businesses to develop further in the future.

7.4 Standardize the operating system

Standardizing the operating system helps improve employee efficiency and ensure customer satisfaction. Therefore, SME businesses need to establish complete operating procedures and working procedures, promulgate and apply to the entire company.

Operating processes in the enterprise are divided into 4 groups based on each specific function:

• Operational management process
• Customer management process
• Innovation process
• Social process or regulation of state management agencies

7.5 Keep up with digital transformation trends

Finally, awareness of the importance of digital transformation will help SME businesses achieve significant success, increase competitiveness and improve production and business efficiency. To do this, SMEs should promote online sales channels to reach many customer groups and promote products/services through digital marketing tools.

Along with effective business strategies, applying technology solutions in the business management process is also really necessary for SME businesses. This helps support businesses in limiting many manual tasks, minimizing errors, and optimizing human resources and costs during operations.

Above is the content surrounding what SME is, its characteristics and directions to help businesses survive and develop in a vibrant competitive situation. It can be seen that SME businesses have been contributing significantly to dispersing financial risks, bringing many new opportunities to the domestic and foreign economies. Follow 1C Vietnam to learn more useful information about other corporate governance!