CRM Definition: What does "SMB" or "SME" mean?

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Note: this is a part of our CRM Definitions Series.

Have you ever been researching business software and run into the term SMB? As in: “Simple CRM software for the SMB market.” Even if you already know what the acronym stands for, there’s some hidden meaning that you might not know about. This post will explore exactly what the term means.

The term SMB stands for “Small or Medium-Sized Business”. You’ll also sometimes see the term “SME” which means the exact same thing (just replace “business” with “enterprise”).

But what is a small or medium-sized business? Each country has a legal definition about what counts as a small business, or a medium sized business. For example, in the U.S. a small business is any company with under 500 employees, whereas in the EU any company with under 50 employees is considered a small business (source). Obviously these definitions aren’t much help because the legal definition varies so wildly from one region to the next, and also because the differences between a five person company and a 500 person company are so great that no one in their right mind would try to use the same term to describe them both.

Luckily, the term means something different in the world of business software. Most business software is meant for enterprises, a.k.a very large companies. Even though it’s a bit of a misnomer, the term “SMB” is really used to refer to any business that isn’t considered an enterprise. If you’re not sure whether your business is an enterprise, or an SMB, there’s not an exact definition, but you can normally tell by asking yourself the following questions:

  • Is the process of purchasing software for your company so bureaucratic that you’d rather pay for a year or more up front rather than paying monthly, just so you don’t have to fill out the paperwork each month?
  • Do multiple different departments have influence over the software purchasing process?
  • Once you buy software, will you need your IT team to build custom integrations with your own internal software?
  • Do you have so many employees that the person in charge of purchasing the software won’t actually be using the software day-to-day?

If the answer to any of those questions is “yes” then you’re probably considered an enterprise rather than an SMB. The last question is the most important because that dictates how the software vendor will treat you. If they think they’re selling to a C-level executive who won’t actually be using the CRM (or whatever software you’re buying) they’ll treat the sale very differently than if they think they’re selling to a small business owner who will log in and use the tool just like the rest of the employees.

The C-level executive doesn’t care about how intuitive it is, how good the training is, or even how much it costs. They really only cares about one thing: ROI. The small business on the other hand is much more likely to care about the user experience because he or she will actually have to use the product (and they’re also more likely to be close with the other employees who will have to use it).

So when you see the term “SMB” used by a software company, understand that it doesn’t just mean “small or medium-sized business” but it also gives you a hint about how you’ll be treated by the software company, and what the priorities of the product will be. There’s absolutely nothing wrong with enterprise software, but if you’re truly an SMB, you’ll almost certainly want to stick to software meant for you.

I’d love to hear about your experiences trying to decipher buzzwords in the software industry. If you’d like to chat, just tweet me (@TylerMKing)

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