Bredin Report: SMB 101: Basics of the SMB Market

What is an SMB, anyway?

It’s August, theoretically the dog days of summer. We thought these supposed-to-be-saner days of the year would be a good time for a refresher on the SMB market: what defines an SMB, how many there are, what industries they are in, and what keeps them up at night. Think of this as a primer on the huge and diverse SMB market.

What is an SMB?

The Small Business Administration’s definition of an SMB varies by industry. For example, an SMB must have 500 or fewer employees in NAICS code 113310, logging, but it can be as large as 1,500 employees in NAICS code 212221, gold mining – but it must have less than $11 million in revenue in NAICS code 113110, timber tract operations. While these aren’t necessarily the most common industries for SMBs, it gives you a sense of the variability of the SBA’s definition. Many financial services firms define SMBs by revenue, while tech companies often define SMBs by headcount. At Bredin, we simplify SMB into Very Small Business (VSB – under 20 employees), Small Business (SB – 20 to 99 employees), and Mid-size Business (MB – 100 to 500 employees). Ultimately, though, how you define SMB should be based on what aligns best with your offerings and works best for your marketing.

How many SMBs are there?

The vast majority of SMBs are what the SBA calls ‘non-employer firms’ – one that has no paid employees, has annual business receipts of $1,000 or more ($1 or more in the construction industries), and is subject to federal income taxes. As of the 2016 business census, there were almost 25 million non-employer firms. While they make up about 82% of all SMBs, non-employers account for about 3% of business receipts. The SMB size distribution is a very flat pyramid. The next largest set of SMBs is those with one to four employees (almost three million), followed by those with five to nine employees (about one million), 10 to 19 employees (about 650,000), 20 to 99 employees (about 700,000), and 100 to 500 employees (about 360,000). So targeting SMB subsegments involves serious tradeoffs – you can target a relatively few big-spending SMBs with 100 to 500 employees, for example, or the vast number of relatively low-spending non-employers.

What industries are SMBs in?

There are nine industry sectors with over a million SMBs each (including non-employer firms). The largest, at 4.4 million is a catch-all called “Other services,” which includes repair and maintenance, non-profits and households with employees. Close behind is professional, scientific and technical services (4.2 million), followed by construction (3.1 million), real estate (2.9 million), retail and health care (tied at 2.6 million), administration and support businesses (2.4 million), transportation and warehousing (1.7 million), and arts, entertainment and recreation (1.4 million). The smallest SMB segment? Utilities, at 25,000, which usually require very large scale.

SMBs identify much more strongly with their industry than their size – they think of themselves as CPAs or electricians, for example, not small businesses. To the degree that you can customize your offerings and communications to your key verticals, your messaging will resonate much more strongly.

What keeps SMBs up at night?

In our research, business concerns vary significantly by company size. VSBs are most concerned with finding new customers, dealing with competition and finding good employees. SBs struggle with finding and retaining good employees, and complying with government regulations. MBs are most concerned with keeping data secure, retaining good employees, dealing with competition and complying with regulations. The better you understand your audience’s pain points, the better you can communicate how your offerings help them with their specific challenges.

Want to learn more?

Contact Bredin to learn more about the SMB segment, how to better understand them via original research, and how to engage them via high-impact content.

About Bredin

Bredin was founded in 1991 by America's foremost small business expert, author and syndicated columnist Alice Bredin. From its beginning, Bredin was designed to be a breed apart: 50% research consultancy, 50% creative agency, 100% focused on SMB. Based in Somerville, Mass., Bredin helps Fortune 500 companies understand, reach and retain SMB customers through timely, targeted research and award-winning marketing programs.