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  The term, “SME” refers to small and medium enterprises. These are organizations or companies that have a limited, specified number of employees, structure and customers. They are companies that display a distinct set of identifying characteristics that set them apart from their larger competitors.
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A business may be regarded as a small business because of the number of employees in the organization, annual proceeds, working capital, assets, and revenue. However, other yardsticks may be used to define a small business such as its location and its ownership type, as a small business could be based at the owner’s home or at a location, which does not occupy so much space, and the business most times, is typically owned by an individual and it operates privately. Below are ways you can identify an SME in Nigeria:

  • Lower Revenue and Funding

Most small-scale businesses bring in less than a specific amount of revenue, depending on the business type, however, most of these small businesses have low annual turnovers at the end of each year. Lower revenue does not necessarily translate into lower profitability, as most small-scale businesses often own their facilities and equipment outright, which, in addition to other factors, help to keep costs lower than more leveraged businesses. Another method to spot an SME in Nigeria is when the small business does not even have any existing major source of funding or depends on a makeshift survival strategy to remain relevant in the industry it belongs. The majority of the small and medium scale businesses in Nigeria fall under this category, as most of these businesses are individuals seeking to earn a living through entrepreneurial endeavours.

  • Number of Employees

It is easier to spot small-scale businesses from the number of employees involved in the running of the business. Small-scale businesses employ smaller teams of employees than companies that operate on larger scales. Sometimes they are run entirely by single individuals or small teams. This limited staff is required to complete all necessary tasks including innovation, production, marketing, sales and accounting for the entire business; for example, the owner of the business may be the manager who oversees all the areas of the company.

  • Small Market Area

Small-scale businesses serve a much smaller area than large corporations or larger private businesses, this is because the structure of a small-scale business is comparatively small, so they can only serve single communities, such as a convenience store in a rural township.
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The title “small-scale business” also serves as a barrier for these companies to serve areas much larger than a local area, because growing beyond that would increase the scale of a small business’s operations and push it into a new classification.

  • Mode of Ownership

The majority of small and medium scale businesses in Nigeria are managed and organized as sole-proprietors, partnerships or at most limited liability companies. These forms of organization ownership provide the greatest degree of managerial control for company owners, while minimizing the hassle and expense of business registration. These businesses are most times solely owned or managed by two or more persons who share the profits at the end of the year.

  • Limited Locations

A small-scale business, by definition, can be found only in limited areas, this is because these companies are not likely to have various branches or sales outlets in multiple states or countries. Most small and medium scale businesses in Nigeria operate from a single office or retail store, some are even managed from the comfort of their homes without any sophisticated company facilities.

  • Relationships

Since small businesses focus on meeting the needs of a small number of customers with a small number of products and services, it makes it easier for business owners to establish strong relationships with their business partners and customers, which in turn provides stability for the SME.

  • Simplicity

The business structure of SMEs in Nigeria is quite simple and very flexible, giving room for necessary changes as the business grows and blooms. This flexibility, however, does not necessarily mean the company is observing local or national regulations that a board or legal team of a larger organization would evaluate before applying necessary changes. Featured Image Source: The Guardian NG
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This article was first published on 10th January 2022

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Grace Christos Is a content creator with a proven track record of success in content marketing, online reputation management, sales strategy, and so much more.

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