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“Taking the ‘M’ out of the SME” – ICAEW report

Taking the M out of SME

In the UK it’s an established nostrum that the Government should focus upon the “SME” (Small and Medium-sizes Enterprises) as the engine-room of the economy. While definitions vary, there’s broad acceptance that the definition covers companies from 5 people through to c£250million turnover. Quite a large slice!

Those of us who’ve worked in the SME sector (or who are involved in supporting growth in this area –
) know that the needs and capabilities of businesses under this definition are by no means uniform nor similar.

This report sets out the 7 characteristics of “M” companies…

Paul Druckman, President of the Institute of Chartered Accountants has undertaken a useful, overdue and insightful investigation into the specific characteristics of the “Medium” companies. This clearly articulates their increased sophistication, professionalism and approach as well as the specific support and development requirements. This isn’t to disparage the “S” companies, of course, but rather a belated acknowledgements that increased scale, skills and different behaviours should be addressed specifically, rather than a sort of “non-FTSE-500 catch-all”.

Paul’s 7 characteristics are:

Professional management teams

Enabling cultures

Effective systems

Longer time horizons

Value outside advice

Distribute equity

Diversify customer base

These criteria certainly ‘chime’ as being both sensible and a welcome change from the turnover/size metrics of the past. That they are also behavioural is welcome: it provides a growth path for the “S” companies – they can start ‘behaving’ as “M” companies immediately. Professionalising management, seeking and using external advice, considering longer planning horizons… all of these approaches are valid at £1m turnover as at £100m.

I’d be interested now to see some follow-up research as on whether there’s a correlation between these characteristics and growth…