What is an SME? Distinguishing between SME and Startup

Did you know that over 95% of businesses worldwide are SMEs? Learn now about the concept of SMEs , their role in the economy and how they are a powerful engine of growth for every country!

What is an SME?

SME stands for Small and Medium Enterprises in Vietnamese. These are businesses that are small in terms of number of employees, capital, and revenue compared to large businesses. In Vietnam, SMEs account for 95 % of the total number of businesses and play an essential role in promoting economic growth.

According to the law in Vietnam, SMEs include three main types: micro enterprises , small enterprises , and medium enterprises . These enterprises often operate in many fields such as manufacturing, trade, services, and technology.

Distinguishing between SME and Startup

Despite their similarities, SMEs and Startups are two completely different types of businesses in terms of goals, scale, and methods of operation.

Criteria	SME Business	Startup
Scale	Small and medium	Usually small
Age	Stable operation in the market	Newly established
Business model	Usually traditional business model	Innovative, breakthrough model
Target	Sustainable Development	Rapid growth, expanding global market
Profit	Usually profitable from the start	Often accept losses in exchange for growth
Technology application	Not demanding	Requires advanced technology applications

For example : A traditional home appliance manufacturing company in Vietnam is an SME. Meanwhile, a technology company that develops artificial intelligence applications to change the way users interact with electronic devices is a Startup.

The role of SMEs in the economy

SMEs are not just small businesses, they are also the driving force of socio-economic development. With their flexibility and quick adaptation, SMEs contribute significantly to national GDP , create job opportunities and develop local areas.

1. Create jobs and reduce unemployment

SMEs make up a large part of the economic structure, creating millions of jobs each year . These businesses often employ local workers, contributing to reducing unemployment and improving the quality of life for people.

2. Promote economic growth

Thanks to their flexibility, SMEs can easily adapt to changes in the business environment. SMEs promote creativity and innovation, while contributing to national GDP growth through production and exports.

3. Production of diversified goods and services

SMEs are constantly looking for opportunities in new market segments, creating diverse products and services to meet consumer needs. For example , SMEs in the food sector have created a variety of foods that are in line with health trends.

4. Regional economic development

SMEs are often concentrated locally, thereby creating positive spillover effects, promoting regional economic development and reducing the development gap between regions.

5. Increase national GDP

SMEs contribute about 40% of Vietnam's GDP and create jobs for more than 60% of the workforce , affirming their important role in the economy.

SME Business Classification

In Vietnam, SMEs are divided into three main types: micro enterprises , small enterprises , and medium enterprises . This classification is based not only on the number of employees but also on total capital and revenue.

1. By labor and capital scale

• Micro-enterprise : Less than 10 employees, capital or revenue under 3 billion VND.
• Small business : No more than 100 employees, revenue under 50 billion VND.
• Medium enterprise : No more than 200 employees, revenue under 200 billion VND.

2. By field of activity

• Agriculture, industry : Food processing, construction.
• Services, trade : Transportation, retail, logistics.

Opportunities and challenges of SME businesses

In the context of a globalized economy, SMEs face both great opportunities and significant challenges. SMEs also face problems such as lack of capital, fierce competition and management constraints.

1. Opportunity

• Potential domestic market : Vietnam with a large population is fertile land for SME development.
• Digital transformation : Increasingly accessible technology helps SMEs improve their competitiveness.
• Government support : Preferential policies on taxes and loans create conditions for SME development.

2. Challenge

• Capital difficulties : Many SMEs face difficulties in obtaining credit due to lack of collateral.
• Fierce competition : SMEs face larger enterprises with stronger resources.
• Management limitations : The ability to manage and train human resources at SMEs is still limited.

Popular industry groups in SME businesses

SMEs operate in many different fields, from manufacturing, trade to services. Popular industries such as food, education, information technology or logistics all have significant contributions from SMEs.

1. Trade and services

• Retail, distribution.
• Tourism, transportation, education services.

2. Production and processing

• Clothing, food, beverage.

3. Technology and innovation

• Software development, website design.

Some frequently asked questions about SME businesses

1. Why do SMEs fail?

• Not understanding the market and customer needs.
• Poor financial management.
• Lack of investment capital and no long-term strategy.

2. How to start an SME business?

• Step 1 : Identify business ideas and research the market.
• Step 2 : Prepare capital and find sources of supply.
• Step 3 : Establish a business and implement a business plan.

SMEs are not only the backbone of the Vietnamese economy but also the driving force for creativity, innovation and competitiveness. Despite many challenges, SMEs still have great opportunities to develop thanks to the support of technology and the government. The flexibility and adaptability of SMEs promises to bring many positive changes to the Vietnamese economy in the future .

Brand Manager – Specializing in Providing Comprehensive Marketing Services for Brands

For small and medium-sized enterprises ( SMEs ), building a strong brand is the key to competing in an increasingly competitive market. This is where the role of a Brand Manager becomes necessary, helping SMEs position their brands, implement appropriate marketing campaigns and optimize limited resources.

Brand Manager not only helps SMEs implement effective marketing strategies but also provides long-term orientation, ensuring sustainable brand development. From leveraging digital tools to measuring campaign performance, Brand Manager is a trusted companion in the journey of expanding market share and enhancing brand value of SMEs.