Small to mid-size enterprise (SME) is a company or rather a corporation that keeps its revenues, market share, and the number of employees below a certain number. For instance, in Germany, and larger Europe, SMEs have their employees at roughly 250 in number or thereabout. Moreover, in other parts, SMEs can also be considered as sole proprietorships with fewer employees, less than 250.
So, what is the current situation of SMEs in Germany? Well, as at 2017, the number of SMEs was standing at 2.45 million, which marked a great increase of more than 360 thousand enterprises in a record five years. It is also important to note that in these statistics, the vast majority are micro-size entities with employees falling under fifty. Also, it would be best if you knew that for a company to be categorized as an SME in Germany, it has to meet the following criteria:
- The turnover of the company must be under 5 billion dollars.
- The company should rank amongst the top three globally in its line of production.
- More than 50% of the company’s revenues must originate from exports.
Other than just fulfilling the above conditions, SMEs have been at the forefront to see the betterment of German’s economy. In fact, most SMEs are not conglomerates and hence ensure efficiency and excellence in their respective lines of production. SMEs in Germany target international markets because they see a big niche there. Moreover, they also have to fulfill the third condition of deriving 50% of their revenue from exports. Either way, SMEs have been the harbinger of success in Germany because of the following reasons:
Unlike in many countries, university students in Germany have a faster job absorption rate, thanks to SMEs. In addition to that, students don’t have debts as their education is fully-fledged by related SMEs. SMEs use the paid and unpaid interns system to promote learn-on-the-job policy and later on absorb the now skilled labor into the gainfully employed labor force.
- Diverse manufacturing
You must know that Germany derives at least 25% of its GDP from manufacturing. On a percentage basis, Germany is the leading manufacturer globally, as it exports twice as what the USA exports in terms of manufactured goods. However, you must also note that tertiary industry is the leading GDP contributor in terms of local consumption and exports. SMEs have brought about this manufacturing diversity, and it is no shock that Germany has the highest number of SMEs globally.
- Equal distribution of resources
Unlike in many countries, Germany promotes a cultural or rather equitable regional development throughout the country. It would be correct to say that Germany is among the few countries globally with balanced economic growth. SMEs have created employment opportunities even in the remotest regions of the country. The advantage of this is that there is no longer urban congestion as people are gainfully employed in their regional towns. Equal distribution of economic resources cuts on the dependency ratio, which consequently reduces the government expenditure on national welfare. That way, funds are channeled into creating more jobs by improving the available infrastructure.
- Tax breaks
They say that a country can either build or break the economy through taxes. Well, for Germany, the government is playing safe and maybe acting prudently when dealing with SMEs’ taxes. Both individual and large corporation taxes have been scaled up to stand in for the lowly taxed SMEs. This act has enabled these micro-enterprises to build from scratch and establish themselves as multi-billion dollar enterprises. Moreover, SMEs are the leading employers in the country, and the government wouldn’t want to hurt that.
