Difference Between Micro, Small & Medium Enterprises and their Validity

Some cultures around the world define micro, small and medium enterprises with fancy terms and language but in developing countries like India, it means survival for many families. Let us discuss about these three enterprises individually to get a better understanding.

  • Micro enterprises and their validity

Micro enterprises are everywhere around us like an ice-cream parlor or your favourite cafe in your neighbourhood. These are small businesses with minimal employees and minimal capital. A microenterprise usually operates with less than 10 people and is started with a small amount of capital. In a developing country, necessity compels micro entrepreneurs to represent the vast majority of small business sector. They add value to the economy by creating micro business, enhancing the income & lowering the overall cost of business. The number of micro entrepreneurs is high due to the reason that no proper training and formal jobs are available to them.

Also Read: What’s in Budget for MSME’s. Tax Relief and other Benefits.

Micro-enterprises in developing countries produce both products and services for their local areas. These small businesses come in the form of local farms, selling cooked food from the sidewalk or food staples from a small store.

  • Small enterprises and their validity

Sometimes called a small business, a small enterprise is a business that employs a small number of workers and does not have high volume of sales. In technical terms, it is an independently owned and operated company that is limited in size and in revenue depending on the industry. Such enterprises are usually privately owned sole proprietorships, corporations or partnerships.

Small enterprises exist almost in every industry. They can range from convenience stores to small manufacturing plants. It can be a local bakery that employs 10 people or a manufacturing unit that employs 50 people. Additional types of small scale enterprises includes privately owned restaurants, law firms, inns, drycleaners, engineering and architectural firms.

Small enterprises also vary in terms of size, revenues and regulatory authorization. Some small businesses such as a home accounting business, may only require a business license. On the other hand, some like day care, orphanages and retirement homes are heavily regulated.

  • Medium enterprises and their validity

The category of medium scale enterprises is made up of enterprises which employ fewer than 250 persons. These enterprises emerge from the slow and steady growth of successful small businesses. As a company earns more revenue, it starts keeping aside the capital required for buildings, equipment and recruitment of more employees. This eventually creates a bridge between small business and big corporations.

Categorization of MSME’s in terms of investment

  1. In manufacturing industry:
    1. Micro Companies: Have investment up to Rs. 25 Lakhs
    2. Small Scale Companies: Have investment more than Rs. 25 Lakhs but less than Rs. 5 Crore
  • Medium Scale Companies: Have investment more than Rs. 5 Crore but less than Rs. 10 Crore
  1. In service industry
  2. Micro Companies: Have investment up to Rs. 10 Lakhs
  3. Small Scale Companies: Have investment more than Rs. 10 Lakhs but less than Rs. 2 Crore
  • Medium Scale Companies: Have investment more than Rs. 2 Crore but less than Rs. 5 Crore