SMB (small and medium-sized business)

Definition

A small or mid-sized business, the size an individual buyer can actually buy.

Why It Matters

Nobody agrees on the range, which is why the word does no work until someone says which end they mean: a lender, a private equity firm and a software vendor each use it for a different size of company. Everything written here uses one checkable band: at least $500,000 of owner earnings, and roughly $1.5M to $5M of purchase price. When you meet the word anywhere else, ask for the number behind it before you agree to anything, because a broker and a bank using the same three letters can be describing businesses ten times apart in size.

In numbers: A business at $600,000 of SDE and a $1.9M asking price is SMB to every speaker. A company at $40M of revenue is SMB to a software vendor and lower middle market to a banker, which is why the word needs a number beside it.