What Exactly is an SME? Your Guide to Business Types and Key Examples

SME is a type of business that plays a vital role in driving the country's economy. Whether small or medium-sized, these businesses help create jobs, generate income, and add diversity to the market. However, in the rapidly changing business world, adapting and modernizing your business is crucial—especially in this digital era, where technology plays an increasing role.

This article will give you a deeper understanding of SME businesses, delving into what SMEs are, their characteristics, and introducing trending small business ideas this year. This will help SME entrepreneurs adapt and grow their business sustainably in the digital age.

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Table of Contents

• What is an SME and what are its characteristics?
• How many types of SMEs are there in Thailand?
• How do SMEs strengthen the Thai economy?
• 5 things to prepare before starting an SME business
• What advantages do SMEs have over large businesses?
• What are the limitations and challenges of SMEs?
• Frequently Asked Questions (FAQs)
• SME: A business opportunity for new-age entrepreneurs

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What is an SME and what are its characteristics?

SME stands for Small and Medium Enterprises. In Thailand, SMEs come in many forms—ranging from sole proprietorships, partnerships, and unregistered ordinary partnerships to limited partnerships, limited companies, and even joint ventures. SMEs operate in sales, manufacturing, and services.¹

Today, SMEs are no longer limited to traditional storefronts but can rapidly grow as online businesses that reach customers nationwide and even abroad. The key factor for business success is an efficient back-office system, especially a modern, secure, and easy-to-use online payment system.

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How many types of SMEs are there in Thailand?

When it comes to SMEs, many people may wonder what types of small and medium businesses there are. In fact, SMEs can be divided into three main types:

Businesses related to trading

These are businesses focused on buying and selling goods. Entrepreneurs source goods to sell to customers or other retailers. The focus is on inventory management and building relationships with partners—such as grocery stores, retail shops, wholesalers, and stores selling electrical appliances or office supplies. The sizes of trading businesses can be classified as follows:

• Micro Enterprise Has an annual revenue not exceeding 1.8 million THB and no more than 5 employees.
• Small Enterprise Has an annual revenue not exceeding 100 million THB and no more than 50 employees.
• Medium Enterprise Has annual revenue between 100-500 million THB and employs 50-200 people.

Businesses related to manufacturing

Manufacturing businesses transform raw materials or semi-finished products into finished goods for sale. The key is in planning, quality control, and resource management—for example, snack and ready-made food factories, small garment factories, kitchenware manufacturers, handicrafts, and souvenir producers. The size of the business is divided by revenue and number of employees:

• Micro business Has an annual revenue not exceeding 1.8 million THB and no more than 5 employees.
• Small business Has an annual revenue not exceeding 50 million THB and no more than 30 employees.
• Medium business Has annual revenue of 50-300 million THB and 30-100 employees.

Businesses related to services

Service businesses are another type of SME that is growing steadily in Thailand, responding to diverse needs. The main feature is leveraging expertise to generate income directly—such as barber shops, beauty salons, massage parlors, small hotels or homestays, graphic design firms, or business consultants. Business size is classified by revenue and staff:

 Barbershops, beauty salons, wellness spas, small hotels or homestays, graphic design firms, or consulting companies, etc. Business size is divided by revenue and number of employees:

• Micro business Has an annual revenue not exceeding 1.8 million THB and no more than 5 employees.
• Small business Has an annual revenue not exceeding 50 million THB and no more than 30 employees.
• Medium business Has annual revenue of 50-300 million THB and 30-100 employees.²

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How do SMEs strengthen the Thai economy?

While the definition of an SME may seem like just a small business, SMEs play an unexpectedly large role in strengthening Thailand's economy. With the sheer number of SMEs nationwide, they are a major source of job creation, income distribution to communities, and a solid foundation for the local economy. 

Moreover, SMEs are incubators of innovation and creativity. SME entrepreneurs are often agile and able to adapt or launch new products and services to quickly meet changing market needs. Supporting and promoting SMEs is a worthwhile investment for building a stronger, more sustainable Thai economy in the long term.

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5 things to prepare before starting an SME business

Entrepreneurs who want to start an SME business should prepare thoroughly, as a good start increases the chance of business success. Important preparations include:

1. Consider resources

Before starting a business, clearly assess whether you have sufficient resources—be it personnel, finances, or equipment—because planning resource use efficiently reduces costs and increases your chance of success. 

2. After-sales service

Most customers decide to buy again or recommend your business based on their after-sales experience. Therefore, SMEs should be ready to take care of customers—such as product warranties, fast responses, and attentive problem-solving—to build long-term customer relationships.

3. Financial planning

Money matters go hand in hand with SMEs. Business owners should have a clear financial plan from initial investment, working capital, to expense planning, so they know how to spend most effectively and can control costs, plan investments, and manage cash flow efficiently.

4. Understand customer needs

Understanding customer needs is the starting point for stable sales. Study what your customers want, which SME products or services will meet those needs, and which channels customers use to contact or order.

5. Business partners that facilitate operations

Having partners that facilitate your business is crucial for SMEs in the digital era, especially for doing business online—for example, selling on a Facebook page. Having partners that offer diverse, reliable payment solutions allows businesses to offer convenient, fast payment experiences, which helps boost sales and customer satisfaction.

One reliable business partner is KGP (Kasikorn Global Payment), offering online payment via Meta Pay with complete options—Mobile Banking, PromptPay, QR Code, credit, and debit cards—to create a seamless, safe experience for every online business.

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What advantages do SMEs have over large businesses?

Some people may think SMEs can't compete with large businesses, but in reality, SMEs have several key advantages that allow them to adapt quickly and grow steadily. The advantages of SMEs include:

• High flexibility Able to quickly adapt strategies to market trends and customer needs.
• Fast decision-making Simple business structures allow owners to make immediate decisions without many steps.
• Close to customers Opportunity to communicate and listen directly to customers, leading to better product and service development.
• Lower operating costs Due to smaller scale, resource management is more efficient and expenses are easier to control.
• Easy to create differentiation Able to try new ideas at any time without the big limitations of large organizations.

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What are the limitations and challenges of SMEs?

Even though SMEs are highly agile, there are still limitations and challenges that entrepreneurs must face and overcome to keep the business moving forward.

• Capital limitations As small or private businesses, capital often comes from the owner or loans, making it harder to expand or invest in new technology.
• Human resource limitations May have difficulty attracting and retaining talent due to limited compensation and benefits. 
• Marketing and competition limitations Fierce competition from big businesses and online businesses means SMEs must adapt and differentiate because large businesses have lower unit costs, bigger ad budgets, and better market access.
• Lack of access to advanced technology Some businesses cannot invest in digital systems or modern tools.
• Risk from reliance on a few customers If main customers stop buying, it may immediately affect revenue.

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Frequently Asked Questions (FAQs)

How are SMEs different from companies?

SMEs are small and medium-sized enterprises, with small to medium size, limited registered capital and income, simple structures, and high operational agility. Management is often centralized with the owner or a few executives, and they have the potential for gradual growth. 

In contrast, companies can be any size, have more complex structures, access a variety of funding sources, have systematic management, and can expand faster.

How do SMEs pay taxes?

SMEs are required to pay income tax as either individuals or juristic persons. If an individual, they pay under Section 40(8); if registered as a juristic person, they pay corporate income tax at the specified rates.

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SME: A business opportunity for new-age entrepreneurs  

SMEs are the heart of Thailand's economy. With creativity and agility, SMEs can differentiate themselves and grow strong in the digital business world. Careful business planning, preparation, and the best use of technology are key to helping SMEs overcome challenges and seize business opportunities. Additionally, partnering with large organizations is a great strategy, as it opens up bigger sales channels and creates sustainability for both parties, enabling mutual growth. SMEs can access the customer base and resources of big organizations. 

In the digital age, SMEs can easily increase business opportunities with KGP’s Meta Pay payment service, which allows customers to pay conveniently and close sales on Facebook. Once customers shop, chat, and confirm orders, they can get paid instantly through Meta Pay, which supports all payment channels, from credit/debit cards to bank transfers. Let KGP help your SME receive payments, expand business opportunities, and grow rapidly.

KGP, Payment. Make It Smooth 

FB : kgpthailand

LinkedIn : Kasikorn Global Payment

www.kasikornglobalpayment.com 

References

1. Revenue Department. (2010). About SME Business Models. rd.go.th

https://www.rd.go.th/fileadmin/user_upload/porkor/taxused/SMEs.pdf 

1. KBIZ. (n.d.). What is SME and SME Business? How many types? Let’s understand. kasikornbank.com

https://www.kasikornbank.com/th/kbiz/article/pages/guide-for-sme-business-and-how-it-works.aspx