One of the most obvious ways in which businesses differ is their size. Most of us know some businesses that are very small – one-person businesses or micro-businesses of fewer than five people. Examples may include a single person running, for example, a web design company, a hairdresser’s or a small catering business, or a small retailer, such as a craft shop or a florist, employing just one or two other people. Small and medium-sized enterprises actually make up over 90% of the number of businesses in most countries (although they do not employ over 90% of all employees or make over 90% of all business deals). At the other end of the scale are businesses that are very large – multinational corporations employing thousands of people and operating in many different countries. We are familiar with at least the names of some, such as Microsoft, Samsung, Siemens, Renault, and many more both well-known and less well-known large corporations. And then there are many businesses of all sorts of sizes in between.
It is less obvious how we should measure the size of a business. There are several different measurements available, not all of which are suitable for measuring the size of all types of business. For example, measuring a business’s size on the basis of how much profit it makes assumes that it is a for-profit enterprise. Measuring the stock market value of a business assumes that its shares are traded on the stock market, which is by no means true for all businesses.
Two measures that are applicable to nearly all businesses are number of employees and annual turnover, i.e. the total value of sales made over the period of a year. These two measurements are not always in accord with each other: there are some businesses with very few employees that nonetheless produce quite a large annual turnover. For example, a single person trading shares on the stock market could make a very large turnover in a year if they were very successful. The European Commission uses a combination of number of employees and turnover to define the size of a business (EC, n.d.):
Businesses with fewer than 250 employees are often collectively classified as small and medium-sized enterprises (SMEs).
In some ways the challenges for small and for large businesses are not so different. All businesses need to make sure they offer goods or services that people want to buy, that they have enough income to cover their costs and something left over, and that people working for them are motivated, well qualified and work well together. In other ways, however, small businesses operate very differently from large businesses.
There is much more that could be said about the differences between large and small businesses and also about the differences between businesses of a similar size. For the moment, it is enough to be aware that size does matter in business and management, not because bigger or smaller is better but because they pose different challenges and different opportunities.
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