Classifying Business - Size

There are qualitative and quantitative indicators of business size.

Qualitative: Descriptive characteristics and features that cannot be represented numerically.

Quantitative: Categories that can be represented in numbers.

The main determination of business size is employee numbers. See below.

Small business:

Examples: Corner store, local mechanic, hairdresser, optometrist, dentist

Number of employees: less than 20. Micro business is less than 5, small business is up to 20 employees

Type of Ownership: Independently owned by small number of people, usually that operate the business day to day

Most common Legal Structure: Typically an unincorporated legal structure. Sole Trader (one owner) / Partnership (2+ owners)

Decision making: Owner responsible; can be distributed through employees; quick to implement decision in small firm.

Sources of finance: From owner savings or personal loans

Market share: small, local, not dominant

Medium Business: 

Examples: Hotel, factory, educational college, stores with multiple outlets

Number of employees: Between 20—199 employees

Type of Ownership: Owned by small number of people, possibly including private shareholders for larger medium firms

Most common Legal Structure: Partnerships, transitioning into private company to protect personal assets of owners; limited liability.

Decision making: Owners responsible, but more complicated processes and slower to implement (Board, management, shareholders)

Sources of finance: Partly owners savings, partly variety of debt, partly equity from external private shareholders.

Market share: Dominant in geographic region, medium player in industry, perhaps growing

Large Business:

Examples: Qantas, Woolworths, Apple, BHP, Commonwealth Bank, Wesfarmers

Number of employees: 200+ Only 5% of all Australian employees work in large businesses

Type of Ownership: Owned by thousands of individual shareholders (unit trusts, super) through the share market (ASX)

Most common Legal Structure: Public company with limited liability.

Decision making: Complex decision making, division of responsibilities into business units / functions, layers of management; slow process involving board, management, shareholders.

Sources of finance: Equity finance (sale of shares), loans from banks / money markets, cash reserves, retained profits.

Market share: Dominant in industry, large revenues from one / multiple nations