Business Size
Business Size
The categorization and importance of businesses by size vary across different countries and regions. While specific definitions may differ, most countries recognize the categories of micro, small, medium, and large enterprises. Understanding these categories from a global perspective is crucial in today's interconnected business world.
Definitions of micro businesses vary by country, but they are generally the smallest type of business entity. Common characteristics include:
Few employees (typically 1-10, but can be up to 20 in some countries)
Low annual turnover
Often family-run or sole proprietorships
Within the United Kingdom, the requirements for a business to be classified as a micro-business are as follows:
a turnover of £632,000 or less
£316,000 or less on its balance sheet
10 employees or less
In the European Union, micro-enterprises consist of businesses with 0-9 employees and an annual turnover that is greater than or equal to €2 million
In the United States, businesses with fewer than 20 employees made up 89% of all employer firms in 2018 (Source: U.S. Small Business Administration)
In many developing countries, micro-enterprises form a significant part of the informal economy
Definitions of SMEs vary significantly across countries and international organizations:
World Bank:
Up to 300 employees, $15 million annual turnover, $15 million assets
European Union:
Small: <50 employees, ≤ €10 million turnover
Medium: <250 employees, ≤ €50 million turnover
United States:
Varies by industry, generally:
<500 employees for manufacturing,
<$7.5 million annual receipts for many non-manufacturing industries
Within the United Kingdom, the requirements for a business to be classified as a SME are as follows:
Operate with fewer than 250 employees.
Small businesses are those with between 10 and 49 employees
Medium businesses are those with between 50 and 249 employees.
In addition to the number of employees, the amount of turnover the business does will also determine its size.
To be classified as a small business, the turnover must be under £10 million
To be classified as a medium sized business, the annual turnover needs to be between £10 and £50 million.
SMEs account for the majority of businesses worldwide
They are important contributors to job creation and global economic development
According to the World Bank, SMEs represent about 90% of businesses and more than 50% of employment worldwide
Asia-Pacific:
In China, SMEs reportedly account for 97% of all businesses and 80% of urban employment
Japan: SMEs comprise 99.7% of all companies and employ 70% of the workforce
Europe:
SMEs represent 99% of all businesses in the EU
They employ around two-thirds of the European workforce
North America:
In Canada, SMEs employ 89.6% of the private sector workforce (as of 2018)
In the USA, small businesses create two-thirds of net new jobs
Africa:
SMEs provide an estimated 80% of jobs across the continent (African Development Bank)
In South Africa, SMEs provide 60% of employment and contribute around 34% of GDP
Large businesses are typically defined as those exceeding the thresholds for SMEs. Common characteristics include:
Substantial number of employees (often 250+ or 500+, depending on the country)
High annual turnover
Often operate across multiple regions or countries
Multinational Enterprises (MNEs) play a significant role in the global economy
The United Nations Conference on Trade and Development (UNCTAD) estimated there were about 80,000 MNEs worldwide in 2020
According to Fortune Global 500 (2021), the world's 500 largest companies generated $31.7 trillion in revenues and $1.6 trillion in profits
The landscape of business sizes varies significantly across the globe, influenced by factors such as economic development, regulatory environments, and cultural attitudes towards entrepreneurship. While definitions and exact proportions may differ, the importance of a diverse business ecosystem, from micro-enterprises to large multinational corporations, is universally recognized for fostering economic growth, innovation, and employment.
Confirm your understanding by completing the Quiz on the right.