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What Are Business Size Classifications and Why Do They Matter?

When it comes to your business, size does matter. Sure, there are advantages and disadvantages when it comes to every business size. You might think that a small medium business will be easier to manage and, to a point, that’s true. But reality has proven time and time again that small businesses can be just as poorly managed and organised as the bigger ones.

At the same time, the business size is relative. There are some important aspects that determine this – such as the number of employees and the general revenue. But before we get into specifics, you have to know that there is no exact thing that determines if a business is small, medium or large. It all depends on the industry the business is in. Sounds confusing? It’s fine, that’s why we’ve put together this guide. It will help you figure out why business size matters.

Small Businesses

Small Businesses

This is the first classification. But don’t go around picturing a small group of employees working from some basement. To be classified as a small business, it would have to not go over $38.5 million in yearly revenue. It would also have no more than 100 employees. So, as you can see, a small business is not quite small by any means. All things considered, a big majority of the active businesses on the market can be considered small.

The small business size seems to be the most flexible. If you have under 50 employees for example, you are not required by law to provide healthcare insurance. You will also be exempted from certain taxes and regulations. But that depends on the country and region you’re in. Even in the United States there are different rules imposed by each state.

Medium Businesses

Medium Businesses

The medium-sized business comes after the small one. These are a bit more expansive than the former but still not as complex as the large enterprises. To be considered a medium business, you’d have to make between $38.5 and $1 billion a year. You’d also have to employ anywhere between 100 and 1000 people.

The medium-sized businesses are even more common than the small ones. They usually have more than one location of activity and even work with remote employees. A fun fact about the medium level business is that if it were a country, its economy would rank as the fourth in the world. Quite impressive, right?

Large Enterprises

Large Enterprises

The large enterprises are not as common as you might think. In order to be considered a large enterprise, a business would have to make over $1 billion in profits every year and have more than 1000 employees. They make up for most of a country’s income and that’s because of the amount of revenue they bring in.

A large enterprise usually boasts a wide array of people with different skills and backgrounds. All the processes that a small or medium business usually outsources are done in-house – think about programming, marketing and even accounting. Such a business would have more than 3 or 4 offices and even some international ones.

Why Your Business Size Matters

Business size matters and not only when it comes to taxes. The size of your enterprise influences many aspects of your workflow. It influences how financial decisions are made, how your business needs are framed and how you interact with providers during the sales process. This also goes the other way. If you’re a service provider working with a small-medium business, you will find out that they’re usually focused on cost savings and ease-of-use.

Why Your Business Size Matters

However, if you provide services for a big enterprise, you won’t be focused as much on cost and ease-of-use but on the more advanced features you can offer them. Naturally, they will be focused on security above everything else and scalability. Is your marketing plan fiable long-term or will it only bring short-term earnings, for example.

You have to keep in mind that these size classifications are in place for a reason. It helps provide a clear outlook on the economic and social impact the business will have. Sure, you can’t really compare a giant such as Microsoft with a small developer team working from one office. But when you take business sizes into account, this will help get a better understanding on how the industry performs as a whole.

These classifications are also in place to protect smaller businesses. It makes sense that a large enterprise doesn’t require the protection and promotion a small business does. After all, they’re the ones that need that little push in order to survive and thrive in the actual economy. For example, if your small software development company would need a loan to compete with Microsoft, the government will take the size of your business into account.

Our conclusion

When it comes to business, size does matter. But one size does not fit them all. There’s a reason this classification is in place. It helps compare businesses based on their profit, output and social or economic impact. Business size matters in all aspects, whether we’re talking about marketing or just taxes.

sachin
He is a Blogger, Tech Geek, SEO Expert, and Designer. Loves to buy books online, read and write about Technology, Gadgets and Gaming. you can connect with him on Facebook | Twitter

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