Measurements of Business Size

Definition of Business Size

Business size is a term that refers to the scale or magnitude of operations of a company.
It’s often measured using a variety of metrics such as number of employees, market share, sales turnover, and capital employed.

Number of Employees

Measurement of business size via the number of employees is direct and simple, with more employees typically indicative of a larger business.
It allows easy comparison across different industries, but fails to account for differences in productivity or technology use.

Market share, another measurement, refers to the percentage of total sales in a specific market that are controlled by a business.
A larger market share denotes a bigger business size.
This measurement is susceptible to fluctuations in consumer demand and market conditions, but provides valuable insight into a business’ competitive position.

Sales Turnover

Sales turnover measures the total value of goods and/or services sold by a business over a certain period.
A higher sales turnover reflects a larger business size.
This measure is beneficial as it reflects a business’ ability to generate revenue, but doesn’t consider profitability or efficiency.

Capital Employed

The term capital employed refers to the total value of all resources available to a business.
A higher value of capital employed usually correlates to a larger business size.
This measurement is good for assessing the value of a company, but it doesn’t take into account the profitability or efficiency of these resources.

Other Measures

Other measurements include value added by a business, profitability, and physical size of business premises.
Value added captures the extra worth a business contributes to raw materials or components in the production process.
Profitability is essential as it shows a business’s efficiency in generating profits from a given set of resources.
Physical size of business premises, while simple to measure, is limited in usefulness as it does not consider other key aspects affecting business size.

Remember, different measures of business size can give different indications about the status and success of a business. No one measure is definitive, and they should be used together for a more comprehensive understanding.