Introduction
The definition of a medium-sized business (MSB) has been subject to a
fair amount of debate. The traditional definition has been based on
company sales or revenues, with the debate then being about where the
upper and lower limits lie. The lower limit tends to be sometimes £25M
per year and usually above £10M. The upper limit seems to vary from
£100M to £500M or even more. So does a business cease to be a
middle-sized business once it’s revenues exceed that number? Hardly. The
M Institute, a body focused on lobbying on behalf of MSBs, has defined
medium in other terms.
UK Government Definitions
The UK Government defines Medium-Sized Businesses (MSBs) as having
revenues between £10M and £100M. Using this definition, MSBs represent
0.2% of the companies in the UK and 17% of the revenues. This
definition has been used as the basis of the recent CBI research into
the sector and is now the official definition being adopted by the
Department of Business Innovation and Skills. For the purpose of being
able to measure progress in the sector, it is certainly useful to have a
hard definition. However, are other ways to identify a medium-sized
business?
Sales is not all that matters
The
M:Institute
conducted research into medium enterprises and identified a number of
attributes that distinguished them from small or large businesses. Not
all them are always true, but here some examples:
- Ownership. Medium-Sized Enterprises have often progressed
beyond being family owned and managed. They have usually adopted
professional management rather than being owner-managed (at the
small-end).
- Employee empowerment. Whereas in a small business,
employees are likely to be micro-managed by an owner-manager,
medium-sized businesses have grown to a point where employees are more
empowered.
- Process maturity and standardisation. Processes are more
likely to be formally defined and standardised than in a small business,
though not formalised to the extent of this in a large firm.
- Size of customer base. Medium-sized businesses are more likely to hundreds and thousands of customers, rather than tens.
- Funding. Medium-sized businesses are more likely to have
access to short funding that exceeds what would be available to small
businesses, but they would not have the choice available to large firms.
Conclusion
Medium-sized businesses can be distinguished by attributes other than
size. It is useful to understand these softer attributes, as a sense
check to ensure that you are dealing with a medium-sized company as
opposed to, say, a small company that has extraordinary revenues.
However, hard measures will always be needed for the purposes of
measurement and comparison. the Government’s definition is useful, but
rather narrow. We prefer the range of £25M to £500M in turnover.
No comments:
Post a Comment