by
Dr Greg Chapman
The official Australian Bureau of Statistics (ABS) definition of a small business is one with less than 20 employees which, according to their latest data, make up 96% of all businesses. Together they contribute 35% to industry GDP, so they are important.
Another way of looking at business size is by turnover. The ABS found that 94% of businesses turned over less than $2 million and 63% earned less than $200,000. While both turnover and the number of employees are an important way of defining business size, they really don’t give much insight into how they are run.
As a business grows in size, its sophistication must also increase if it is to survive. That means better management, better systems and better reporting because the owners are unable to be everywhere and watch everything. There will be organisational changes as well. At some point an operations supervisor will be appointed so the owners can focus on growing the business, but I would still regard such a business as being small.
The next stage is the appointment of managers for key business areas. This is the real point where a business moves from small to medium size. However, it is not just the organisation structure that makes the difference between a small and medium sized business, it is the way they operate. Not only is there more delegated responsibility, but the owners share the decision making with their management team, although the owners may still reserve the right to set the vision.