Business Size & Characteristics (Edexcel IGCSE Business)

• Small businesses employ fewer than 50 people
  
  • Micro enterprises employ fewer than 10 employees
  • Small enterprises employ between 10 and 49 employees
    
    
• Small businesses usually provide goods and services at a local or regional level 
  
  
• They are the most common form of business in most countries
  • In 2022 5.5 million small businesses existed in the UK, more than 99% of all businesses operating at that time
  • Italy has the highest number of small businesses in the EU
  • Germany's businesses tend to be larger, on average, than those in other EU countries
    
    
• Small businesses share a range of characteristics
  
  

Characteristics of Small Businesses

Business Type	Liability	Source of Finance	Control	Profit Share
Sole Trader	Unlimited	Savings Loans from friends and family	The single owner makes all decisions and sets the business objectives	The owner receives all of the business profit
Partnership	Unlimited	Each partners contribution Trade credit Small bank loans Retained profit	Each partner has a vote equal to the share of the business they have bought Some partnerships are equal whereas other may have a dominant partner	Each partner receives a share of the profit equal to their proportion of ownership
Private Limited Company	Limited	Owners savings Shares sold to friends and family Trade credit  Bank loans Retained profit	The entrepreneur usually appoints themselves as a Chief Executive Officer (CEO) The CEO may hire other employees but has control and takes responsibility for decision making	Most of the profit usually goes to the entrepreneur who set up the private limited company

• Measuring business size according to the number of employees is becoming increasingly unreliable
  • Businesses do not always employ full-time, permanent employees
  • The use of fixed-term contracts, subcontractors and casual staff means that a business could have high levels of output with few employees
  • Increased use of technology such as chatbots means that many services can provided with little human input

• Large businesses are commonly classified as those that employ 250 or more workers and may be very well-known
• In many countries, a small number of large business generate the largest proportion of revenue
  • Germany has the highest number of large businesses in the EU
  • Greece and Ireland have few large businesses, with their economies dominated by SMEs
    
    
• Large businesses usually find it easier to raise external finance than small businesses
  • They are seen as less risky than unincorporated businesses
  • They have significant assets to allow them to pay back money they have borrowed
     
• Some private limited companies can grow into very large businesses without ever having to sell shares to the public in order to raise finance
  
  • The benefit of this is that the owners maintain full control of the company
  • E.g. Hermès is one of the wealthiest family-owned businesses in the world
    
    

Characteristics of Large Businesses

Business Type	Liability	Source of Finance	Control	Profit Share
Public Limited Company	Limited	Shares sold on stock exchanges Trade credit Bank loans Retained profit	There is a separation between ownership and control Shareholders own the company, but they appoint Directors to manage the company	The profit is distributed to the shareholders on an annual basi Some profit may be retained to reinvest in the business operations

• Public limited companies may have many thousands of shareholders
  • Shares are sold on the stock exchange and can change hands frequently
  • Large amounts of capital are raised during flotation
  • E.g. German footwear company Birkenstock's IPO raised $1.5 billion in October 2023