Methods of Measuring Business Size
- A range of stakeholders have an interest in understanding business size
- Some suppliers prefer to deal with larger businesses as they are seen as less risky than small businesses
- Governments can determine which businesses may need support to grow
- Investors may want to compare businesses to determine which offers the best return
- In some sectors, specific variables are used to measure business size
- Hotels and guesthouses measure the number of rooms or beds
- Restaurants measure the number of 'covers' they can cater for
- Retailers measure the number of outlets they operate
- Logistics businesses measure the number of vehicles they employ
Ways to Measure Business Size
Method |
Explanation |
Evaluation |
Size of the workforce |
|
|
Value of capital employed |
|
|
Value of business sales |
Price x Quantity sold |
|
Value of business output |
Total costs x Quantity |
|
Market capitalisation |
Share price x Number of shares |
|
Market share |
(Business Sales ÷ Market Sales) x 100 |
|
Exam Tip
Profit is not a measure of business size, though it can be used to measure business success.
A business with many employees may make a loss whilst a business with just one employee may make a profit. This does not mean that the business with one employee is the larger of the two.