How do you classify businesses according to size?


Quick Answer

Businesses are classified according to size through industry measures that accurately show the operations of a business as a whole, explains the U.S. Small Business Administration. These measures include the number of employees, receipts, production capacity and financial information.

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Full Answer

Size measures are specific to the industry occupied by the business, according to the SBA. The main size measures for many industries are the number of employees and receipts or the value of the output of the business. For small businesses, the cap for the number of employees for the manufacturing industry is 500; it is 100 for the nonmanufacturing industry. Businesses that go over this cap are not classified as a small business.

Moreover, if a business has a large value of output, which is what a company gets in return for using its labor pool and factories, it is also not classified as a small business. For other industries, the SBA uses different size measures that more accurately show the value of a business. In the banking industry, financial measures like total assets and the net worth of those assets are used to classify businesses according to size. For the oil industry, size measures include production capacity or the number of barrels produced per day.

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