Deciphering The Difference Between Small Business And Big Business: 3 Things To Know
Is it fair to say that a small business is just a large corporation scaled down in size? Absolutely not. While it’s common for SMBs (small and medium-sized businesses) and corporations to coexist on the same landscape, sometimes competing for market share, they are not created equal.
As a matter of fact, the two seldom operate under the same principles. What a small firm considers normal could be totally strange for a larger one, and vice-versa. Likewise, an entity’s size classification can impact its ability to obtain financing and qualify contracts.
So what then distinguishes corporations (or, rather, big businesses) from SMBs? And how does an enterprise know that they’ve reached a point where they can no longer be considered small? You can only understand that by looking at the key differences between small and large businesses.
Revenue
It goes without saying that large enterprises generate more revenue compared to their smaller counterparts. But where do you draw the line between the two? Well, it depends.
For one, the distinction between a small enterprise and large corporation varies across agencies and territories. The United States Small Business Administration (SBA) defines a small business as one whose revenues average at $7 million or less over a 3-year period. The standard however varies by industry, rising to a high of $33.5 million in the construction sector. On the flip side, a service provider who earn more than $2.5 million annually for more than 3 years is classified as a big business.
In reality, the most significant difference between small and big players is variance in annual turnover. Since small firms aren’t in the position to bolster their revenue streams, their earnings hardly ever remain stable. By contrast, a large corporations earning’s will remain stable in the short-term when all other factors are held constant.
Workforce
On paper, every other organization will hire more employees as it grows larger. But as you’d expect, workforce size standards vary within and across industries in practice. So let’s switch to a more straightforward distinction: the SBA notes that employees in small firms typically wear multiple hats. As such, they take on more tasks within a wider scope compared to their large-firm counterparts.
Strategy and Operation
Conventional wisdom suggests that size varies in tandem with bureaucracy; the larger an organization, the more rigid it is, and the more time it takes to get stuff done. That’s mostly because large entities tend to have a high degree of specialization. A typical corporation can be dissected down to a few core processes that match up to their capabilities. As such, employees are strongly urged to follow protocol or risk punitive action.
SMBs, on the other hand, tend to be less complex and stringent. Though employees aren’t always given a free hand to take risks, most small firms encourage their staff to innovate and find better ways to do things. As these entities grow over time, however, they devise risk-averse procedures and policies to ensure everyone marches at the same rhythm.
