Factors that determine the size of a business

1. Factors that determine the size of a business
Size of capital
Number of
employees
Volume of
sales
Level of
technology
Raw materials
used
Legal form of
ownership

2. Size of capital
The capital invested by the owner determines the size of business. It is mainly used to compare
two firms or more that are producing similar or differentiated products. It is an important factor
because it determines how little of how much you will be able to do in your business.
If a business has limited capital, it is limited in terms of the volume of sales, services to be
rendered, number of employees to be appointed and the level of technology to be employed in
its operations.
Volume of sales
High volume of sales = business have many clients and selling large amount of goods/rendering
a lot of services.
Business with high volume of sales are usually regarded as big. It is also assumed that the capital
contribution will be high, buildings are bigger and more staff will be employed than in a small
business.

3. Number of employees
The number of employees employed by any business determines its size. In the case of a small
sole trader the owner will do all the work him/herself and possibly appoint a receptionist who
will do the administrative duties. In a large sole trader with different sections the owner will
need more personnel to be responsible for different tasks. One of the aspects one can look at
when comparing businesses is the wages paid to employees.
Level of technology
The technology used can also give an indication of the size of a business. Is production done
manually or by means of machinery? Does the business have a sophisticated computerised cash
register system or just an ordinary cash register or a money box? If we have a small business
with only a few customers and little capital, it is not necessary to have state-of-the-art
equipment.

4. Raw materials used
This is the form in which the business is registered. A sole trader business most probably will be
the smallest business, unless the owner has lots of capital and employ many people, while a
partnership with a maximum of twenty partners or a Close Corporation will be much bigger.
Legal form of ownership
The annual consumption of raw materials of any firm determines its size. The raw materials is
used to determine the size of the business where firms are producing similar products.