What is a medium-sized business?

A medium-sized business is any company that has between 100 and 499 employees. The legal classification of an organization as small, medium, or large depends on the number of individuals it employs. Medium-sized organizations comprise approximately 1.9% of the businesses in Canada, with the largest number of medium-sized enterprises existing in Ontario and Quebec.In most situations, small- and medium-sized enterprises (SMEs) are in the same category. A small business is an organization with 99 or fewer employees. Large enterprises employ 500 or more staff members. SMEs comprise a cumulative 99.8% of the total businesses in Canada, as of December 2019.

Types of business classifications

An organization's classification is important because the Department of Finance Canada budget specifically accounts for types of business when allocating funds. The legal definition depends solely on the number of employees, though there are many ways to classify businesses. These include:

• The net profits: Despite not being the technical definition of a business, the government monitors the cumulative net profits of each size of business. Historical income distribution shows small, medium, and large businesses comprise approximately 25.3%, 11.9%, and 62.8% of the gross domestic product (GDP), respectively.
• The number of staff on payroll: The standard manner of classifying businesses refers to the number of part-time or full-time employees the company has on its payroll.
• The number of locations: While not official, knowing the number of locations a business has or plans to open can help you understand that company's actual size. If a business opens multiple branches, its current staff can't accurately represent its size until each location has the opportunity to hire employees.

Characteristics of a small-sized business

Small businesses represent the largest part of the nation's gross domestic product. The four provinces with the largest number of small enterprises include Ontario, Quebec, British Columbia, and Alberta. These represent the parts of Canada with the highest populations. While each business is unique, companies in this category share many traits, including:

Organization structure

Most small enterprises use a sole proprietorship or a partnership. This enables owners to retain full decision-making ability and help avoid costs associated with incorporation paperwork and annual filings. Small companies participate in each sector, ranging from private medical practices to diners. The common factor is that the owner often acts in an executive capacity by making important business decisions. Instead of answering to a board of directors, it allows small companies to operate efficiently.

Geographical access

Small companies typically have geographical restrictions due to having fewer locations—usually only one. While companies retain access to remote staff, if the business relies on a service such as a repair, physical limits remain. Employees can only travel so far to provide on-site services and customers can only realistically travel so far to visit a small business. Sometimes, if a company chooses to expand to multiple locations, the increased demand for human resources can result in reclassification as a mid-sized company.

Approach to business

Companies with fewer than 99 employees typically focus on cost when choosing service, prioritizing affordability and accessibility. When investing in business development, smaller companies often have less capital than larger counterparts. Small enterprises thus tend to prefer rental agreements over large purchases. Because of the limited capital, businesses in this category often employ fewer specialists. Usually, the highest skilled company members are also the owners.

Characteristics of a mid-sized business

For most purposes, incentive programs and social supports exist for SMEs, classifying small and medium organizations in the same category. Having a medium-sized company offers access to many of the same support programs as a small business but with a greater amount of human resources. Many mid-sized companies share traits with small businesses, though some unique characteristics include:

Increased delegation

Mid-sized enterprises have more human resources, resulting in more delegation within the organization. Instead of the owners making most decisions, mid-sized businesses usually employ management professionals. Usually, the owners delegate to managers, who then assign tasks to team members. Because there are more employees at the company, there is more opportunity to hire specialists and invest in technology to streamline operations.

Multiple locations

Companies with between 100 and 499 employees are more likely to have more than one location, simply due to the logistics of a workplace layout. Depending on the type of business and the higher the number of staff members on the payroll, the more likely it is that the company has more than one location. For instance, if the business offers IT services, it can perform many tasks remotely and requires less company infrastructure. Conversely, a restaurant that requires employees to work in person may need physical space to accommodate staff.

More employment opportunity

Mid-sized businesses are likely to have higher employee turnover, simply due to the larger number of staff members. This can result in increased career opportunities with medium-sized organizations. To remain in this calculation, the company can employ up to 499 people, but no fewer than 99. This offers a growth opportunity for the business without risking any benefits it gets from counting as an SME. Because medium-sized companies hire both in-person and remote staff members, they can also offer ample employment opportunities.

Characteristics of a large-sized business

As of late 2019, Canada had 2,987 businesses, representing less than half of the total number of companies. Large businesses have more resources than smaller counterparts, resulting in unique company traits such as:

International reach

A common denominator for large companies is access to an international market, both digitally and in-person. Most large companies have multiple locations in Canada, with additional branches overseas. Many businesses begin by opening locations in the United States, close to the original location. It allows the company to rely on the same or similar supply chains as the domestic locations. Because there is no cap on the number of employees a large business can have on payroll, when it continues to grow, the company retains its classification as large.

Corporate governance

Unlike SMEs, you can consider large enterprises as corporations. Usually, the company files articles of incorporation and completes annual filings, pursuant to legal regulations. The business has a board of directors, voting on important decisions at official meetings. When a large enterprise incorporates, there is a corporate veil between the people that operate the business and the actual business itself. This protects the board members from liability by declaring the company as an independent legal entity.

Tax programs

Large corporations have different tax regulations than smaller businesses for many reasons, namely the number of individuals they employ, and the often-essential nature of the services. While SMEs are more likely to obtain relief benefits from government entities, they also have a proportionately higher tax rate than large corporations. Other differences include corporations remitting taxes monthly rather than quarterly, and unique processes for tax audits.

Larger customer base

Large enterprises usually appeal to a broader range of customers, increasing market share and encouraging continued success for the business. Unlike SMEs that can only sell a limited number of goods, larger businesses can retail more products and services. With fewer geographical restrictions due to multiple locations, the company can appeal to customers in a larger area. Paired with the market information a large business obtains through sales tracking, executives can position the company to maintain its status as a large company.

Multi-level leadership

Similar to medium-sized enterprises, large companies rely on management professionals to run departments. Owners and board directors seldom make small-scale decisions. Both medium and large businesses have specific departments to address different business needs. The larger the business, the more facets there are to its organizational structure. Common departments include accounting, human resources, customer service, marketing, and sales. Medium-sized companies may combine some departments, while larger business entities usually have specialized professionals working exclusively in their area of expertise.