How to measure the size of a business?

Updated: Feb 21

1) Size of capital employed

2) Market share

3) Revenue/Output volume

4) Number of employees

Each of the above ways to measure a business have limitations and justifications. They may be suitable to measure one business but not another, as it depends on the nature of the business.

Number of Employees & Capital Employed

The size of a business that is technology oriented, such as a SpaceX, may not be suitable to be measured by the number of employees as it could be capital-intensive. As such, the number of employees could be few, but the revenue or size of capital employed could be large.

While a service oriented business, such as a restaurant, may have a high number of employees, who may be part-time employees (labour-intensive), but low size of capital employed.

Revenue / Output Volume

A business that is measured by the revenue or output volume may not reflect the actual performance if the size of market is small or the value of each unit of output is high.

In example, SpaceX can only build 100 rockets a year, but each rocket will cost USD28million for each launch.

Market Share

As a pioneer in space exploration, SpaceX is likely to have a large market share because the market size of SpaceX is small and growing slowly. Compared to other industries, like the car industry, where it is very competitive, as such each company have a smaller market share, even though the size of the market is large.