The scale of business refers to the size of a business. In Malaysia, scale is usually measured by two criteria: annual sales turnover and the number of full-time employees. Scale matters because it determines the assistance, financing and government policies a business is eligible for.
Four scales of business
- Micro — the smallest businesses, such as hawkers and small online sellers.
- Small — a few employees and limited capital.
- Medium — more employees and higher sales.
- Large — big companies with hundreds of workers and high sales.
Small and Medium Enterprises (SMEs)
SMEs cover micro, small and medium businesses. In Malaysia the SME definition is split by sector. For the manufacturing sector, a business is micro if its annual sales are below RM300,000 or it has fewer than 5 employees. For the services and other sector, the sales and employee thresholds are lower.
Example
A bakery factory with 40 employees and annual sales of RM8 million falls under the small SME category for the manufacturing sector.
Importance of SMEs
SMEs make up the vast majority of businesses in Malaysia and contribute significantly to Gross Domestic Product (GDP) and employment. The government supports SMEs through grants, training and low-interest loans.
Large-scale businesses
Large-scale businesses, by contrast, have annual sales and employee numbers above the SME thresholds. They are usually limited companies, can produce goods on a mass scale and may export to international markets. The scale of a business is not fixed — a micro business can grow into a small, then medium and finally large one as its sales and workforce increase. That is why identifying scale matters: it determines the management strategy, the capital needed and the type of assistance suitable at each stage of growth.
Remember
Scale is determined by annual sales AND/OR the number of employees — not merely the number of premises or the age of the business.