Why are mid-sized businesses so invisible, asks Jyoti Banerjee? Its because they get grouped with small and start-up organisations that they are absolutely different from.
Mid-size enterprises are the powerhouse of the UK economy.
Although only 6% of UK companies are in the £10-£250 million revenue bracket, these businesses employ 30% of the British work force, and generate 20% of all corporate profits. Their annualised growth rate is at 8%, which is well above the national growth rate.
Despite this sterling performance, mid-size enterprises are nearly invisible. They have no profile in the market, government does not pay them any attention, and they are usually lumped together with small and micro enterprises via the SME label, although they are significantly different from those companies in almost all respects.
Mid-size businesses are in a different ballpark from small businesses
Mid-size businesses are categorised in most UK analytics as part of the SME grouping. This is certainly tautological in terms of size as SME seems to cover any companies that are not large, but it does not provide any analytical insight on the behaviour of such companies as they are different from small and micro enterprises in a number of significant ways.
In 2005, the Institute of Chartered Accountants and BDO Stoy Hayward conducted a research study among 183 mid-sized UK enterprises and identified seven key dimensions in which mid-size businesses are different from others in the SME grouping. These differences are summarised below:
Owner action
In a small business, the owner is usually in a manager role, whereas mid-sized businesses feature management by professional staff, particularly with the inclusion of a qualified finance director.
Style of management
Micro-management of employees is typical in an S business while M organisations are more likely to have an organisation culture enabling employee development and the taking of individual initiative.
Formality of organisation
S businesses are characterised by informal business processes while M businesses feature formal business processes and organisational structure.
Planning perspective
S businesses, dogged as they often are by survival issues, are unable to take a longer-term prespective than M businesses.
External input
S businesses usually have their external input limited to the involvement of an auditor or bank manager, while M businesses take external input from a number of additional sources including consultants, non-executive directors, and industry bodies.
Distribution of equity
The equity of a small business is held by founders or family, whereas M businesses are more likely to have a wider equity base.
Customer base
Small businesses have a narrow customer base, while mid-sized businesses have a more diversified customer base.
It is not my intention to assert that all mid-size businesses reflect the characteristics attributed to them, nor that no small businesses have any of the M characteristics. What is being proposed is that it is more likely for small and mid-sized companies to demonstrate the characteristics attributed to each of them but the actual situation for any individual company could be an amalgam of the characteristics.
For example, a business employing 5 people could have formalised processes in place, just as a business employing 50 people could have a very small customer base.
In fact, a key issue being raised in this discussion is that size, the usual arbiter of categorisation (denominated in either revenue or employee terms), is actually a poor indicator of how a business operates. Companies that are physically small in size could operate in ways normally attributable to mid-sized organisations, and vice versa.
The motivations of a business and its behaviour patterns are critical for understanding how these businesses would respond to particular products and services that are offered to them. Yet, few suppliers to the marketplace for mid-sized businesses understand their unique characteristics, and end up confusing mid and small enterprises in their product development, positioning and messaging.
No room for M businesses
The government (whether at local, national or European levels) is guilty of ignoring the particular needs and aspirations of mid-sized businesses. Government support for non-enterprise business is restricted to Business Links (an advice network aimed at small business) and the Small Business Service (featuring good quality content aimed, again, at small and start-up businesses). Government policy from the Department of Trade and Industry does not in any way distinguish the needs of mid-sized businesses from other groupings, nor does it provide any assistance to them.
UK businesses are represented by a number of apex bodies. The best known are the:
- Confederation of British industry – strong bias towards large enterprise and manufacturing businesses
- Institute of Directors – a small business lobby group that also explores lifestyle issues for company directors
- Chambers of Commerce – a national network of local and small business
None of these claim to represent M businesses nor do they. As a result, M businesses are without a voice, without profile in government, and without attention in the national/business press.
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