Medium-sized businesses play a key role in the UK economy. These companies have specific traits that set them apart from start-ups and larger corporations.
Read on to discover the main characteristics of a medium-sized business. We’ll outline the official definition and what these firms commonly look like. From staffing to their typical legal structures, our guide has it covered.
Mid-size business definition
Mid-sized and medium business are simply different names for the same thing. You can use the two terms interchangeably when talking about this type of business.
However you refer to them, there’s an official mid-sized business definition to keep in mind. According to the UK Government, a firm falls into the ‘medium’ category if it has a:
- headcount under 250
- turnover that’s less than or equal to €50 million;
- or a balance sheet total lower than €43 million.
This is different to small businesses, which are defined as having fewer than 50 employees. And a turnover or balance sheet total under €10 million.
Meanwhile, micro businesses require a headcount lower than 10. Plus, a turnover or balance sheet total beneath €2 million.
Is a medium business an SME?
Yes, a medium-sized business in the UK will typically be classed as an SME. That’s because SME stands for ‘small and medium-sized enterprise’.
So long as you meet the headcount and financial criteria, you’ll fall under the SME umbrella.
Medium business examples
You’ll likely spot medium-sized business examples whenever you step out of the house. They often play a major part in sectors like healthcare, hospitality, legal services, finance and beyond.
Examples could include:
- logistics companies. Those which employ staff across warehouses, ports or transport routes, for instance
- holiday groups. Leisure parks, caravan sites and cottage rentals are often run by mid-sized firms
- local gym chains, which can employ anyone from fitness instructors and lifeguards to receptionists, cooks and cleaners
- tech firms. Think cloud service specialists, IT solution providers, and telecom businesses
- regional law firms, specialising in personal and family matters, or corporate and commercial issues.
Key characteristics of medium businesses
Each medium-sized business will have unique features, staffing requirements and niches. However, here are some common traits and characteristics of these firms…
Management and operations
Many medium-sized businesses adopt a ‘functional’ organisational structure. This splits their workforce into separate departments. For example, grouping people by their area of expertise, skills and roles. Picture different departments for finance, marketing, operations, IT, product development, and so on.
A functional structure normally includes a vertical hierarchy. This may sound complex. But it simply means that each manager reports upwards, until the chain of command reaches the chief executive.
So, employees might report to a team leader, who is overseen by a more senior department head. Each department head then reports to the next manager up the ladder, or to the CEO.
The size and complexity of a medium business can loosen the founder’s grip. It may not be possible for them to control every single decision anymore. As a result, they’ll likely need to delegate responsibilities down the chain to departmental and team managers.
This is different to a start-up firm, which typically has fewer departments and employees. For these businesses, the owner is usually at the centre of any big decisions. And all the firm’s employees might report directly to them.
Making this adjustment can be a major step when scaling a small firm into a medium-sized company.
Legal structure and registration
A medium-sized business can adopt different legal structures in the UK. These may include:
Limited company status
This involves registering the business with Companies House. It then becomes a legally separate entity that’s no longer linked to your personal finances.
In exchange, you’ll face more administration. For example, filing a company tax return each year. And compiling statutory accounts. A limited company must also be registered to make corporation tax payments.
These share the responsibility for a business between at least two people. That means any profits, losses and business expenses are split.
Those taking this route must register for tax with HM Revenue and Customs. They also need to decide on a nominated partner, who will oversee business tax returns and records.
Limited liability partnerships
As the name suggests, LLPs combine elements of both limited companies and partnerships. They’re common among professional services firms, like legal businesses.
The key difference is that partners are only responsible for the amount they’ve invested in the firm, should it go under.
LLPs must be registered with Companies House. They also require two designated members, with responsibility for things like company accounts.
The UK has another major business structure too, called sole trader status. However, this covers self-employed people who work for themselves. It doesn’t separate their business and personal finances. For this reason, it’s usually designed for start-ups.
Medium-sized businesses have a traditional headcount of between 50 and 250. But a random hiring spree is unlikely to hold the answer to your long-term success.
Your activities may involve complex decision-making and high volumes of skilled work. So, recruitment is more about handpicking talent for specialist roles. Appointing team leaders and department heads can also build a solid organisational structure.
As workloads increase and teams expand, specialised software could help take the strain too. Task management systems offer an overview of team productivity, and seamlessly assign projects to the right people.
They can reveal exactly how long people are spending on each task – highlighting potential efficiencies.
The life of a medium-sized business leader should be varied and fulfilling. But it’s a category where one size certainly doesn’t fit all. Mid-sized firms can each follow different legal and organisational structures. What’s more, they’re spread across a diverse range of industries.
Gain further insights into the business world with our Tyl Talks guides.
Mid-sized business FAQs
What are the four sizes of business?
In the UK, businesses can be broken down into four main categories:
- Micro firms, with fewer than 10 staff members.
- Small companies, with under 50.
- Medium-sized businesses, with headcounts lower than 250.
- Large organisations.
What is the easiest business to start?
No business is guaranteed to succeed. However, there are plenty of firms you could easily start from scratch and gradually build up. Here are just a few potential examples:
- Making and selling crafts online.
- Offering a tutoring service.
- Launching a dog-walking business.
- Making local parcel deliveries.
- DIY and minor home improvements.
Why do medium businesses fail?
A medium business may fail due to both internal and external factors. These can include:
- a lack of customer interest and buy-in
- unclear leadership and a lack of direction
- low morale and poor staff retention
- weak financial discipline and high costs
- unexpected events, such as the Covid-19 pandemic.
This has been prepared by Tyl by NatWest for informational purposes only and should not be treated as advice or a recommendation. There may be other considerations relevant to you and your business so you should undertake your own independent research.
Tyl by NatWest makes no representation, warranty, undertaking or assurance (express or implied) with respect to the adequacy, accuracy, completeness, or reasonableness of the information provided.
Tyl by NatWest accepts no liability for any direct, indirect, or consequential losses (in contract, tort or otherwise) arising from the use of the information contained herein. However, this shall not restrict, exclude, or limit any duty or liability to any person under any applicable laws or regulations of any jurisdiction which may not be lawfully disclaimed.