In the industry, there are business units of varying sizes. Some are small, and some are big, and many of giant sizes. The costs of production in these firms of different sizes vary. A businessman must determine the size of his business unit i.e the scale of its organisation and operations because of the size determines efficiency and profitability of his business unit. With a view to make the most economical use of the available resources, the businessman has to select the most ideal size which economist term it as "optimum firm".
The problem of size is related with the laws of returns as well as the principle of division of labour. For the purpose of selectivity ideal size of the firm or business unit, the businessman has to assess the financial and other facilities he can command. Finance and the managerial capacity will determine the actual size of the business-small or big. Adequate provisions should be made for horizontal and vertical expansion.
The U.S. Small Business Administration counts companies with as much as $35.5 million in sales and 1,500 employees as "small businesses", depending on the industry. Outside government, companies with less than $7 million in sales and fewer than five hundred employees are widely considered smal businesses.