Definition of critical mass
: a size, number, or amount large enough to produce a particular result the critical mass of activity needed for a retail store
First Known Use of critical mass
Financial Definition of CRITICAL MASS
What It Is
Critical mass refers to the size a company needs to reach in order to efficiently and competitively participate in the market. This is also the size a company must attain in order to sustain growth and efficiency.
How It Works
A company's critical mass is determined by the size of its staff, resources, revenues, and market share. Once these elements reach the size that enables a company to operate efficiently, it is said that a company has reached its critical mass. Critical mass is the point at which a company becomes profitable.
To illustrate a company's critical mass, consider Company XYZ which was recently formed and has been experiencing steady growth and increasing strength in the market. The company’s steady revenues allowed Company XYZ to invest in more capital and to hire additional employees. XYZ's productivity subsequently increased and their revenues exceed their expenses: XYZ then becomes profitable. The company is said to have reached its critical mass, since its capital and human resources have reached a size at which they can sustain themselves through productive efficiency.
Why It Matters
A company's critical mass is important to consider because it can mean the difference between thriving and surviving in a market environment. A company that sustains profitability is safely above its critical mass.
CRITICAL MASS Defined for English Language Learners
Definition of critical mass for English Language Learners
: an amount of material (such as plutonium) that is large enough to allow a nuclear reaction to occur
: the size, number, or amount of something that is needed to cause a particular result
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