Small and Medium-Sized Enterprises (SME) sector has an important role to play in developing economies not only in economic development, but also in poverty alleviation, innovation and invention and in job creation. However, their transition from one phase to another is faced by many challenges which inhibit the rate of transition. This study sought to determine the factors affecting transition of small businesses to medium organizations in Kenya by conducting a survey of the clearing and forwarding companies in Mombasa. To achieve this objective, the study was guided by three specific objectives which were: to establish the effect of organizational characteristics on the transition of the clearing and forwarding companies in Mombasa, to determine the effect of organizational factors on transition of the clearing and forwarding sector in Mombasa and to establish the effect of environmental factors on transition of the clearing and forwarding companies in Mombasa. The study focused on the clearing and forwarding companies in Mombasa and was conducted in the month of July 2016. The study adopted a descriptive research design to help build a profile of the factors affecting transition of small businesses to medium organizations. The target population was 1298 small and medium enterprises in Mombasa and the sample size for the study was 221 respondents from small and medium sized enterprises. The collected data was analyzed using descriptive statistics like mean and standard deviation and presented using tables and figures. The study found out that the characteristics of an organization often reveal the growth pattern of small to medium sized enterprises and were characterized by having a single product or service and an increase in numbers of employees, the growth of small sized enterprises was determined by the effectiveness of transforming firms‟ resources into products and transition of small scale enterprises into medium scale enterprises was affected by its business climate and the legal framework. The study concluded that the organizational characteristic of an enterprise was affected by a number of factors like size of the business, the nature of the business, the diversity of the business, the characteristics of the market, the characteristics of the strategy and the future plans of the organizations. The study recommended that in order for small scale business to transits to medium organization, there should be diversification of product or service and an increase in numbers of employees, small scale businesses should efficiently transforms firms‟ resources into products by having quick decision-making process and proper monetary management and government through their legal avenues should protect small scale enterprises against unfair competition and high tax rates.A project submitted in partial fulfillment of the course requirement of MBA corporate management at the school of business and public management, KCA university October, 2016