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When It Comes to Small Business Classification, Size Does Matter

If you thought your business was too big to join the queue of companies taking advantage of Small Business Administration (SBA) programs and services, you may be able to catch a break if the SBA’s proposed rule changes go through.

For the first time in more than 25 years, the SBA is proposing to change the way they define small businesses.  The SBA believes that as many as 9,450 additional firms would become eligible for its programs if the proposed changes are adopted. The main beneficiaries will be companies in the services sector.

The SBA defines small businesses based on two aspects of size: revenues and number of employees. Most small businesses judged on annual revenue have been measured against a base or “anchor size” of $7 million. Where the number of employees has been the magic metric for small business classification, the ceiling has been 100 for wholesale trade companies and 500 for retail trade companies. Regardless of classification, if your company receives federal contracts, the employee cap is 500.

The agency wants to change rules for a wide variety of companies in the professional, scientific and technical services sectors, including law firms, accounting firms, computer design services, architectural and engineering companies and advertising agencies.

Under the new proposed caps, for example, a law office might be able to have revenues of as much as $10 million and still be classified as a small business. An engineering services company could make as much as $17 million.

A total of 36 industries and one subindustry would be affected by the changes. These changes, the SBA said, would allow some industries that are close to exceeding their current size standards to retain small business eligibility under higher size standards and give federal agencies a larger selection of small businesses to choose from for small business procurement opportunities.

In its proposed rules document filed last week, the agency said, “Over the years, the SBA has received information that its size standards have not kept up with changes in the economy and, in particular, that they do not reflect the changes in the federal contracting marketplace.”
Comments on the proposed rule changes can be submitted online on or before May 16,  the SBA said.

Reach BusinessNewsDaily senior writer Ned Smith at nsmith@techmedianetwork.com. Follow him on Twitter @nedbsmith.

Ned Smith

Ned was senior writer at Sweeney Vesty, an international consulting firm, and was Vice President of communications for iQuest Analytics. Before that, he has been a web editor and managed the Internet and intranet sites for Citizens Communications. He began his journalism career as a police reporter with the Roanoke (Va.) Times, and was managing editor of American Way magazine and senior editor of Us. He was a Captain in the U.S. Air Force and has a masters in journalism from the University of Arizona.