SBA will propose new small-business size standards

Later this year, the Small Business Administration (SBA) will begin to roll out new industry-by-industry size standards that will determine who qualifies as a small business for government programs, according to the Washington Business Journal. Two years in the making, it is SBA's first comprehensive overhaul of the standards since the 1980s.

Currently, standards are varied by industry, depending on factors such as average size of businesses in the industry and how much the industry is dominated by large businesses. To measure size, SBA sometimes uses revenue and sometimes number of employees.

The current standards range from $750,000 in annual revenue for agricultural businesses to $31 million for some manufacturers and from 100 employees for wholesalers to 1,500 employees for courier services.

The new standards will use revenue to measure a company's size in some industries. SBA hopes to reduce the number of size standard levels and will issue new proposed standards one sector at a time. To begin, the agency is presuming that $6.5 million in revenue is a good size standard for receipts-based industries, and 500 employees is a good size standard for employee-based industries.

Size standards most likely will go up from current levels, with some exceptions. Size standards can be a difficult issue to handle—if the standards are too high, smaller companies will complain that relatively large businesses are receiving small-business preferences; if they are too low, businesses will complain about losing their small-business status.

In 2004, SBA proposed moving all industries to an employee-based standard in an attempt to reduce the number of size standards and was met with negative comments, leading to SBA's withdrawal of the proposal.

Date : 7/17/2008