Small business size standards determine whether your business is a small business. If yours is indeed a small business, you would be eligible for different kinds of support and assistance, such as free business training programs, preferential contract opportunities and financial guarantees.
This page comes under the section Small Business in USA.
In USA, small business size standards are set by SBA in association with North American Industry Classification System - NAICS. The standards could be based on turnover or number of employees of the business. For this purpose, a business includes not just a single firm, but a group of businesses controlled by the same person or group. Thus, if the group as a whole has a turnover or number of employees in excess of the small business size standard, none of the businesses would be considered a small business.
The standards differ from industry to industry. You could see the current small business size standards for different industries at NAICS SBA size standards page. As you would note if you go to the page, the most common standard is 500 employees, though in a few industries it could go up to 750 or 1000 employees, i.e., in these cases you could employ 750 or 1000 persons and yet be considered a small business.
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Turnover-based standards show more variation. It could be as low as less than $5 million for some service industries to as high as more than $30 million for some construction (and medical services) industries. In a few industries, such as banking and credit card, it is the value of assets that determine whether a business is a small business or not. In this case, the typical limit is $165 million.
The values indicated above are current levels. These could vary from time to time.
To be eligible for small business assistance, the small business concern must be:
The small business concern must also be a business organized for profit, with its place of business in the US. It must operate primarily in the US, or contribute significantly to US economy by paying taxes, using US products, materials or labor.
While computing turnover or number of employees, all the affiliated businesses are considered. If the aggregated entity does not qualify as a small business, the constituents also do not.
For this purpose, any firm is considered to be under your control (and hence your affiliate) if you:
If the same individual or group of individuals exercises effective control over different firms under one of the above means, all the firms are aggregated to compute annual income or number of employees. All the firms need not be in the same business.
The objective is to prevent an individual or group setting up a number of different firms to claim small business benefits for each separately.
Even a temporary association in the nature of a joint venture might result in the contracting firms being aggregated together.
Turnover means gross receipts averaged over the latest three completed years. If the small business has been in existence for a lesser period, average weekly revenue is multiplied by 52 to arrive at annual turnover. The following kinds of receipts are excluded for this purpose:
Number of employees is computed by averaging number of persons employed for each pay period during latest 12 months. If the small business was in existence for a shorter period, this shorter period is considered.
All persons on payroll, whether part time or temporary, are included in the computation.
SBA does not issue certificates to small businesses meeting size standards. Nor does it maintain a list of eligible small businesses.
Instead, the organization seeking assistance self-certifies that it meets the small business size standard requirements. However, any interested party could contest the self-certification.
The Office of Size Standards at SBA has the power to change the small business size standards. Requests for this purpose could be addressed to the Assistant Administrator.
The structure of the industry and impact of a size standard on federal procurement are important factors considered during a review.
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