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Are You the Definition of Small Business?

The SBA is introducing new size standards–will you benefit from them?
Business Writers
February 22, 2012

Are you the new definition of small business?

Better check the Small Business Administration's dictionary–they've changed the description of the term across several industries for the first time in about a quarter of a century. The SBA has been working on the new standards since 2007; they take effect March 12.

This month the SBA has spelled out in The Federal Register the new size definitions of small businesses. The new rules increase 37 of the revenue-based size standards in 34 industries in the "Professional, Scientific and Technical Services" sector. They also increase one size standard in what the SNA calls the "Other Services" sector.

Factors considered in making the changes included inflation and current economic conditions, plus federal contracting trends, average firm size, and the degree of competition within individual industries. Part of the impetus for the change was the Small Business Jobs Act of 2010, which requires the SBA to review size standards.

The SBA says the new definitions could make hundreds more small businesses eligible for SBA programs such as contracts and assistance.

"It allows small businesses to retain their small-business status and contracting officers to have a larger selection of small businesses to choose from for contracting opportunities," an SBA spokesperson told The Huffington Post.

Small-business advocates, however, say they are not so sure.

The Washington, DC-based National Small Business Association will conduct a comprehensive review. But in the meantime, the advocacy group–for whom small business government contracting has been a long-term issue–said it had a couple of areas of concern.

Spokeswoman Molly Brogan told The Huffington Post: "Some industries, such as architecture and engineering, are grouped together, and the combination can cause some issues."

Very small businesses also could find themselves squeezed out of work by larger ones.

"Another concern is there may be enhanced competition from businesses on the larger end of the scale that are now classified as a small business," Brogan said. "For the majority of businesses that have about nine to 11 employees, it's hard to compete against a company that has 500 employees."

Separately, the House Small Business Committee also is looking into the federal contracts issue as it relates to the SBA's definition of small business. The Protect American Small Businesses Act, introduced by Reps. Joe Walsh (R-Ill.) and Gerry Connolly (D-Va.), would require that the size standard be assigned by each group's North American Industry Classification System (NAICS) code.

Walsh said in a statement: "My bill ensures that small businesses do not have to compete with global corporations to create jobs in our local communities. Size standards assure the viability of America's biggest job creators–small businesses."

Do the new definitions affect you?

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