During the events at National Small Business Week the Small Business Administration announced upcoming changes due to take effect on July 22, 2013. These changes shift what defines how “small business” is defined. The administration is increasing the size standards in 70 industries. These standards lay out the maximum size a firm can be and still be considered a small business.
This shift in classification is noteworthy because companies that do not currently qualify for this categorization will now be eligible for special SBA loans and government contracts set aside to help smaller firms. Defining much larger businesses as “small” could have costly implications for the “little guy”.
The indicator that the SBA looks to for this classification is the average annual revenue of the company. The threshold that is increasing in about 25 industries will increase over 500 percent from the current $7 million to $35.5. That translates into around 17,000 U.S. businesses that will now be considered a small business.
There are four NAICS sectors and one NAICS subsector that are revised in the new standards. They are:
- NAICS Sector 71, Arts, Entertainment, and Recreation
- NAICS Sector 52, Finance and Insurance
- NAICS Sector 55, Management of Companies and Enterprises
- NAICS Sector 11, Agriculture, Forestry, Fishing and Hunting
- NAICS Subsector 213, Support Activities for Mining
There is already controversy surrounding the amount of contracts that are to be awarded to smaller firms, a mark that the federal government has missed over the past 11 years, according to an article by the Washington Post. A total of 23 percent of federal contracts are earmarked to be granted to companies with the designation from the SBA. Adding more players to the mix will surely increase competition in an already competitive process.