The New, Not-So-Small, Small Business

The term ‘small business’ is used with increasing frequency. But many don’t know what all goes into that name. To some it is a badge of honor to be a Small Business Owner. Others try to downplay the small aspect of their business.

Even when both competitors are small, the competition may not be equal.

Even when both competitors are small, the competition may not be equal.

But the actual and appropriate use of the term has specific parameters, and July 14, 2014 those parameters changed. Those changes and their impact were addressed in the Nerdwallet article News: SBA Changes the Definition of Small Business, July 15, 2014.

The change was deemed necessary to adjust for inflation but by changing the monetary measures used to define small business, the government recast about 8,500 businesses from large to small, according to estimates.

The new classification may prove beneficial to some of the formerly large businesses, now declared small. They now qualify for contracts with the federal government, as well as special lower rate loans and grants specifically crafted for small businesses by the Small Business Administration.

The announcement of a widening pool is not good news to the existing small businesses. They will now compete with large, though no longer technically large, firms for the same contracts and funding opportunities. It brings to mind David and Goliath as the home-growns will now square off with even larger firms than before, many are multi-million dollar businesses. Many have questioned the Small Business Administration’s motives.

Defining the new parameters of ‘small business’ is not a clear-cut, one-size-fits-all cap. It varies by industry in both the means of measure and the upward limit. Some industries are measured by total assets or revenues and others are by number of employees. This table from the Small Business Administration provides a breakout of those industries.

If you are a small business owner be sure to read up and determine how this change will impact you. If you are the owner of a smaller large business, it is possible these adjustments will change your classification. And please take note that if you contract with the government, you will need to be sure your SAM account, profile and certifications are up to date.