Industry Matters

• Consider the business of manufacturing cars, where hundreds of employees are often a norm for even the smallest company. Labeling these small manufacturers as small isn't always so difficult. However, contemplate whether you might classify a car dealership as small should it also employ several hundred people.
  
  In 1953, the Banking and Currency Committee faced this same dilemma and decided, "It is utterly impossible to define small business rigidly in terms of number of employees, amount of capitalization or dollar volume of business." As a result, it authorized the creation of the SBA through the Small Business Act, also known as Public Law 85-236, and granted the agency the right to maintain a mutable definition for "small business" rather than write a static one into law.
  
  

Size Standards Methodology

• Industry classification is not the only criteria, though it is arguably among the most important. In fact, the SBA maintains a large, meticulously detailed document outlining the methods it uses to define small businesses. The document, titled "SBA Size Standards Methodology," is produced by a segment of the SBA whose sole job is to study and define size standards. For those painfully curious, that segment is the Size Standards Division of the Office of Government Contracting & Business Development, a program office of the SBA.
  
  

Modern Standards

• Standards for the definition of small business, created by the SBA during the 1980s, have remained largely static since that time. However, the agency decided to make revisions starting in 2009, with updates continuing from 2010 through 2012. Kiplinger.com indicated that the revisions represent a substantial change to the current standards, calling them a revamp and noting that the SBA, during just the first phase, is "looking at 138 industries and proposing to change the standards for 71 of them."
  
  

Effect of Redefining Size Standards

• The SBA maintains an array of programs designed to aid small businesses, ranging from training and advisory services to business loans and even grants. Only businesses meeting a current definition for small business may benefit from these programs, though small businesses are not the only ones affected by a change to size standards.
  
  Investors who specialize in providing loans and venture capital to small businesses also receive a special label from the SBA, and are known as Small Business Investment Companies, or SBICs. A company, once classified as an SBIC, is able to apply for federal funds and grants so long as it continues to make investments in businesses the SBA has defined as small. Changes to the SBA's size standards have a literal impact on the breadth of market opportunities available to an SBIC, and therefore to the companies they collaborate with, as hundreds of millions of dollars in venture capital can become exposed or excluded based on the alterations.
  
  

Federal Register

• If you are ever interested in perusing the latest rules, laws and notices created by the U.S. federal government, your first stop should be the Federal Register. The Federal Register is effectively a daily journal of government activity, and this includes actual and potential changes to the SBA's size standards for small businesses. The SBA enters proposals and concepts for new definition standards in the Federal Register specifically to receive commentary from individuals, businesses and other government agencies. Through its Office of Advocacy, the SBA also maintains a list of regulatory alerts detailing the documents the SBA has sent to the Federal Register.