How should a small business be defined? Should the definition be based on the number of those employed by that business. the amount of money that that business makes or some combination of the two? Depending on which definition you read each one of these would describe a small business. With these multiple definitions comes confusion to the small business owner.
One of the definitions, as defined by the Small Business Administration (SBA), states that a small business may be a sole proprietorship partnership, corporation, or any other legal entity. The definition becomes convoluted when industry differences, such as size standards, come into play. Listed below is a breakdown of what the SBA general standards consist of:
- Manufacturing: Maximum number of employees may range from 500 to 1500, depending on the type of product manufactured;
- Wholesaling: Maximum number of employees may range from 100 to 500 depending on the particular product being provided;
- Services: Annual receipts may not exceed $2.5 to $21.5 million, depending on the particular service being provided;
- Retailing: Annual receipts may not exceed $5.0 to $21.0 million, depending on the particular product being provided;
- General and Heavy Construction: General construction receipts may not exceed #13.5 to $17 million, depending on the type of construction;
- Special Trade Construction: Annual receipts may not exceed $7 million; and
- Agriculture: Annual receipts may not exceed $0.5 to $9.0 million, depending on the agricultural product.
According to the SBA size standards what some may consider a big business actually will qualify as a small business. These size standards were set to give federal agencies a guideline when it comes to having a small business bid for a government contract. By using these size standards a business with 25 employees or one with 100 employees can bid on the same government contract. The Small Business Act only requires 23% of government spending be set aside specifically for small business. Because bidding on a government contract is both time-consuming and competitive, chances are the small-sized business will shy away from making a bid.
Join in the discussion – Is it possible that the time has come to not use the SBA definition to define a small business since not all small businesses bid on government contracts? Share your thoughts and comments in the comment section below.
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