When is a Business Considered “Small”? Why Does it Matter?


The Small Business Association (SBA) qualifies small businesses entirely around size. Size can mean number of locations or number of employees; however, annual receipts are the deciding factor most often. A small business is one that in general has fewer than 1,500 employees and a maximum of 38.5 million in average annual receipts. That may seem like “big business” income; nevertheless, remember that some industries carry higher operating costs (cost of goods, salaries & wages, or research & development). According to recent statistics, small businesses with fewer than 20 employees make up 89.6% of all U.S business enterprises. Furthermore, a minimum of 24 million businesses in the United States are sole proprietorships, meaning no employees at all.

The definition of a small business is entirely determined by the industry.

  • Agriculture: Maximum of $750,000 in average receipts.

  • Construction: Maximum of $36.5 million in average receipts.

  • Manufacturing: Maximum number of employees ranges from 500 to 1,500

  • Transportation & Warehousing: Maximum number of employees ranges from 500 to 1,500. Sub-industries are defined by a range of $7.5-$37.5 million in average annual receipts.

  • Finance & Insurance: A maximum of 1,500 employees and a maximum in average annual receipts ranging from $32.5-$38.5 million.

  • Real Estate, Rental, and Leasing: A maximum of $7.5-$32.5 million in average annual receipts.

  • Professional, Scientific, & Technical Services: A maximum of $7.5-$20.5 million in average annual receipts, or a maximum of 1,000 to 1,500 employees.

  • Health Care & Social Assistance: A maximum of $7.5-$38.5 million in average annual receipts.

Why is it important to distinguish small from large? This technique of size standards is meant to help small businesses qualify for business loans from the government, win contracts from the government, and be granted access to business tools. This entire methodology is meant to defend small business against large corporations and their marketing budgets.

Test if your business is considered “small” using the SBA Size Tool.

Here is the table of standards from the SBA. It analyzes the “size standard” deeper and dives into sub-industries past what we have analyzed so far.

If you have questions about “size standards” you can reach out to the SBA:

Office of Size Standards

409 3rd St., S.W.

Mail code 6530, Eighth floor

Washington, DC 20416

Phone: 202-205-6618

Fax: 202-481-1749

sizestandards@sba.gov


Article Resources:

  1. Shopify. “Small Business“

  2. Fundera.com What is the SBA's Definition of Small Business


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