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As you probably know, small businesses are afforded benefits to help them compete in the Federal marketplace. So, how do you determine if your business is small and able to participate in Federal small business programs? Here are a few tips to help you figure out if you are in fact a small business.
Second, you need to identify the size standard for your primary NAICS. To look up your size standard, you can visit SBA’s website at: https://www.sba.gov/contracting/getting-started-contractor/make-sure-you-meet-sba-size-standards/table-small-business-size-standards. As you’ll see, size is determined by revenues or employees.
Finally, you need to calculate your actual size. If the size standard for your primary NAICS is revenue-based, you need to calculate your business’ average receipts for the past three years. Receipts means “total income” plus “cost of goods sold” as defined and reported on your Federal tax returns. To determine your annual receipts, you will need to calculate your annual receipts for each of the three most recently completed fiscal years and divide the total by three. For example, if your annual receipts were $3M for 2012, $10M for 2013 and $2M for 2014, your size would be $5M.
If the size standard for your primary NAICS is employee based, you would take the average number employees you’ve had for the past 12 months. To calculate a business’ size for an industry based on employees, you would take the average number of employees of your business based upon the number of employees for each of the pay periods for the preceding completed 12 calendar months. If you have been in business for less than 12 months, you would take the average number of employees each of the pay periods during which you have been in business. According to SBA, employees are all individuals employed on a full-time, part-time, or other basis. This includes employees obtained from a temporary employee agency, professional employer organization, or leasing concern.
To highlight how size standards apply for specific industries, let me go through couple of examples. For NAICS code 541330, Engineering Services, the size standard is revenue based. As such, in order to be small in this industry, a business must have annual receipts (averaged over the past three years) that is equal to or less than $15 million. Electronic Computer Manufacturing, which is NAICS code 334111, is an industry measured by employees. So, in order to be small in this industry, a business’ number of employees (averaged over the past 12 months) needs to be equal to or less than 1,000.
It’s important to note that even if you are not small in your primary NAICS, but small in other secondary industries, you are still able to certify as a small business and pursue small business opportunities in the industries for which you meet SBA size standards. However, being small in your primary NAICS is particularly important for businesses interested in participating in Federal small business contracting programs, including the 8(a) BD program and HUBZone program.
For more information on this or other issues relevant to small businesses in Federal contracting, please contact us at: email@example.com.