Small Business Concerns

When getting started in government contracting, it is good to know whether your business is considered small. The Small Business Administration (SBA) sets these size standards based on the company’s annual receipts and the number of employees.

A small business will fall into these categories:

• A for-profit company.
• Be located and primarily operate within the U.S. This can be in the form of paying taxes or by using American products, labor, and materials.
• Is independently owned and operated.
• Is not dominant in their industry on a national basis.

Independently owned and operated usually means that the business’s daily operations are run through their internal ownership and management without outside influence by way of ownership or financial support of the small business.

Affiliates will also count towards being independently owned and operated along with whether or not they are considered dominant in their fields.

Size Standards

When registering your SAM in the system, if you have input correct and accurate information, your company will automatically be self-certified as a small or other than small business (OTSB) based on what was given. There is no small business certification that you can receive from completing this process, but your status can be viewed from an active SAM registration.

Anyone can also determine their size standards before registering a SAM by looking at the size standard table that is released by the SBA.

Size standards are based on the North American Industry Classification System (NAICS) codes based on the annual receipts or revenue of a company or the number of employees for the federal government.

Your company can be considered small for one NAICS code but may not be considered small for another depending on what their size standards show. However, your company is considered a true small business based on its primary industry.

Annual Receipts

Receipts are the revenue of a company in whatever form they were accrued. This calculation is usually defined as the “total income” or “gross income” plus the “cost of goods sold”.

You can find this number on your business’s IRS tax return forms. These numbers should be averaged over the past five years, if the company has been around that long.

You can find this information inside 13 CFR § 121.104.

Employees

Employees include all of those individuals that were hired by the company, whether they are full, part, or on any other basis. Employees from employment agencies or people that come from similar organizations will also count in this figure. Volunteers, or those who receive no compensation from the business, are not considered employees.

The number of employees for small business size standards is calculated by finding the average number over the last two years when including all the employee sources. If the pay period is less than 2 years, then the average is taken over how long the company has been in business.

You can find this information inside 13 CFR § 121.106.