Government Redefines Small Business 338 Times Over—Who Counts?
Published Date: 8/20/2026
Proposed Rule
Summary
The U.S. Small Business Administration (SBA or the Agency) is proposing new size standards for 338 industry groups and industries. The new size standards are designed to better reflect the nature of the markets in which small businesses compete. SBA seeks comments on its proposed changes to size standards.
Analyzed Economic Effects
5 provisions identified: 5 benefits, 0 costs, 0 mixed.
No reductions; many thresholds increase
SBA proposes not to reduce any existing size standard even where analytics suggest a decrease and instead will retain or raise standards for 45 listed industries. Examples from the table include Electric Power Generation (NAICS 2211) proposed to rise from 700 employees to 1,150 employees, Natural Gas Distribution (2212) from 500 to 1,150 employees, and Waste Collection (5621) from $38 million in receipts to $47 million.
Net increase in firms qualifying as small
SBA estimates the proposed changes would result in a net increase of about 114,541 businesses classified as small, raising the total from 6,344,967 to 6,459,508 firms (about a 2% increase). SBA also estimates roughly 37,002 unique firms with FY2025 contracts would become newly eligible small businesses, representing more than $71 billion in existing contract dollars that would count toward federal small-business goals.
Shift toward employee-based standards
SBA proposes to convert numerous industries from revenue (receipts)-based size standards to employee-based standards and to default to employment-based standards where SBA has discretion. The change aims to reduce firms flipping between "small" and "other than small" due to revenue volatility, inflation, or productivity changes.
Fewer, simpler size standards
SBA proposes to move from 6-digit NAICS size standards to a combination of 4- and 5-digit NAICS levels, reducing nearly 1,000 unique standards to 338 size standards and removing all size-standard "exceptions." This change is meant to make it easier and faster for businesses to determine whether they qualify as small.
Productivity added to revenue standards
For receipt-based (monetary) size standards, SBA proposes to add an adjustment for general productivity growth in addition to inflation. SBA says this will help place monetary-based size standards on a more equal footing with employee-based standards.
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Key Dates
Department and Agencies
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