Wednesday, May 27, 2015

Another defining moment for the SBA

Small business is broadly defined as a company with 500 employees or less. The federal agency wants to revise that rule of thumb.

Another defining moment for the SBA

Small business is like apple pie.

You get a flavor of that in the speeches of every politician, including the president, who has been on a small-business kick in the last couple of weeks.

“These are companies formed around kitchen tables in family meetings, formed when an entrepreneur takes a chance on a dream, formed when a worker decides it’s time she became her own boss,” President Obama said Dec. 8th at the Brookings Institution.

But if all you see is the pie, you’ve missed the measuring, slicing, mixing, rolling, and baking, not to mention the purchasing, payroll, and other less glamorous aspects of business.

And how big can a small business get before the nobility of its humble origin becomes superseded by the popular dislike associated with many big businesses?

For years, the U.S. Small Business Administration has defined its universe as populated by enterprises with 500 or fewer employees. (A company that big starts to lose that warm and fuzzy feeling, doesn’t it?)

I was a little surprised this week to find out on a blog associated with the Ewing Marion Kauffman Foundation that the SBA is actually considering revising its definition.

Let’s hope the SBA has better luck this time than the last time it tried to tackle the subject. Five years ago, the federal agency’s proposal would have meant about 34,000 businesses would lose their small-business designation, while 35,000 would win it.

That matters because often a business has to be a certain size to qualify for federal grants or to receive government contracts.

In 2004, the howling over the definition changes led the SBA to drop the whole thing. Until now.

The new proposal is not a simple one. But like the previous effort, it uses revenue size or employment levels to set the bar for small businesses depending on the type of industries in which they operate.

A 44-page document on the SBA Web site lists all manner of business and the proposed size standard. For example, mushroom producers are considered small businesses if their annual receipts are less than $750,000. But a “chicken egg producer” can have receipts up to $12.5 million.

The Philadelphia area prides itself on its “knowledge economy.” So life-sciences firms with heavy research-and-development components can have up to 500 employees and be considered small businesses. But aircraft manufacturers and petroleum refiners can employ up to 1,500 and meet the small-business sniff test.

We all know which banks are “too big to fail.” The SBA considers any commercial bank, savings and loan, or credit union with more than $175 million in assets “too big to be small.”

Unfortunately, it’s not clear who the winners and losers with these changes are. So check the list and drop me a line.

Then click over to this site, called Regulations.gov, where the public has until Dec. 21 to comment on the proposed changes.
 

Inquirer Columnist
About this blog
Mike Armstrong blogs about Philadelphia corporations and business-related topics. Contact him at 215-854-2980. Reach Mike at marmstrong@phillynews.com.

Mike Armstrong Inquirer Columnist