Of those employer firms, 99.7 percent had fewer than 500 workers. Collectively, they employed 59.69 million workers, or about 10 employees per firm.
I'd hazard to say that most of us think of a small business as a place that would have trouble fielding enough players for a five-on-five game of basketball. Looking only at businesses with fewer than 10 employees, I find 4.66 million businesses with 12.96 million employees, or nearly three per firm. (That's not counting the 21.35 million "non-employer" firms, where the boss has no one but himself or herself to boss around.)
So how did the federal government come to set 500 as the upper boundary for small businesses?
The answer dates to World War II, when the government cranked up consumption of everything for the war effort and set that measure. Today, the 500-worker limit is more like shorthand for a long-standing practice used by procurement officers.
The U.S. Small Business Administration uses a flexible size definition because businesses in one industry can be wildly different from those in another. Often, the standard involves annual receipts, defined as a firm's total income plus cost of goods sold, rather than employment.
The SBA says it actually prefers receipts as a measurement of enterprise size because it reflects the value of output of a business and is easily verified by tax returns and financial records. Generally, the agency uses annual-receipts criteria for non-manufacturing industries.
So if you're a peanut farmer, as one former president was, the cutoff to be considered a small business is annual receipts of $750,000.
As a rule, wholesalers can't employ more than 100 and be considered small. Retailers, construction firms, and many service businesses rate as small with up to $7 million in annual receipts. Manufacturers and miners are small as long as they write fewer than 500 paychecks at payroll time. So if you're sitting on a gold mine, you can employ up to 500 people and be considered a small business.
But there are plenty of exceptions to those rules of thumb. Lots of retailers can generate far more sales and still qualify to sell their goods to the federal government or qualify for SBA loan programs: used-car dealers, up to $23 million; home centers, $35.5 million.
For the last several years, the SBA has been reviewing its size standards, and in many cases has increased them, potentially allowing even more businesses to qualify as "small."
In late September, the agency raised size standards for 58 industries in the real estate, education and health-care sectors that will take effect Oct. 24. Raising the bar there will bring more than 18,600 more firms under the small-business umbrella.
The SBA promises more revisions in the years ahead, but I'm not persuaded that it makes sense to keep raising the limits on what constitutes a small business. You're either small, or you're not.
If you want to find out whether your business is "small" by SBA standards, consult the 45-page document on the agency's website at http://1.usa.gov/IZXzSv.
Contact Mike Armstrong at 215-854-2980 or marmstrong@phillynews.com, or @PhillyInc on Twitter. Read his blog, "PhillyInc," at www.phillyinc.biz.
