Small businesses are the backbone of the American economy, making up 99.9% of all businesses. But what exactly qualifies a business as "small"? This outline examines the criteria used to define small businesses.
Number of employees
The most common metric is number of employees.
The SBA defines a small business as having fewer than 500 employees.
Other government agencies use different employee limits, ranging from 50 to 1,500.
Annual revenue is another key factor.
The SBA defines small manufacturing firms as those with fewer than 1,000 employees OR less than $1 million in average annual revenue.
For most non-manufacturing industries, small firms have revenue under $8 million.
Revenue limits by industry
The SBA uses detailed size standards that vary by industry.
For example, small farms have sales up to $1 million while small air transportation firms can have revenue up to $41.5 million.
Independently owned and operated
Not dominant in its field
Location/operations in the United States
Organized for profit
Operates primarily within the U.S. or makes a significant contribution to the U.S. economy
While number of employees is most often used, the official SBA definition uses both employee count and annual revenue to determine if a business is "small"—with detailed size standards by industry. Ownership structure and geographic factors are also taken into account.