Question 1

How is average annual revenue calculated for size standard purposes?

Accepted Answer

Average annual revenue is calculated by averaging the total revenues from the firm's three most recently completed fiscal years, including all affiliates. Revenue includes all income from all sources, not just government contract revenue. If the firm has been in business less than three years, the average is calculated over the years the firm has been in operation. SBA uses IRS tax return revenue figures.

Question 2

Which three years are used for the revenue size standard calculation?

Accepted Answer

The three most recently completed fiscal years are used. If you are self-employed and file a calendar-year return, this typically means the three most recent tax years. For businesses with non-calendar fiscal years, use the three most recently completed fiscal years. The year of contract performance is not included. If a year hasn't been filed yet, use the available data and estimate.

Question 3

How does affiliation affect size standard calculations?

Accepted Answer

Affiliated businesses' revenues and employees are combined when determining size. Affiliation exists when one entity controls or has the power to control another, through common ownership, management, stock options, contractual relationships, or economic dependence. SBA's affiliation rules are complex — common triggers include family members owning related businesses, identical or near-identical owners, and the ostensible subcontractor rule for subcontracting relationships.

Question 4

What is the difference between revenue-based and employee-based size standards?

Accepted Answer

Revenue-based size standards (expressed in millions of dollars) apply to most service and retail industries. The firm's average annual receipts over the past three fiscal years must not exceed the threshold. Employee-based size standards apply to manufacturing, mining, and some other industries — the average number of employees over the past 12 months must not exceed the threshold. Some NAICS codes use a different measure entirely.

How is average annual revenue calculated for size standard purposes?

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