Question 1

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.

Question 2

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 3

How are employees counted for size standard purposes?

Accepted Answer

Employees are counted as the average number of individuals (including part-time, temporary, and seasonal workers) employed during each pay period over the prior 12 months. All affiliates' employees are included. Part-time employees count the same as full-time employees — there is no FTE conversion. Leased employees count if the company directs their work. Independent contractors generally do not count as employees.

Question 4

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.

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

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