The SBA Just Changed the Rules for 59,000 U.S. Businesses in a $150 Billion Opportunity. But Most People Don’t Even Notice

What if I were to tell you that the federal government just changed the definition of “small business” in hundreds of U.S. industries, and that thousands more companies can now compete for nearly $150 billion in government contracts as a result? 

It could be an enormous opportunity. It’s also just the beginning of a series of upcoming rules changes that could mean massive chances to take advantage, for people who pay attention.

It all began with a little-noticed announcement in April that the Small Business Administration had settled on final rules to modify small business definitions in 16 business sectors covering hundreds of industries.

The new rules “make 59,000 additional firms eligible for millions of dollars in revenue and business expansion opportunities,” Bibi Hidalgo, the SBA’s associate administrator for government contracting and business development, said at the time.

We’ll get into the details below. But two things struck me at the outset:

• First, not that many businesses or even people seem to pay attention. (One smart exception: Justin Ho’s coverage on Marketplace.)
• Second, the sheer volume of opportunities, especially as government spending has continued to balloon over the last few years. From fiscal 2019 to 2020, for example, total U.S. federal government contracts rose from $595 billion to $665 billion, according to the Government Accounting Office.

And, it’s not all defense contracts and office supplies.

“The government buys just about everything, from soybeans to toddler clothing to cloud computing,” Sam Le, director of policy, planning and liaison at the SBA told me in a video interview Friday. “The government buys everything.”

Another fascinating data point: While overall government spending and the percentage of government contracts granted to qualified small businesses had risen over recent years, the actual number of individual businesses getting those deals has fallen.

In other words, it’s the relatively smart few who pay attention, that have walked away with a bigger and bigger piece of the pie.

“Exactly,” Le said. “The number of dollars is growing, but the number of businesses is declining.”

That’s why these definitional changes are so interesting. 

With literally hundreds of adjusted definitions, it would be impossible to list them all here, but the qualifications are available on the SBA’s website at sba.gov/size.

What’s more, the most recent changes are just part of a long series. 

In short, while some industries are judged for “small business” size based on each business’s revenue, other industries are judged based on total number of employees in each company, and the employee-count industries are up for review next.

In fact, the SBA has virtual public hearings set for Tuesday and Thursday for anyone who would like to comment on those proposed changes. Additionally, Le said changes in SBA size standards for certain loan programs are set to be released shortly.

Now, I don’t know what business you’re in, and I don’t know how you feel about government spending in general.