Small Business Size Standards: The SBA Is Redefining Who Counts

by | Oct 8, 2026 | Business Strategy, Economic Insight, SMB Leadership

Stacked bar chart of small business size standards showing employer firms measured by revenue falling from 88.8% today to 58.2% under the SBA proposal, with the remaining share measured by headcount

By law, the SBA has to do this.

The Small Business Jobs Act of 2010 directs the agency to review all of its small business size standards every five years and adjust them to market conditions. The first closed in 2016, the second in 2023, the third is underway. The proposed rule the SBA published on August 20, 2026 is a major and significant adjustment. The statute requires a review. It does not direct redesign.

How Small Business Size Standards Actually Work

Two measures exist, a five-year average of your revenue or a 24-month average of your headcount. Congress fixed the measure for two sectors: manufacturers are counted in employees, service firms in revenue. Everywhere else the SBA decides, and today defaults to revenue.

What the Proposal Would Change

The SBA claims its proposal replaces roughly 1,000 standards with 338, set at broader industry groupings. In addition, the agency estimates over 110,000 employer firms would be newly added to the ranks of small business.

It also reverses the default, proposing to count employees wherever Congress has not required otherwise, which the agency claims would reduce how often a firm crosses between small and large. Today 88.8% of employer firms are classified under the revenue test. Under the proposal, this would drop to 58.2%.

What This Means for Your Business

More companies qualifying means more competition for the federal contracts reserved for small businesses. The SBA states the change would hit hardest at “businesses most similar in size” to the firms that newly qualify, and may cut their odds of winning those contracts.

Four things to do before November 20, when the period to submit comments closes.

  1. Start with the SBA’s size standards tool, which tells you where you stand under the current rules. Then look up the proposed standard for your grouping, now generally classified as the first 4 digits of your current 6 digit NAICS number, and which measure it uses. It may not be the one you track.
  2. Find out where your industry association stands, and whether it filed. Comments on Docket SBA-2026-0199 are public, so you can read what was filed on your behalf.
  3. Decide whether to comment either directly or to your industry association.
  4. Start planning against the classification you would be in, not the one you are. If your measure switches to headcount, hiring decisions start to affect eligibility.

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