New government size classifications could impact your fleet
This year a number of big companies became small without their owners even realizing it. At least the Small Business Administration (SBA) now says they're small. The SBA provides loan guarantees, advice and disaster assistance to small businesses, and also determines which businesses qualify for contracting preferences and set-asides from other federal agencies. In order to decide who gets these goodies, the agency has to decide what constitutes "small."
Periodically the office bumps up the cutoff for an industry, typically in response to a petition from companies that find they're no longer small. Recently, the ceiling for waste haulers was raised from $6 million in average annual receipts to $10 million. In other words, a hauler with revenues of $9 million suddenly "shrank" into being a small business.
The office has a detailed set of rules on how to define a business and its industry. Companies that perform for-hire trucking along with other activities need to pay attention to their classification because size standards can differ sharply.
Most trucking firms other than waste haulers are small if their revenues do not top $18.5 million. However, they must be careful that they're not deemed to be affiliated with a larger company and that they're properly classified under trucking rather than some other industry.
Beginning October 1, industries will no longer be defined by Standard Industrial Classification (SIC) codes. SBA has reissued its size standards in terms of industries classified under the North American Industry Classification System (NAICS). NAICS uses industry definitions worked out with Canada and Mexico, making crossborder transactions, reporting and statistical comparisons easier. Many industries under NAICS correspond closely to their SIC counterparts. For instance, most of trucking (SIC codes 4212-4214) is now in Subsector 484, Truck Transportation, with six industries: 484110-General Freight Trucking, Local; 484121-General Freight Trucking, Long-Distance, Truckload; 484122-General Freight Trucking, Long-Distance, Less Than Truckload; 484210-Used Household and Office Goods Moving; 484220-Specialized Freight (except Used Goods) Trucking, Local; and 484230-Specialized Freight (except Used Goods) Trucking, Long Distance.
A small business in any of these industries is one with revenues of up to $18.5 million, the same ceiling that applied to trucking SIC codes. In general, the SBA adopted size standards that matched the prior SIC size standard for an industry. In some cases, though, industries with disparate size standards have been combined into a new industry. Thus, some companies may find they're in a smaller or larger size class as a result of being placed in a new industry.
The bottom line: Find out today if you "shrank" under either the change from SIC to NAICS or an industry-specific change adopted by the SBA. If you did, you may find "small is beautiful" when it comes to preferences on interest rates, government contracts or other goodies. Conversely, if you're still too big, but one of your competitors shrank, you may find small is much less attractive as a competitor.