SBA gets mixed message

The Small Business Administration is still trying to figure out how to change the process for determining which businesses qualify as small, and a public hearing today at the agency's headquarters may have only added to the confusion.

Small business owners, managers and representatives of small business trade groups discussed the issue as SBA officials listened and asked questions.

Some companies support SBA's desire to reduce the number of different size standards, and to base as many of them as possible on employee size rather than revenues. Others, however, took the opposing view. Some favored a method to "grandfather" businesses that would be kicked off the small business roles by any new parameters, while others said grandfathering would be unfair to smaller firms.

The hearing was one of 11 that SBA has scheduled to be held around the country. Four more remain on the schedule.

SBA proposed changes to the system last year, then withdrew their proposal after several months of dialogue with companies that would be affected. In December 2004, they published an advance notice of proposed rulemaking, which detailed the issues in which SBA is seeking industry opinions.

Some of the people who testified said they saw no need for significant changes.

"We believe the need for rulemaking has not been shown," said George Spencer, executive director of KeyLogic Systems. "Focus on enforcement of the existing standards rather than modifying them."

Ulises Martinez, owner of NOVUstar, said the number of people testifying who held on to small business status for 25 or 30 years surprised him. "How long [does] a baby stay a baby?" he said.

Martinez said he reviewed SBA's database of small business and found that by far, the majority reported fewer than 100 employees. "I don't understand the concern when companies under 100 [employees] are the majority," he said.

Others pointed out that whether changes to the rules are good or bad depends on who is making the evaluation. Ronald Segal, president of Spectrum Systems, said that his company makes much of its revenue reselling commercial technology products and small amount providing services. Because it's possible through reselling to bring in significant profits with a small number of people, measuring size status based on revenues could make his 35-person company a large business by SBA definition.

"Companies that are services focused will face the opposite problem," he said.