How many employees is a small business? SBA size standards, legal thresholds and the average small firm

This page is for owners checking whether they count as small for a federal contract, set-aside or SBA loan, for HR and finance teams working out which employment laws apply, and for sellers who segment accounts by headcount. It sets the official definitions side by side, shows how the SBA counts employees, gives the legal thresholds, and counts how many US companies sit in each size band.

How many employees counts as a small business

US law has no single number. Each program that gives small firms a benefit or an exemption defines "small" for itself. If you're asking because of a federal contract or an SBA loan, the size standard for your NAICS code is the answer that counts. If you're asking which employment laws apply, the thresholds are much lower (see below).

SBA size standards by industry

The SBA sets a size standard for each six-digit NAICS industry: the largest a business can be, together with its affiliates, and still qualify as small. The table in force on 30 October 2026 is the one effective March 17, 2023. It covers 978 industries. 477 are measured by average number of employees and 496 by average annual receipts. Four (commercial banks, credit unions, savings institutions and credit card issuers) use $850 million in assets, and petroleum refineries use employees plus refining capacity.

Among the employee-based standards, 1,000 employees is the most common (72 industries), followed by 750 (63) and 1,250 (53). Only 47 industries use exactly 500. "Under 500" works as a rule of thumb for research, but it isn't the SBA's rule.

Some common industries:

To find your own, look up your code with the NAICS code lookup, then find that code in the SBA table. The SBA's own guide still says most manufacturers with 500 employees or fewer and most other businesses under $7.5 million in receipts qualify; the table itself is more generous, so check your code.

How the SBA counts employees and receipts

• Employees are averaged over 24 months. The SBA averages the number of employees across every pay period in the preceding 24 completed calendar months (13 CFR 121.106).
• Part-time counts as full-time. Part-time and temporary staff count the same as full-time staff, and so do workers supplied by a temporary agency, professional employer organization or leasing company. Volunteers don't count.
• Affiliates are added in. Employees of domestic and foreign affiliates, meaning businesses under common control, are added to your own.
• Receipts are averaged over five years. For contracting programs, annual receipts are the total over the last five completed fiscal years divided by five (13 CFR 121.104).
• Update SAM.gov. When a standard changes, a registered business must update its SAM registration before its profile shows the new status.

Illustrative example. A machine shop with 470 full-time staff, 60 part-time staff and 20 agency temps has 550 employees for SBA purposes. Under the 500-employee standard for NAICS 332710 it is not small, although a count of full-time staff alone says it is.

The 2026 proposal to rewrite the size standards

On August 20, 2026, the SBA proposed a full rewrite of its size standards (91 FR 53741). The main changes:

• 338 standards instead of 978. Standards would be set for four- and five-digit NAICS groups rather than six-digit industries, and every exception would be removed.
• Employees by default. The SBA would use employee-based standards wherever it has discretion, converting many industries now measured by receipts.
• A new method. Standards would follow each industry's average market size, and receipts-based standards would be adjusted for productivity growth as well as inflation.
• No reductions. The SBA proposes not to lower any standard, even in the 45 industries where its analysis points to a decrease.

The SBA extended the comment period to November 20, 2026. Until a final rule takes effect, the March 2023 table applies. If you're close to a limit, check again once the rule is final.

Employment-law thresholds

Federal employment laws define a covered employer by headcount, and each counts differently. State laws often apply at lower numbers.

From the Census Bureau's 2022 firm counts, 903,870 employer firms had 15 or more employees, 675,542 had 20 or more, 247,770 had 50 or more and 114,382 had 100 or more. The Census measures each firm's employment in March, not by the legal tests above, so treat these as approximate counts of covered employers.

The average number of employees in a small business

These are Census Bureau Statistics of US Businesses (SUSB) figures for 2022. A firm is the whole company, with all its locations, sized by its national employment.

The average small employer firm has 9.8 employees, but the typical one is smaller: more than half have fewer than five, so the median is under five. Small firms employ 45.9% of private-sector workers and pay 38.7% of payroll. Count the 29,811,495 businesses with no employees (Census Nonemployer Statistics, 2022) as well, and the average US small business has about 1.7 employees (our calculation).

Size varies by industry:

For the full count of US businesses by size, industry and state, see how many businesses are in the US.

Using the thresholds to find buyers

Each threshold is a moment when a growing company takes on new obligations, and new obligations create purchases. As general guidance:

The firms just below a threshold are the ones to reach, because they're about to need the product and haven't chosen a vendor.

Worked example: benefits software for firms approaching 50

Illustrative example. The company and its rates are invented; the firm counts are Census SUSB figures for 2022.

Northgate Benefits (northgate.example) sells benefits administration and ACA reporting software. Its best customers bought in the year they crossed 50 employees.

1. Count the segment. 70,770 US firms had 40 to 49 employees in 2022, employing 3,118,666 people. Another 89,207 had 50 to 74.
2. Narrow to firms that are growing. If an illustrative 20% of the 40 to 49 band are hiring at any one time, that's about 14,150 firms.
3. Do the arithmetic. Contacting 2,000 a quarter with a 4% reply rate gives 80 conversations; closing 15% gives 12 customers a quarter. At an illustrative $9,000 a year each, each quarter's cohort adds $108,000 in annual revenue.
4. Find the buyer. At this size the buyer is usually an HR manager, a controller or the owner. Working out which firms are hiring and who owns benefits is the slow part; Bebop finds the companies and contacts and researches each account in the list.

Next step: read how to sell to small businesses for who decides at each size and how to reach them.