Awardly Toolbox

Receipts Averaging Helper

The five-year average annual receipts calculation at 13 CFR 121.104, including the parts people get wrong: short years, a business under five years old, affiliates, and a share of a joint venture. It shows the working so you can check it.

1. Your receipts, five most recently completed fiscal years

Total income (or gross income) plus cost of goods sold, from your federal tax returns. Not net profit. Leave a year blank if you were not yet in business.

One of these was a short year, or I have been in business under five years.

Year	Your receipts	Affiliate receipts	Weeks

Affiliate receipts go in for the same period. Affiliation is broad: businesses that control, are controlled by, or are under common control with yours. 13 CFR 121.103.

2. Joint venture share

Only if you hold an interest in a joint venture. A concern must include its proportionate share of a joint venture’s receipts; it cannot leave them out because the venture filed its own return. 13 CFR 121.103(h)(4).

No joint venture

Unpopulated — the venture performs no work itself; the partners each perform their own share

Populated — the venture itself performs the work, for example it has its own employees

3. Result

How the five-year average works

Since the Small Business Runway Extension Act was fully implemented, with the transition period ending 6 January 2022, SBA uses a mandatory five-year lookback for every receipts-based size standard. The average is the sum of total receipts for the five most recently completed fiscal years, divided by five.

What counts as receipts

Receipts means total income, or gross income, plus cost of goods sold, as reported on your federal tax returns. It is not net profit. The figure is reduced by returns and allowances, but not by ordinary business deductions.

Three things are excluded: taxes collected for and remitted to a taxing authority; proceeds from transactions between the concern and its affiliates, domestic or foreign; and amounts collected for another party under an agency agreement, such as government funds passed to a lower-tier participant in an assistance programme.

If you have not been in business five full years

Divide total receipts by the number of weeks you have been in business, then multiply by 52. If one of the five years is a short year, take the short year’s receipts plus the four full years, divide by the total number of weeks across all five, and multiply by 52. The calculator above does this automatically as soon as any year carries fewer than 52 weeks.

Affiliates

Add the receipts of all affiliates over the same five-year period, unless a former-affiliate exclusion applies. Affiliation is at 13 CFR 121.103, and it is broader than most people expect: it turns on control, not only on ownership.

Joint ventures

Under 13 CFR 121.103(h)(4) a concern must include its proportionate share of a joint venture’s receipts in its own figures. Filing a separate return does not move those receipts off your books for size purposes. How the share is worked out depends on the venture’s structure.

Unpopulated — the venture performs no work itself and the partners each perform their own share. Your proportionate share is the percentage of the work you actually perform, which is not necessarily your ownership percentage.

Populated — the venture itself performs the work, for instance because it has its own employees. Your proportionate share is your percentage ownership interest.

A worked example

Joint venture AB wins a $10 million contract and will perform half of the work, $5 million, itself as an unpopulated venture. Partner A performs 40% of that venture-level work and Partner B performs 60%.

Partner A includes 40% × $5,000,000 = $2,000,000 in its own five-year average.
Partner B includes 60% × $5,000,000 = $3,000,000.

Note that the base is the $5 million the venture performs, not the $10 million contract value.

Do not count the same dollars twice

Proportionate receipts do not include amounts that already reach your own tax return through subcontracts from the venture to you. Subtract those, or the same revenue is counted in both places.

The two-year, three-offer limit

A joint venture may generally submit no more than three offers, and may not operate past two years from its first award, without the partners becoming affiliated for all purposes going forward. Past that point the figures combine in full — receipts and employees both — rather than by a proportionate share. 13 CFR 121.103(h)(2)–(3).

Planning with a rolling average

Because the measurement period rolls, a single unusually large year does not leave the calculation for five years. Plan set-aside eligibility and recertification with that lag in mind rather than expecting a good year to drop out quickly.

Re-run the average whenever a fiscal year closes, a joint venture work share changes, or an affiliation begins or ends — a new investor, an ownership change, a franchise or licence arrangement.

A missing tax return does not exempt the year. SBA will reconstruct receipts from books of account, audited financial statements, or a statement from someone with knowledge.

Once you have the average, the Federal Size Standard Checker shows whether you are small under each NAICS code, current and proposed.

Sources

13 CFR 121.104 — annual receipts. The five-year formula, what counts, what is excluded, short years and businesses under five years old.
13 CFR 121.103(h) — joint venture attribution, including (h)(4) on the proportionate share and (h)(2)–(3) on the two-year, three-offer limit.
13 CFR 121.103 — affiliation generally.
Small Business Runway Extension Act — five-year lookback mandatory, transition ended 6 January 2022.

Not legal advice. This tool does the arithmetic the regulation describes. It does not determine your size, and it is not a certification. A size determination is made by the contracting officer and, on challenge, by SBA. Confirm the current rules at 13 CFR Part 121 before relying on a figure for a certification or a protest.