Variables should include different size and industry classifications. For instance, a rule may have a very small impact on one sector, but a significant impact on a another. If these impacts are evaluated together, an average would not accurately characterize the impact. An effective economic analysis will delineate the burdens placed on specific sectors of the small business community. Any conclusions about the impact of regulations should be couched in a thorough assessment of economies of scale when appropriate.
Small businesses have fewer customers to pass along the cost of compliance.
As a result, a small business with the same economic costs becomes uncompetitive because of higher prices or the company is less profitable with fewer options to react to market changes. Obviously, the definitions used in an economic analysis also must withstand critical review. For instance, agencies are compelled to use definitions for small business established by SBA in most instances. This critical definition question is one of several lynch pins in an agency's demonstration of compliance with the Regulatory Flexibility Act. Finally, agencies should not be tempted to certify a rule because they believe the benefits of a regulation will pay for the costs.