Hundreds of small businesses enter the SBA’s 8(a) business development program each year, but when those companies graduate, continued success and favor isn’t a given.
The playground is a lot flatter, your sole-source advantage is gone and the competition is fierce.
As you enter the five-year transition phase of the 8(a) program, now is the time to plan a graduation strategy so that your business will go on to thrive in a competitive business environment.
Narrow Your Focus
This rule of thumb applies to all businesses but is especially true in the government contracting space. You can’t take on the whole government. Identify specific agencies, sub-agencies or departments. If you’ve already done business with a certain agency, look for ways to repeat that success (proof of performance is a huge advantage).
Get Your Foot in the Door: Form Teaming Relationships Before You Graduate
8(a) businesses are very attractive to larger companies because of their ability to win sole-source contracts. Hopefully, you’ve used this leverage to form relationships and teaming agreements with other, larger contractors. Not only will you learn from their experience and add greater value to government clients, you’ll also gain past performance, which is all-important in the contracting world.
Take Advantage of Mentor-Protégé Relationships
In addition to forming joint ventures and teams to bid on contracts, you can also participate in the 8(a) BD Mentor-Protégé Program which allows companies to learn the ropes from other more experienced businesses.
Hire the Right Talent
Invest now in employees who have the networks and experience required to help you develop relationships, market to the government (what works in the private sector doesn’t work with govies), and understand the sales/contracting process. To help you “talk-the-talk” consider hiring former government employees. They can provide invaluable advice on tailoring your proposals to a specific agency’s needs and procurement processes.
Be sure to talk to your 8(a) SBA Business Development Specialist about your hiring plans. They can advise on any special rules and regulations about hiring former federal employees and creating certain positions to ensure they don’t deviate from 8(a) regulations (particularly financial positions).
Maintain a Balance of Private-Sector and Government Business
One of the requirements of the 8(a) program is that your business maintains a balance between its commercial and government business. There’s also a $100 million (or five times the value of your primary NAICS code) limit on the total dollar value of sole-source contracts that you can receive while in the program. To secure your financial future and readiness to exit the 8(a) program, it’s a good idea to start thinking of other ways you can diversify your business and enter new commercial markets.
Keep an Eye on your Financial Statements
Many 8(a) companies see a decline in revenues within a few years of exiting the program. Now is the time to prepare for this. Many of the steps described above can help you prepare and conserve cash flow.
Formally Plan Ahead for your Exit from 8(a)
You don’t graduate college without a plan for how you’re going to find the perfect career or business venture to pursue, and the same goes for 8(a) graduates.
For help, why not turn to SBA’s Create a Business Plan tool? This secure, web-based, planning tool walks you through the critical steps of building a plan. Save it online and come back at any time to modify your strategy.
– Caron Beesley