The 8(a) Program Can be a Springboard to Success.
In 1991, friends Lew Parker and Mitch Caron had a vision of creating a business that was built around the concept of positioning employees as the backbone of the company. Guided by this vision, they sought out to found PC Mechanical, Inc. They collaborated and launched a full service, multi-disciplined mechanical repair and service company from Parker’s garage. With their extensive experience in the service and maintenance industry, they positioned themselves to apply for an 8(a) certification in 1996. PC Mechanical, Inc. used the 8(a) program as a stepping stone to secure numerous government contracts including their largest-to-date: a $140 million multi-year military contract they won over numerous competitors worldwide. They were recognized as an Outstanding Business at the Spirit of Small Business Awards held by the Pacific Coast Business Times and the U.S. Small Business Administration’s Los Angeles District Office. Many small little-known enterprises such as PC Mechanical, Inc. have grown into multi-million dollar empires with the assistance of the SBA’s 8(a) Business Development Program. As you likely already know, the 8(a) program is specifically tasked to assist small socially or economically disadvantaged entrepreneurs in gaining access to the economic mainstream in the government marketplace.
Success can come quickly after joining the 8(a) program with the government’s flagship to develop minority entrepreneurs. Businesses that aspire to join 8(a) companies like PC Mechanical, Inc. need to think big and think ahead to formulate a plan to stand out from the increasingly crowded marketplace. Frankly, continued success after graduation isn’t a given. 8(a) graduation can be a sobering experience when money is aggressively spent to maintain an image for a higher valuation, overlooking the necessity of obtaining a healthy balance of commercial and government business. In fact, hundreds of small businesses fail after graduation as they forget to prepare their company for real-world business competition. There are tens of thousands government contractors competing for the same opportunities. Indeed, the SBA was under scrutiny in the 90’s for failing to prepare their 8(a) participants for graduation. A dated agency study showed 46% of the 8(a) graduate companies from October 1989 to September 1992 went out of business or cut back their operations substantially.
To address this vulnerability, the program’s five-year transitional phase offers a weaning methodology referred to as the “Business Activity Target”. The idea is to encourage companies to start obtaining commercial business outside of the 8(a) program by creating a balance between commercial and government business. The target ratio set forth to win commercial business during the transitional stage is as follows:
- End of year 5 = 15%
- End of year 6 = 25%
- End of year 7 = 35%
- End of year 8 = 45%
- End of year 9 = 55%
As the success story of PC Mechanical Inc. attests, the 8(a) program provides the framework for thousands of aspiring entrepreneurs to gain a foothold in government contracting and set new startup companies on the same road to success. Here are some of the universally accepted best practices aimed at businesses nearing the completion of their nine year 8(a) program:
SUBCONTRACT for quick experience and Past Performance.
The easiest way to gain access to the Government marketplace is to have experience and past performance examples at your disposal. Of course, for a new contractor entering the marketplace, this places recent 8(a) graduates at an immediate and profound disadvantage. Experts strongly recommend gaining entry to this roiling market by forming a relationship with a larger, more experienced contractor first. Such an approach serves a dual purpose. Firstly, it allows the 8(a) graduate to focus on providing exemplary service and establishing a Past Performance repository- an essential characteristic of a successful contractor. Secondly, it allows the business to do so without having to negotiate with a Government agency- an endeavor that many contractors find particularly challenging. As a Subcontractor, the larger contractor deals directly with the Government. This arrangement gives the new, smaller business an opportunity to observe the relationship between the larger contractor and the Government to better understand what they will need to do when they make the jump to offering a bid directly to an Agency. Working with a larger contractor also helps when you can name that contractor as a reference to the Government further down the road.
We’ve all heard the cliché phrase “it’s not what you know, it’s who you know” when it comes to hiring. Unfortunately, while it may not seem fair to those just breaking ground, this rings especially true in Government contracting. The key is to seek experienced employees that have taken the time to gain networks. This will assist enormously in the most time-consuming but rewarding aspect of acquisition- establishing relationships. Also, it is a good idea to explore attracting former federal employees that have an inside track on the internal workings and operations of Agencies. With these considerations in mind, your business can accelerate explosively from new and unproven to savvy and smart on the strength of your personnel. Once obtained, however, there must be continuous efforts to retain these employees. Just as in other industries, there is a high rate of “poaching” as the highly sought-after employees are constantly being tracked down by competitors.
BUILD a Business Plan.
Creating a business plan out of whole cloth is one of the more challenging tasks of a recently graduated 8(a) businesses. However, it makes no sense to attempt to navigate the choppy waters of the contracting industry without a clear and definable plan already in place. At times like this, it is recommended that upcoming graduates rely heavily on tools that are available for just this purpose, rather than “go it alone.” A good place to start is the SBA website itself, where new small businesses can take advantage of the Business Plan Tool. This tool assists in laying out the thought process that is required to build a road map 3 to 5 years into the future to help 8(a) graduates navigate the early years of their business. There are also a variety of supplemental training courses, blogs, and guides available online for additional resources that will help in the conceptualizing of a business plan.
FOCUS on Unique Characteristics.
This may be one of the more oblique sounding pieces of advice, but a new business must be capable of standing out from the crowd, and avoiding the temptation of falling into a laundry list of clichés when describing itself and its capabilities. The competition is fierce and plentiful, and the further an 8(a) graduate can distance itself from the chorus of sound bites, the better. Finding this optimal way in which to market oneself is known in in the industry as Strategic Brand Management, or SBM. This is where the sphere of public relations and marketing comes into play; an area where admittedly some new 8(a) graduates are not willing to spend significant amount of money when funds are tight. Most established businesses give a ringing endorsement to Strategic Brand Management through marketing and public relations. It is important that new businesses be mindful of the benefits of unique branding that will allow them to stand separate and apart from the competition.
Vice President for Coley Government Contracting Services, Dan leads the day-to-day Consulting Practice. He has more than a decade of experience with the acquisition, management, and marketing of Federal, State, and Local government contracts. Daniel specializes in all aspects of GSA Schedules management and marketing and has helped hundreds of Coley clients remain compliant with the terms of their GSA contract while helping them expand their business.