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Federal Market Intelligence for Small Business |
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Column: Grow - Don’t GrowBy Ann Sullivan, president, Madison Services GroupWe all have experienced a difficult friend or boss who tells you “do this” and then when you do it, they say “no, I didn’t mean it that way.” Then you spend the next hour trying to undo the thing they told you to do in the first place. Frustrating, right? That is largely what the federal government has been telling small businesses who enter public sector contacting. The message to small businesses is “grow.” The Small Business Administration and its stakeholders pour significant resources into helping small businesses succeed. These range from SBA District offices in every state, lending and counseling programs and support for programs like ChallengeHER, which is sponsored by Women Impacting Public Policy (WIPP). Organizations like WIPP encourage their members to think about federal contracting as a complement to commercial business. We have spent an inordinate amount of resources promoting policies such as the SBA’s Women-Owned Small Business (WOSB) contracting program, along with subcontracting and acquisition strategies, all designed to provide more opportunities for the government to buy from women-owned firms. But then, the government says “wait, don’t grow” by implementing a pretty rigid system of determining when a company is too big to be small. SBA size standards SBA determines which companies are eligible to be called “small businesses” by setting standards for the maximum size allowed in each industry while maintaining status as a small business. In some cases, the government calculates the average amount of annual business revenue for companies within a specific industry. From this, it sets a revenue limit that cannot be exceeded in order to be considered a small business in that industry. To take advantage of SBA small business contracting programs, the company cannot exceed this limit. The SBA then takes the average of the last three years of your revenue, deciding whether you are small or have exceeded the size standard, bumping you into being a midsize company. Ouch. Challenges when facing the size limit This is exactly the position that Lisa Firestone, chair of WIPP, finds herself in. She testified at a House Small Business Committee hearing on the challenges larger small businesses face when approaching the top of their size standard. Lisa testified on behalf of WIPP, telling her story of watching her company, Managed Care Advisors, go from a small boutique healthcare consulting company to the leading provider of Federal Workers’ Compensation Case Management Services. She grew a four-person company to facing a daunting dilemma of growing beyond the $15 million size standard for her industry. The hearing, titled “No Man’s Land: Middle-Market Challenges for Small Business Graduates,” featured witnesses discussing the issue of options available to small businesses who reach the top of their size standard. Should they stay small, sell their business or venture into operating as a midsize company that has to compete for government business with more than 100 very large contractors. According to Bloomberg Government’s recent report, Mid-Tier Market Report: 2018, only 325 companies have made the decision to be a midsize vendor to the federal government. This is in contrast to the 118,000 small businesses who sell to the federal government. Recommendations How can this trend be reversed? The Montgomery County Chamber of Commerce, a WIPP partner in the initiative, “Pathway to Growth,” proposes the following recommendations:
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