When a company is facing the transition from small business status to competing in the open market with much larger companies, they face many challenges. Some are internal issues – things a business owner can and should directly control. I defined and gave tips on how to deal with internal mid-tier challenges in a previous post.
Other problems are external threats – things that could be within the business owner's ability to influence, to some extent, but beyond her complete control. Here are some ideas for how to anticipate – and respond.
- Set-Aside Pressure
There is increased pressure for the feds to do business with small businesses and increase their use of set-asides. That makes it attractive to switch from an incumbent who has recently outgrown its small business status to a new small business. Government agencies don’t understand the risks to the success of the project when requirements exceed that small business’s capacity.
Response: Collect and tell the stories of what happens when that approach doesn't work. Advocate research to calculate the cost of project failure due to small business rollover, and the economic cost of deliberately stalled small business growth.
- Risk Aversion
The government’s risk aversion favors big contractors over mid-tier companies.
Response: Develop "Goldilocks messaging" to show when and why you as a mid-tier are JUST RIGHT. Show that you’re not going to fail, you do know the job, and you don’t cost the earth. Quantify the value of how your experience mitigates risk that rises with weaker small businesses. Deepen your understanding of client needs and strengthen your proposal writing to communicate that message.
- Structural Invisibility
The small business subcontracting program makes mid-tier companies invisible. When large primes focus heavily on companies that contribute to their small business goals, they don't see the mid-tier companies right in front of them – companies that have the financing, past performance, and lower overhead that they really need.
Response: Focus your marketing on the primes' desperate desire to lower cost and risk, and increase revenue. Reach up to team with big companies, and show them how you reach back to team with small companies. Leverage mentor-protégé programs for more flexibility.
- Low Price, Technically Acceptable (LPTA)
Budget pressures and cost-cutting culture is driving LPTA as the basis for evaluation, and spawning solicitations making top-flight demands while asking for bottom-dollar prices.
Response: Advocate for criteria to limit LPTA use in favor of best value. Seek examples in or similar to your target agency to show when Low Cost, Technically Acceptable (LPTA) actually generates High Cost Technical Failures (HCTF).
- No Programs, Low Awareness, for Mid-Tier
There is low awareness, at the political and contracting levels, of mid-tier businesses: the impact if they fail, and the benefits when they thrive. Opposition to mid-tier programs includes some heavy hitters in both industry and government.
Response: Start thinking about how the strong detractors benefit when mid-tier firms succeed. Define and seek out stakeholders and common ground. Engage with curiosity, not antagonism. Start conversations to gauge awareness. Share what you learn with Mid-Tier Advocacy. Write and speak about what you find out to foster dialogue.
In the third post in this series, we’ll discuss how to prepare for the transition to mid-tier.