The small business size standards define a critical playing field for federal contracts competed among and awarded to small firms. But those same size standards can represent significant risks for companies that grow too big to be considered small, and lose access to both set-aside prime contracts as well as small business subcontracting programs. Yet they're too small to compete on the same playing field with the much larger businesses in full and open competitions: in short, they become lost in the procurement space.
Finding it hard to be sympathetic? Think again. Today's federal system of small business preferences unintentionally stunts the growth of the very best firms that it nurtures to maturity.
As I was preparing some remarks for a group of mid-tier companies, I ran across scientific reporting of a new planet in the "Goldilocks zone" – neither too hot nor too cold, but just right to support life. That got me thinking, "Maybe mid-tier companies aren't lost in space; they're the perfect fit for some of the most vexing problems of federal buyers and primes alike."
Earlier this year, I completed a research project with the CEOs of current and nearly mid-tier companies. That research revealed the most common challenges facing mid-tier businesses. Here are some ideas to approach those challenges and thrive across this critical growth stage.
The challenges divided easily into two groups: internal issues that are within the business owner's control, and external threats that could be within the business owner's ability to influence, to some extent, but beyond her complete control.
The top internal issues CEOs cited were these:
- When your business is in growth mode, the push for diverse business can dilute your focus.
Solution: Set your vision and focus, then say NO to everything else. Be highly selective on potential opportunities and partners.
- You don’t have the resources or scale to compete with big companies on prime contracts.
Solution: If you can’t compete, you have to team.
- You must take the risk of relying on subcontractors to deliver.
Solution: Raise your standards to lower that risk.
- It's hard to retain critical resources – especially key personnel and technical staff – in lean times when you don't have a project on which they can be billable.
Solution: Strengthen your recruiting systems and pools.
- It's hard to meet federal program managers during the capture process.
Solution: Take leadership roles in your industry and community, to increase your network and get in front of the right people. Seek more than “face time” with agency PMs; pursue leader-to-leader relationships.
- Low Price, Technically Acceptable (LPTA) contracts are unwinnable.
Solution: Keep overhead low, strengthen your costing skills and project selection, and walk away if you can’t win on your terms.
- Proposal writing is an essential, highly-specialized skill that your full-time staff doesn't have.
Solution: Either hire someone with proposal expertise, and/or get that person's help to train your team internally.
- There is limited access to lower-risk growth capital. Bankers want us to use our personal assets to guarantee loans.
Solution: Shop around. With interests rates so low, it's a borrower's market.
In a follow-up post, we’ll look at the most common external issues, those that are within the mid-tier business owner’s potential to influence.