Countdown to Graduation: A Quick Guide to Successfully Navigating the 8(a) Transition Phase
The SBA’s 8(a) Business Development Program is an exceptional way for socially and economically disadvantaged small businesses to gain access to federal contracts. Additionally, the mentoring, administrative support, financial assistance and other benefits it offers give aspiring entrepreneurs the opportunity to become polished business leaders and veterans of the government space.
There’s maybe only one big downside to the Program.
It ends.
Like all good things, 8(a) certification doesn’t last forever. However, there are plenty of steps you can and should take while you’re a participant that will position you for an even brighter future, whatever your goals may be.
A Means, Not An End
The 8(a) Program is divided into two phases – a developmental phase and a transition phase. Unless the SBA determines that you’ve been successful enough to graduate early or that you’ve failed to maintain eligibility, the two phases span a total of 9 years. That may sound like a lot of time, but it goes by fast.
If you’re leading an 8(a) company that’s in the second phase of the Program, it’s critical to have a plan in place for graduation. The adage “failing to plan is planning to fail” is especially applicable here. Around 60% of all 8(a) Program participants fold after graduating.
To avoid a similar fate, here’s what you should be doing as your 8(a) certification nears its expiration date.
4+ Years Out
From the moment you enter the Program, you’ll be responsible for researching opportunities and marketing your firm’s offerings to federal contractors. While it’s fine to rely heavily on sole source contracts in the early stages, the value of these contracts is capped at $4 million (or $7 million for manufacturers), and the SBA requires you to earn revenue from competitive bids.
Don’t make the mistake of assuming you’ll win contracts simply by virtue of your certification. You’ll face intense competition from other 8(a) firms.
By the start of the transition phase, you should have a clear understanding of your organizational readiness to compete. Assess your strengths and weaknesses, and begin finding ways to bolster the former and mitigate the latter, either through hiring, training, or both. We offer a proprietary evaluation program (RISE) that assesses your strengths and weaknesses in the business development, capture, and proposal processes, along with a roadmap to help shore up your weaknesses.
If you’re having trouble addressing major gaps in your business development capabilities, consider entering the 8(a) Business Development Mentor-Protégé Program (which will likely soon merge with the SBA’s All Small Mentor-Protégé Program). This will give you access to the knowledge and resources of a more experienced government contractor, and can put you on the fast track to winning more work.
2-4 Years Out
By now, you should be aggressively pursuing federal contracts, and working to develop strong relationships with potential partners. Commit to putting out a certain number of proposals on a regular basis, for instance every month or every quarter. Aim to scale that amount up as you progress through the Program.
We can’t emphasize this enough: winning government contracts is hard. That said, it’s also critical to your success, both now and after graduation. The more frequently (and sooner) you confront the pain of losing, the more you stand to learn from the process. Figure out where your bids are coming up short, and aim to make each proposal better than the last.
Eventually, the time will come when you have to compete to survive. You don’t want to be starting from zero when it does.
12-24 Months Out
At this point, you should be aggressively pursuing competitive work, and have a number of successful bids to show for your efforts. Now is the time to review existing contracts that are set to expire either just before or just after graduation. If you hope to keep generating revenue from these contracts, you’ll need a detailed succession plan.
Ideally, you’ll have developed solid relationships with 8(a) subcontractors that have the capabilities and record of past performance to take over as the prime once a given contract expires. If that’s the case, use those relationships to your advantage. Make sure they know you want to continue working with them as a subcontractor, and put together a plan that will make the transition as smooth as possible for your companies and for the program office.
If you haven’t yet considered the All Small Mentor-Protege Program, now could be an ideal time to think about becoming a mentor. Partnering with a firm that holds one or more special certifications (i.e., WOSB, MBE, VOSB, etc.) can make you eligible to compete for set aside contracts associated with those.
< 12 Months Out
The SBA imposes a ceiling of $100 million in revenue (or 5 times the value of your primary NAICS code) coming from sole-source contracts over the duration of Program participation. You should be aiming to secure as many of these contracts as possible up until the day you graduate.
If revenue from new sole source contracts combined with your earnings from competitive bids puts you above the Program threshold, you’ll graduate early.
That’s fine, you were leaving anyway.
The harsh reality is that life is about to get harder, so try to position your business as favorably as possible before it does. Depending on your background, you might consider applying for other SBA certifications that will shrink the field of competition and qualify you for certain federal set asides after graduation.
Post Graduation
There are essentially three options for 8(a) Program graduates: sell your business, maintain your current level of activity, or growth. Regardless of which path you intend to choose, you’ll have to demonstrate an ability to compete with much larger contractors and win. If you’re unsure whether your business development capabilities are robust enough to sustain success in the federal space, give us a call. We use a proven framework to help 8(a) firms and Program graduates build the capacity to consistently win federal contracts, and we’d love to put our expertise to work for you.