Planning Your 8(a) Graduation Strategy

logoPortions of this appeared on the US Small Business Administration (SBA) blog.

Entering the five-year transition phase of the SBA’s 8(a) business development program? Now is the time to plan your graduation strategy to make sure your business thrives afterward.

The SBA has put together the following recommendations:

Narrow Your Focus

This rule of thumb applies to all businesses but is especially true in the government contracting space. You can’t take on the whole government. Identify specific agencies, sub-agencies or departments. If you’ve already done business with a certain agency, look for ways to repeat that success (proof of performance is a huge advantage).

Get Your Foot in the Door: Form Teaming Relationships Before You Graduate

8(a) businesses are very attractive to larger companies because of their ability to win sole-source contracts. Hopefully, you’ve used this leverage to form relationships and teaming agreements with other, larger contractors. Not only will you learn from their experience and add greater value to government clients, you’ll also gain past performance, which is all-important in the contracting world.

Take Advantage of Mentor-Protégé Relationships

In addition to forming joint ventures and teams to bid on contracts, you can also participate in the 8(a) BD Mentor-Protégé Program which allows companies to learn the ropes from other more experienced businesses.

Hire the Right Talent

Invest now in employees who have the networks and experience required to help you develop relationships, market to the government (what works in the private sector doesn’t work with govies), and understand the sales/contracting process. To help you “talk-the-talk” consider hiring former government employees. They can provide invaluable advice on tailoring your proposals to a specific agency’s needs and procurement processes.

Be sure to talk to your 8(a) SBA Business Development Specialist about your hiring plans. They can advise on any special rules and regulations about hiring former federal employees and creating certain positions to ensure they don’t deviate from 8(a) regulations (particularly financial positions).

Maintain a Balance of Private-Sector and Government Business

One of the requirements of the 8(a) program is that your business maintains a balance between its commercial and government business. There’s also a $100 million (or five times the value of your primary NAICS code) limit on the total dollar value of sole-source contracts that you can receive while in the program. To secure your financial future and readiness to exit the 8(a) program, it’s a good idea to start thinking of other ways you can diversify your business and enter new commercial markets.

Keep an Eye on your Financial Statements

Many 8(a) companies see a decline in revenues within a few years of exiting the program. Now is the time to prepare for this. Many of the steps described above can help you prepare and conserve cash flow.

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