Sometimes, certain entrepreneurs deserve an edge over the competition. That’s the theory behind a government leg-up program for disadvantaged small-business owners.
Those who may have been subject to racial or ethnic prejudice or cultural bias can get help to compete in the marketplace with the SBA’s 8(a) business development program.
If accepted in the program, an entrepreneur is eligible for government sole-source contracts — meaning there are no other competitive bids — up to a ceiling of $4 million for goods and services and $6.5 million for manufacturing, according to the U.S. Small Business Administration.
Businesses that are 8(a) certified can get help securing SBA-backed loans, join in business-education and guidance programs and partner with other business owners to bid on contracts, according to the administration.
To qualify, a small business must be owned and controlled at least 51% by “socially and economically disadvantaged” citizens, meaning they may have faced cultural bias or prejudice as a result of their race or ethnicity. The business must also “demonstrate the potential for success, and the owners must show good character,” according to the SBA. Here’s a full list of requirements.
NerdWallet recently spoke with three small-business owners who benefited from the SBA’s 8(a) program to get a better idea of what it has to offer, as well as advice for other small-business owners interested in the program.
‘The time will fly by quickly’
Lourdes Martin-Rosa, president of Government Business Solutions and an American Express Open advisor on government contracting
Martin-Rosa applied for the 8(a) program six years ago. Her business, Government Business Solutions, is a program management firm that works with the federal government, providing event management, advertising and marketing services, as well human-capital training. (Human capital, as Investopedia puts its, is the economic value of an employee’s skill set and can be invested in through education and training.)
She found the application process to be a bit time consuming but says the program has helped her business significantly.
“We received our 8(a) certification in January 2010,” Martin-Rosa says, “and the following years, we won three 8(a) sole-source contracts, totaling over $3 million in contract awards.”
Martin-Rosa had been doing business with the federal government for 15 years prior to pursuing the certification. “It helped our visibility,” she says, “but our experience and expertise in the government sector played a large role in these wins.”
There’s help for creating an acceptable submission, she adds. Representatives from Small Business Development Centers and Procurement Technical Assistance Centers are available, but Martin-Rosa says you still have to take the time to complete all the forms and gather all the information you’re required to submit.
“In addition to a variety of corporate documents, personal and business financials, you need to submit several SBA and IRS forms to an SBA 8(a) eligibility office before you are even considered as a program candidate,” she says, and this part of the application process may take up to a year to complete.
“The total timeframe for applications is averaging eight months to a year from the time of the first application submission to receiving the 8(a) SDB certification award letter,” she says.
Martin-Rosa has some advice for other small businesses thinking of pursuing 8(a) certification: “They should have experience in government contracting. Many small businesses make the mistake of obtaining an 8(a) certification to learn how to capture contracts in the government sector.”
Time in the 8(a) program is limited to nine years, she says, unless you are Alaskan or Native American. “The time will fly by quickly and likely will not be utilized efficiently if you are still learning the basics.”
‘It’s not a magic bullet’
Jeannette King, president and CEO of Strategic Resolution Experts Inc.
Strategic Resolution Experts work with customers to help them solve problems related to human capital, business processes and technology, says King, a Navy veteran who founded the company in 2007 in West Virginia. Over half of the company’s workforce is made up of veterans or spouses of veterans, according to King.
The application itself was lengthy — the first submission was 499 pages, and the supplemental submission was 501 pages along with financials, King says.
The application process is rigorous, according to Nikki Bowmar, public affairs specialist at the SBA, so the agency can perform its due diligence to prevent fraud.
King calls the program “a tool in your toolbox — it’s not a magic bullet, but like everything else worth having, you have to work to make it successful.”
“Having the 8(a) designation provides a foot in the door,” she says, “but you still must be able to back up your capabilities and prove you can perform.”
Strategic Resolution Experts also obtained an SBA-backed line of credit, King says, which allowed the company to bid on larger contracts and show customers and teaming partners that they had the ability to pay employees and vendors.
She says the best advice she can give to other small business owners is not to rush to get the designation.
“It takes a good five years to develop strong relationships and a solid reputation, which can be done by working with large partners, obtaining a General Services Administration schedule, and responding to requests for information and requests from small-business specialists,” King says. “Take that time to develop relationships, establish your corporate infrastructure and branding, and then apply.”
Be ‘ready to immediately pursue 8(a) business opportunities’
Crystal L. Kendrick, president of The Voice of Your Customer
Founded in 2007, The Voice of Your Customer is a marketing firm that assists clients seeking to penetrate niche markets, using surveys, focus groups, secret shopping and media campaigns, according to Kendrick.
The company applied for its 8(a) certification in 2009, and Kendrick says that although the application process was lengthy, she received a lot of support from local procurement and technical assistance centers and SBA offices.
“The staff at these organizations is very well versed in the process,” she says, “and their support is invaluable.”
Participating in the 8(a) program spurred The Voice of Your Customer to develop a sound business plan, identify target markets, set budget and annual operating plans, and establish strategic plans, Kendrick says.
“Once we were certified, we began to receive notices of set-aside contract opportunities that were not presented to us in the past,” she says. “These opportunities were very competitive for the size and scope of our business. In addition, because they were set aside for 8(a)-certified businesses, there were fewer competitors for each opportunity.”
Some final advice from Kendrick for other small-business owners seeking 8(a) certification.
“It is important that any small business that applies for the program is ready to immediately pursue 8(a) business opportunities, since the certification only lasts for nine years and a company can only have one 8(a) certification,” she says. “Firms must be prepared to take advantage of the opportunities, participate in networking activities and complete the required re-certification documents.”
Steve Nicastro is a staff writer covering personal finance for NerdWallet. Follow him on Twitter @StevenNicastro and on Google+.
Image via iStock. Portraits (from top) of Lourdes Martin-Rosa, Jeannette King and Crystal L. Kendrick courtesy of interviewees.
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