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The horror stories are common -place. A wide-eyed black small-business owner enters the Small Business Administration’s 8(a) program with high hopes and the best of intentions. He or she makes vital contacts and locks down the necessary contracts to nurture and grow the small firm while seeking out lucrative government business. And after a few years of doing fairly good business under the 8(a) umbrella, the CEO leaves the 8(a) nest with expectations of going on to bigger and better ventures. But the next rime the business owner makes news is a year or two later under the bankruptcy listings in your daily newspaper.
This could have been Lillian Handy’s story. After eight years as an exemplary participant in the SBA program, Handy was confident her Alexandria, Virginia-based technology firm, Tresp Associates Inc., was ready to soar. By all accounts she had reason to be optimistic. When her 1994 graduation date rolled around, her firm, which provides full-service systems integration and computer hardware, had secured valuable contacts and multimillion dollar contracts with Fortune 500 concerns such as IBM and Lockheed Martin. Revenues for her business had risen past the $15 million mark.
Yet almost immediately after leaving 8(a), Handy’s once-thriving operation began to downsize. She lost a lucrative $26 million contract with the Department of Energy to provide full-service facilities management for the DOE’s complex in Oak Ridge, Tennessee. Tresp initially locked down a five-year contract with DOE to provide the work. Handy says the contract was extended an additional three years because DOE was pleased with her service. Then the time came to re-compete for the contract. Handy’s company was scheduled to graduate the day after the proposal was due; therefore, the company was eligible. But the DOE insisted that the contract go to another 8(a) company. Handy’s revenues dipped to about $7 million, and she was forced to lay off a significance number of her employees. Simply put, “We took a dive,” she says.
She’s hardly alone. The U.S. Small Business Administration conducted a survey of the 1,242 firms that exited the 8(a) program between October 1, 1992 and September 30, 1995: only 646 were still independently operational; 19 had substantially curtailed operations; 19 others had been acquired by other firms owned and controlled by nonminority individuals; and almost one-half, or 558, ceased to exist altogether.
So if your company were a graduate of 8(a) between 1992 and 1995, there would be a pretty good chance you’d be in another line of work today — not a very inviting observation if your firm is considering entering the program or is soon to graduate from it.
Yet, Handy and many others do find a way to survive the difficult transitional phase from a youthful 8(a) firm to a fully independent enterprise. What’s the difference between survival and extinction’ Preparation. What happens to your business after leaving 8(a) depends entirely on how well you work the program during your time there.
More than 6,000 small firms across the U.S. are currently 8(a) companies. In 1996, 8(a)