Small Business Graduates - Fail to Plan, Fail to Grow

Posted by Guest Author on August 14, 2019

Small Business Graduates Fail to Plan Fail to Grow

By Nicole Mitchell, CPA MBA, Partner, Aronson, LLC

Small business contractors receive a competitive advantage through small business set asides, which limits both the competition for certain contracts and the associated “back office” requirements. As an organization grows, it is imperative that the systems and processes also grow to fully support the minimum requirements and open competition.

The first webinar in the partner expert series Navigating No-Man’s Land: From Small Business Set-asides to Full and Open Competition will focus on the top risks small business graduates face, which is failing to plan for growth before graduation. Benjamin Franklin famously said, “If you fail to plan, you are planning to fail,” or as I say, “Fail to plan, fail to grow.” In this webinar, we will address how this applies to small businesses.


 

Congratulations You’ve Graduated – Top Risks Small Business Graduates Face


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Recent graduates of the small business program oftentimes not only fail to recognize  opportunities tagged to the size of the organization, but also most of the laws, Federal Acquisition Regulations (FAR), and back office systems requirements that are equally tied to the size of the organization. The competition has changed, and so have the requirements to compete. Executives can be surprised the first time they realize they have been “knocked out” of the competition, due to failure to meet minimum regulatory compliance requirements—even if their past performance, client relationship and customer solution are strong.

I equate the failure to plan for graduation from small business set asides to trying to find a job after graduating from college and not having a resume. Your degree demonstrates that you know something and can complete a task, but this piece alone is not enough. Your competition will have a resume, a templated cover letter, and a system for responding to job postings. The competition will also have identified a few recruiters, produced letters of recommendation and an effective LinkedIn profile, and be able to articulate their skills and value. On graduation day, if you think, “I better get a job,” that would be absurd, right?

Another important note to keep in mind is that what made you successful before may not make you successful again. A pre-graduation job as a lifeguard at the swimming pool for the summer, versus earning an entry-level position that will help you start your career are completely different. In my 21 years at Aronson, LLC, and more than a decade as a partner in the consulting practice, I have seen this happen more than I care to admit.

Common areas or requirements that small business graduates fail to plan for include:

  • Increased price competition
  • Compliance requirements
    • Adequate accounting system
    • Purchasing system
    • Small business subcontracting plan
    • Cost accounting standards and disclosure statement
    • Auditable cost or pricing data
    • Code of conduct and compliance program
    • Affirmative Action Plan
    • Lack of automation and scalability
    • Lack of cybersecurity and Defense Acquisition Regulations System (DFARS) cyber controls.

Requirements must be identified well before a request for proposal (RFP) or “need” arises, so planning is critical. Organizations need to not only plan the time needed for implementing the requirements, but must also assess the impact of the requirements on the organization and its processes, as well as the financial and talent resources required. Remember, your price competition increases significantly at the time you enter full and open competition; thus, you should plan for these costs incrementally and for a period when your indirect rates can absorb the costs. Implementing requirements the same year that the general and administrative expenses (G&A) rate needs to decrease to compete in the full and open marketplace is a lose/lose position.

I echo: If you fail to plan, you will fail to grow. The top risks small business graduates face can be avoided if proper planning occurs. Review session one, Congratulations You’ve Graduated – Top Risks Small Business Graduates Face, in the webinar series, as I go more in-depth with information on preparedness prior to graduation.

Make sure you do not miss any part of Navigating No-Man’s Land. Register for the complete webinar series.

 

About the Author

Nicole Mitchell specializes in accounting and financial issues impacting government contractors. She has a broad-based background in generally accepted accounting principles and cost principles related to government contractors, including Federal Acquisition Regulations (FAR) and Cost Accounting Standards (CAS). With in-depth knowledge of the key financial business systems and compliance risks unique to government contractors, Nicole provides consulting and accounting services in the areas of financial regulatory compliance, contract pricing, and complex cost accounting structures.