Before you burst through the $27.5M size standard

Part 4 of 4 in Lohfeld’s MAC series

Government has two definitions of a company’s size: large or small. MACs use North American Industry Classification System (NAICS) Codes to classify small business size standards. The size standard may vary depending on which NAICS Code the contracting office applies. One of the most popular size standards is $27.5M of revenue on average for the past 3 years.

If you are a successful small business, chances are you are going to burst through the MAC’s size standard mid-way through the contract. Some small businesses have achieved remarkable success, while other companies graduate just above the $27.5M size standard and must overcome resource challenges to enter the mid-tier range. We can learn from their success stories and challenges.

  • ActioNet is now #62 on Washington Technology list of the Top 100 Government Contractors in 2018. By the time ActioNet won Alliant and CIO-SP3 Small Business awards, the company was well positioned to succeed. It had a solid 10+ years of past performance, experience managing large contracts, and considerable business development resources, partnerships, and industry certifications. Furthermore, it had a demonstrated record of winning in FY08–FY11.
  • Digital Management Inc. (DMI) is now #95 on Washington Technology’s list of the Top 100 Government Contractors in 2018. In its early years, DMI depended on GSA Schedule 70 and GSA 8(a) Stars to propel its growth. However, upon winning Alliant and CIO-SP3 contracts, DMI’s earnings dramatically improved with much of its growth fueled by DoD, DHS, DoS, and NASA wins. DMI also has increased its capabilities by purchasing seven firms since 2012.
  • Companies earning less than $75M annually (in federal prime contract dollars). While it is a challenge to compete against the large companies, small companies have many options. For example, Solers used its strong scientific and environmental IT and engineering capabilities to win DISA’s Encore III Full and Open and NOAA’s Protech Small Business – Satellite Domain MACs.

We can learn many lessons from these businesses including these five tips:

1. Develop a multi-year pipeline and plan for strategic growth

Plan how and when you are going to exceed the size standard. Develop a detailed business pipeline, financing, and merger/acquisition plan that will enable your company to reach mid-tier status (around $200M annually in revenues) and propel the company’s growth long-term.

2. Create the runway for a soft landing

  1. Obtain Schedules that will not require you to re-certify and enable you to compete until the period of performance ends, as in the case of GSA 8(a) Stars. Many companies leverage these contracts to extend their ability to bid on small business contracts.
  2. Bid on task orders that use NAICS codes for larger-sized small businesses, such as R&D codes that have a size standard of 1,000 employees.
  3. Bid on as many task orders as possible during your last year(s) as a small business to maximize your company’s backlog of work and help fund bid and proposal budgets.

3. Diversify your MAC portfolio

Win as many relevant MACs as possible while you are a small business to extend your ability to compete and opportunities to earn revenue.

4. Partner to retain maximum workshare

If you are not eligible to compete for your work again, consider forming a teaming arrangement with a small business partner who will agree to a maximum workshare arrangement and who can complement your bidding process going forward.

5. Consider a merger or acquisition

Many small companies plan on selling or merging with other firms to make their business more competitive. Even large companies merge with other large companies as in the case of General Dynamics’ acquisition of CSRA in February 2018.

In summary, MACs play a vital role in a company’s growth. Every company should develop a plan to acquire multiple MACs, propel their growth, and support customers in their use and benefits. If you would like assistance with your pipeline development, market strategy, capture efforts, and creating winning proposals, please contact us at info@LoheldConsulting.com.

We hope you enjoyed this series on MACs – keep checking back for more insights from Lohfeld Consulting Group.

by Brenda Crist, MPA, CPP APMP Fellow

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As the premier capture and proposal services consulting firm focused exclusively on government markets, we provide expert assistance to government contractors in Proposal Management and Writing, Capture Planning and Strategy, Capture and Proposal Process and Infrastructure, Go-to-Market Strategy, and Training. In the last 3 years, we’ve supported over 550 proposals winning more than $135B for our clients—including the Top 10 government contractors. Lohfeld Consulting Group is your “go-to” capture and proposal source! Start winning by contacting us at www.lohfeldconsulting.com and join us on LinkedIn, Facebook, and Twitter.