Monday, December 20, 2010

The 8(a) Business Development Program: What It Is and Who It’s For

clip_image002[4]This article was written by Doug Dare, Public Information Officer, Santa Ana District Office, U.S. Small Business Administration

Editor’s Note: This article is a follow-up to the article Mr. Dare prepared for the November 2010 SCORE Newsletter concerning the workings of the Federal Procurement Program. Those who are interested in soliciting business from the Government should read that article for the full background. The article can be found by clicking the November 2010 tab in our blog.

Probably the best known contracting certification program that the SBA offers is known as the 8(a) Business Development program, which was created by Congress to assist in the growth and development of socially and economically disadvantaged businesses.  To qualify for the 8(a) Business Development Program, a business must: be a small business, be unconditionally owned and controlled by one or more socially and economically disadvantaged individuals who are of good character and citizens of the United States, and exhibit a potential for success.  Last year alone, the roughly 140 8(a) certified companies in our district secured $119 million in Federal contracts.  I’ll break each of these terms down and how the SBA considers them in an application below, so please read on if you think you might qualify.

Small Business Size.  Small business size standards are numerical definitions of what constitutes a small business.  A business is considered small if it’s below the size standard for that particular industry.  For a complete list of size standards, see the SBA’s Table of Small Business Size Standards.

Ownership and Control. An economically and/or socially disadvantaged person must unconditionally control the business applying for 8(a) certification.  Control is not the same as ownership, although both control and ownership may reside in the same person.  Control includes both strategic policy setting and the day-to-day management and administration of business operations by disadvantaged individuals.

Disadvantage. Socially disadvantaged individuals are those who have been subjected to racial or ethnic prejudice or cultural bias because of their identities as a member of a group.  Social disadvantage must stem from circumstances beyond your control. Economically disadvantaged individuals are those whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities.  In layman’s terms, a person’s adjusted net worth (net worth, less equity in primary residence and business, must be less than $250,000).  African American, Hispanic, Asian/Pacific Islander, Native American and sub-continent Asian American are presumed to be socially disadvantaged and are only required to write a narrative outlining their economic disadvantage.  Individuals who do not belong to one of these designated groups (e.g. women, service-connected disabled veterans, physically handicapped individuals) are not presumed to be disadvantaged and must write a narrative outlining their social and economic disadvantage.

Potential for success. To evaluate an applicant’s potential for success, the SBA evaluates factors that include the technical and managerial experience of the applicant firm’s managers, the firm’s operating history, its ability to access credit and capital, and its record of performance.

By this point you’re probably wondering why someone would jump through so many hoops just to get a certification.  The reason for that is this certification provides you with access to set-aside contracts, the ability to receive sole-source contracts, and to enter into mentor-protégé agreements.  If you remember from the last article, set asides increase a businesses’ chance of getting a particular contract as the bidding pool is restricted to similar firms.  Sole source contracts (also called no-bid contracts), though rare, can be awarded to 8(a) firms, particularly when there is an urgent need for the procurement.  Also, the ability to enter into mentor-protégé relationships allows a mentor large business to provide technical and management assistance; financial assistance in the form of equity investments and/or loans, subcontract support, and assistance in performing prime contracts through joint venture agreements with 8(a) firms.

Applying for the Program. Before applying to the 8(a) Business Development Program, businesses should register for the following three databases (in this order):

DUNS number (Required in order to register with the Federal government for contracts and grants)

Central Contractor Registration (CCR) (Governmentwide vendor registration)

General Log-in System (SBA single login service)

The application is completed online and takes around 90 days to process after a 15-day review for completeness.  The SBA may contact the applicant to arrange an initial screening and gain more information.  After receiving the acceptance letter, the business meets with a small business representative and presents its business and marketing plans for the next year.

Participation. Companies participate in the 8(a) business development program for nine years.  During this time, they must remain eligible and inform the SBA of any factors that might affect that eligibility. As part of an annual review, each participating business must submit information to the servicing district office that includes records of payments, compensation, and distributions, along with certifications stating that it meets the program requirements and that there have been no changed circumstances that might affect its eligibility. If a participant fails to provide this documentation, the SBA may initiate termination proceedings.

Graduation and Termination. Businesses may be terminated from the 8(a) Business Development program for reasons such as falsification of information, failure to maintain eligibility, cessation of business operations, and inadequate performance on contracts. A business graduates when it exits the program after successful completion of its term.

I’d like to close this article with an example of one of our 8(a) firms that has used this program to grow.  Stronghold Engineering, a woman-owned construction firm based in Riverside, California, entered the 8(a) program in 1995 with annual revenues in the neighborhood of $1.5 million.  By the time Stronghold graduated from the program in 2004, Stronghold’s annual revenues exceeded $77 million and the company employed 185 individuals.  Of course, there’s a lot of hard work glossed over in that last statement – being in the program doesn’t mean you will be able to secure contracts, just that you will have the opportunity. In fact, many firms go through their entire nine years in the program without securing a single Federal contract because they don’t market to the individual buying activities or don’t do the research before entering the program to see if the Federal government is actually buying the products and/or services that their company provides.  We hope you don’t make the same your due diligence!

Which Marketing and Branding Strategy is Best For You?

clip_image002[1]This article was written by Bernard Lefson, SCORE Orange County Management Counselor

If your marketing and branding strategies target low prices first, you may benefit from unbundled pricing.  This permits you to advertise and stress the best product pricing to your potential customer base.

Should your branding plan stress product quality and service, bundling prices may be the optimum strategy.  What do we mean by unbundled prices?  Think of online buying from Amazon where you find low prices and you pay extra for shipping.  Another example would by the baggage fees imposed by most airlines.  Bundled pricing would be inclusive of the baggage fee as is the case today with Southwest Airlines.  Another good example would be Nordstrom's which provides high quality goods and high service levels such as easy returns.  While both strategies work, the best for you and your company usually depends on your industry, your specific market, and your ability to meet your profit margin and sales volume goals and objectives.  For example, if your marketing and branding strategies target low prices first, you may benefit from unbundlled prices.  This permits you to advertise and stress the best product pricing to your potential customer base.  Should your branding plan stress product quality and service, combining/bundling prices may be the optimum strategy.  Your consumer base is probably more concerned with perceived quality, high level customer service, and simplicity of product purchasing, including delivery and installation.  The Pros and Cons of Both Strategies:

Unbundled pricing pros:

• Lower product selling prices

• Hide small expenses to sell, deliver, and install the product

• Offer best price possible for the product

• Clear gross profit margins on product sales

• Direct expense reimbursement for associated selling costs

Unbundled pricing cons:

• Added Customer complaints that you’re “nickel and diming” them

• Potential loss of customers, since you don’t offer anything “free” with purchases

• Losing sales to competition that combines prices to generate the

perception of convenience

Bundled pricing pros:

• Perception that your company offers something extra

• Simplified purchasing procedure for your customers

• Ability to increase gross profit margins and volume if your combined

• Selling prices are competitive

• Potential increased return customer sales, as buyers may not

• Intensely evaluate competition in the future

Bundled pricing cons:

• Competition may “squeeze” your profit margins as you lower product prices

• Forces your purchasing managers to negotiate lower wholesale inventory acquisition pricing

• Risk of being perceived as having higher prices for products

Business owners must integrate their pricing strategies with their marketing and branding plans. Building a cohesive company strategy, with no components at odds with other objectives, should result in success.  Whether you select to combine prices, the key is to integrate complementary strategies that positively contribute to your company goals.

How To Seal The Deal In Ten Seconds

clip_image002[1]This article was written by Barry McKinley, SCORE Orange County Management Counselor

Can you close a sale in just 10 seconds?  You can do it even faster if you make a great first impression. Ten seconds is the average length of time you have to make a first impression.  If your first impression is not good you won’t get another chance with the potential customer.

Whether your initial meeting is face-to-face, over the phone or via the Internet, you do not have time to waste.  It pays for you to understand how people make their first judgment and what you can do to be in control of the results.

1. Learn What People Use To Form Their First Opinion

When you meet someone face-to-face, 90% of how you are judged is based on non-verbal data – your appearance and your body language.  Only 10% is influenced by the words that you speak.  Whoever said that you can’t judge a book by its cover failed to note that people do.  When your initial encounter is over the phone, 70% of how you are perceived is based on your tone of voice and 30% on your words.  Clearly, it’s not what you say – it’s the way you say it.

2. Choose Your First Twelve Words Carefully

Although research shows that your word make up a mere 10% of what people think of you in a one-on-one encounter, don’t leave them to chance.  Express some form of thank you when you first meet a customer.  “Thank you for your interest in our products.”

3. Use The Other Person’s Name Immediately

There is no sweeter sound than that of our own name.  When you use the customer’s name in conversation you are sending a message that you value that person and are focused on him.  Nothing gets other people’s attention as effectively as calling them by name.

4. Pay Attention To Your Hair

Your customer will look at your face and hair.  Very few people want to do business with someone who is unkempt.

5. Keep Your Shoes In Mint Condition

People will look from face to feet.  If your shoes aren’t well maintained the customer may question whether you pay attention to other details.

6. Walk Fast

Studies show that people who walk 10-20% faster than others are viewed as important and energetic- just the kind of person our customers want to do business with.

7. Fine Tune Your Handshake

The first move when shaking hands should be sure to make it a firm one.  Yet time and again people offer a limp hand to their customer.  You’ll be assured of giving an impressive grip and getting off to a good start if you position your hand to make complete contact with the other person’s hand.  Once you’ve connected, close your thumb over the back of the other person’s hand and give a slight squeeze.  You’ll have the beginning of a good business relationship.

8. Always Have Business Cards

Your business cards and how you handle them contribute to your total image.  Always have a good supply, remember this is the least expensive item you can give a customer but can certainly repay you in sales and commissions.

9. Match Your Body Language To Your Verbal Message

A smile or pleasant expression tells your customer that you are glad to be with them.  Eye contact says that you are paying attention and are interested in what they are saying.  Leaning in towards your customer makes you appear engaged and involved in the conversation.  Use as many signals as you can look interested and interesting.

Customer Service Principles that Never Go Out of Style

clip_image002[1]This article was written by Jerry Margolin, SCORE Orange County Management Counselor

Most customers that are lost by small businesses are lost because of poor customer service performance, rather than for any other reason.  A small business has a golden opportunity to increase their sales simply by being aware of customers needs, and responding positively to them. In fact, many of these same customers are willing to pay more for the privilege, since it happens so seldom.  Here are a few tips that you might consider.

  • Never use an automated telephone system unless you absolutely have to!

Let the big boys annoy their customers; not you.  Most people hate to be put on hold while a recorded message tells them how important they are.  It doesn’t matter how many employees you have, any time a telephone is answered by a person rather than a machine, your stock goes up.

  • If you say you will call back in fifteen minutes, call back in fifteen minutes!

If you set a time to call someone back with information, call them back at the promised time even if you haven’t received the information yet.  Too often I hear “I didn’t call back, because I had nothing to tell you”.  Yes you did have something to tell them; you had to tell them that you did not have the information yet.  Customers are almost more grateful for that, than they are for the answer to their problem.  It says that you are working on it, you haven’t forgotten, and that you are trustworthy.  They will remember that the next time that they buy a product that you sell.

  • Learn the names of as many customers as you can, and use them!

Everyone loves to hear the sound of their name.  It says that you remember them, and are important to the proprietor and that business.  If I regularly use a cleaner, or small sandwich shop, dog groomer, or whatever, and they speak to me by name, rather than asking me what it is, and how to spell it each time I go there, I feel flattered and want to recommend that business to my friends, so that they too can feel flattered and enjoy the same experience.  When I go to a restaurant and the owner stops by the table, and says “Jerry, how was the food this evening?”  It tells my dining companions that my business is meaningful to that restaurant, and theirs will be too.

  • Be flexible when dealing with problems!

If you guarantee a product for thirty days, and it breaks on the thirty-first, think of negotiating something anyway.  The big question should be “Is it defective, not when it was bought.  Giving a customer their money back once may cement the relationship with your business.  Good customers are hard to replace.  If you are unable to make that decision for some reason, at least give them a gift certificate or a decent discount on their next purchase.  You don’t win when you invoke a rule because “it’s there.”  In fact by making a concession to a rule, you may turn an angry shopper a devoted shopper for life instead.

There are lots more tips to mention, but hopefully, these will get you thinking.