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8(a) Certification 2000000 Stagnation

If we look at the pattern for firms that currently in year 8-9 in the program we see that the average revenue for these firms begins to stagnate around year 4-9 where the averages stay constant at around $2,000,000 in federal revenue. Now you might be thinking to yourself that I would be pleased if my firm had $2,000,000 in federal revenue however a firm and the owner only have 9 years of lifetime eligibility and this is a major opportunity for a firm to make a transition from a small to a medium sized firm or beyond.

I have put some thought into why 8(a) firms appear to stall at the $2,000,000 in revenue point. See Graph below:

1.    Some 8(a) firms are more service based and do not leave their geographical boundaries looking for opportunities. Therefore they may reach a market saturation within their given area at the $2,000,000 dollar mark.

2.    8(a) firms are having a hard time making the transition from a small firm billing $2-4 million per year in billing to a medium sized firm with $8-10 million per year.

3.    8(a) firms maybe failing to seek out subcontracting opportunities with large federal prime contractors. As this type of revenue is counted as non-8(a) revenue (although the prime needs to subcontract to 8(a) firms in order to meet their subcontracting obligations with the federal government), these type of contracts can be of great value for firms that are having difficulty meeting their non-federal sales requirements that are a requirement under the transitional phase of the 8(a) program. The transitional phase begins in year 5.

8(a) firms year in the Transitional stage Non-8(a) business activity targets
1 (8(a) year5) 15%
2 (8(a) year 6) 25%
3 (8(a) year 7) 35%
4 (8(a) year 8) 45%
5 (8(a) year 9) 55%

4.    Firms that are past year six could simply be afraid to grow their business knowing that in three years they will be losing their 8(a) status and may feel forced to unwind the firms past growth.

Overall what is key to remember is when you obtain your 8(a) certification the firm must move forward with clear cut objectives as to what it hopes to achieve as well as an overall marketing strategy. We provide these types of services for our client. $2,000,000 per year in federal sales is definitely nothing so scoff at but when the firm could have used its 8(a) certification to elevate it to the next level of enterprise, a negative is that it could be viewed as a once in a lifetime opportunity missed.