What the SBA’s New Size Standards Mean for Small Business

By: Michelle Macaux, Principal at Redpoint Consulting and Associate at Next Street

The SBA’s new rule to increase the revenue-based size standards in 37 industries, especially those in the “Professional, Scientific and Technical Services” sector, will allow 8,350 additional firms to qualify as “Small Business Enterprises” (SBEs) under the new guidelines and increase the competition for federal contracts and financial assistance. This will have significant implications for both very small businesses (those with fewer than 10 employees) and for the larger enterprises that are newly eligible for the SBE qualification.

Under the new rules, very small companies will have to compete against companies that are dramatically larger and are generally better positioned to meet the demands of federal agencies. The SBA and other organizations have historically worked closely with these very small companies to help them overcome that barrier through strategic partnerships with other SBEs in which they leverage complementary services or products when responding to bid requests. Through this kind of partnering, SBEs submit a stronger application and improve their chances to win federal contracts.

Partnering with some of the larger SBEs or acting as a sub-contractor to them is another way to help smaller companies grow and develop the infrastructure necessary to contract directly with the federal government.  Expanding the SBE definition to include even larger entities makes this resource gap even greater and may make it more challenging to include very small SBEs in federal contracts.

Nevertheless, the SBA’s new definitions may increase the economic and community development impacts associated with federal contracting.  Larger companies, which have historically been outside of the “small business” revenue requirement, are often better positioned for growth and new job creation in their communities. However, these larger companies often lack the necessary capital and management experience to effectively build capacity. As qualified SBEs, they will have increased access to capital through the SBA and other small business lenders, as well as access to programs specifically for SBEs through organizations like Next Street, which offers strategic advice, growth capital and capacity building programs for small businesses.  

 In reality the new SBA guidelines will offer small businesses advantages and disadvantages. Smaller companies will experience increased competition for federal contracts and financing, whereas larger companies that now qualify as small businesses will have increased access to federal contracting, financing and business advisory opportunities. These larger companies will be better positioned to grow, employ more people and give back to their companies. And the savvy companies will use these new opportunities to do just that.

Michelle Macaux is a principal at Redpoint Consulting and an associate at Next Street, where she works with both minority-owned and women-owned businesses that are looking to build capacity for purposes of obtaining government contracts. She has previously worked at the Center for Women & Enterprise.

 The views expressed herein are those of the author and do not necessarily represent the views of The Guardian Life Insurance Company of America.

News of the Death of SOPA and PIPA are Greatly Exaggerated

By: Sarah Biller, President, Capital Market Exchange

Michelangelo simply reflected on his work, “I saw the angel in the marble and I carved until I set him free.” Like the sculptor, entrepreneurs start with a heavy stone.  We work to shape soft ideas into hard realities. We know instinctively that, as with a piece of marble, the coarser the beginning the more brilliant the potential outcome.

To move from idea to operations, we must combine tenaciousness with energy and, most often, personal savings to overcome flaws. We sketch out our visions. We influence others to put capital at risk. We put extraordinary people to work, helping us carry the rock. We worry about stresses in the technology we build and whether anyone will buy what we have envisioned. 

Like most entrepreneurs, I cannot imagine expending all this energy only to find that we would not be paid for our efforts.

With this in mind, I understand the appeal of recently proposed legislation to the beleaguered community who supported its basic premise of stopping online piracy.  The Stop Online Piracy Act (SOPA) was introduced in the House of Representatives and intended to better enable U.S. law enforcement to reduce the exchange of copyrighted intellectual property and counterfeit goods.  The U.S. Senate introduced a similar bill, titled the PROTECT IP Act (PIPA).

However, I embrace the concerns of the opposition and mostly applaud their collective actions that put the brakes on the overreaching legislation contained in the SOPA and PIPA bills.  A vocal group comprised largely of web companies and venture capitalists successfully opposed the bills on the premise that they go beyond their stated intent, stifling free speech and, ultimately, innovation on the internet.

My early stage business relies on an unencumbered connection to my clients.  What small business doesn’t?  It is questionable if the SOPA / PIPA legislation is dead in light of the current actions domestically and on an international stage. Already underway, the recent expansion of top-level domain name-related extensions by ICANN will likely create a significant disadvantage to early stage businesses due to the insurmountable cost of this program.  This coupled with the movement to create a new international body to oversee internet governance out of the old International Telecommunications Union gives rise to the same innovation-stifling effect of the SOPA / PIPA legislation.  

In the likely event this will be revisited in Congress or, worse, the United Nations, the global start-up community needs to be just as informed as their large company counterparts and join the broader conversation.  Here are some good action steps to consider:

• A good first step is to read the Reddit community’s Free Internet Act online
• A second is to better understand the impact of ICANN’s top level domain program and how these changes could affect your business
• Actively read and understand the renewed effort of the United Nations to play a lead role governing the internet
• The last and most critical step is to take action by reaching out directly to your House and Senate representatives with your clear ideas on how they can balance future legislation

From the ground up, we have an opportunity to inform their discussions so innovative, small businesses are not overlooked in the emerging fray over internet governance.   It starts with us, picking up the point chisel and helping to remove large, unwanted chunks that inhibit our ability to carve out great businesses.    

The views expressed herein are those of the author and do not necessarily represent the views of The Guardian Life Insurance Company of America.

Small Bizdom Spotlight with David Nilssen

What do Minority Entrepreneurs Need to Succeed?

One of the beauties of the “American Dream” is the opportunity for all U.S. citizens to pursue prosperity and success, and – if they choose – to start a business of their own.   Consistent with this Dream, the immigrant and minority entrepreneur community has experienced exceptional growth, with the U.S. Census Bureau reporting that minority small business ownership is expanding at more than twice the national rate of all U.S. businesses.  However, despite this fact, these businesses are still in great need of support. 

A new program from The University of Georgia Small Business Development Center’s Office of Minority Business Development is doing just that.  The center, located in Athens, Georgia, is sponsoring a Premier Development Program with the goal of providing assistance to existing minority-owned businesses.  The year-long program will begin in February 2012 and include high-powered training sessions and peer mentoring for minority business owners.  This kind of support is not just taking place in Athens, but nationwide, thanks to the U.S. Small Business Administration’s “Emerging 200 Initiative.”  The SBA’s goal is to identify 200 inner-city businesses across the country that show a high potential for growth and provide them the network, resources and motivation required to build a sustainable business.

In addition to the support and mentorship these companies need, a recent article in Entrepreneur.com noted the uneven distribution of capital among small business owners.  Specifically, the article cited a 2009 study by the Kauffman Foundation, which found that Caucasian-owned business have on average more than $80,000 of startup capital, while African American-owned businesses have less than $30,000.  In the article, University of Texas professor, John Sibley Butler said urban cities need to create entrepreneur ecosystems to aid growth in their communities.  To do that he recommends:

• Garnering the support of local academic institutions, government and businesses
• Conducting outreach to individuals who may become angel investors

What are your thoughts on these programs for minority entrepreneurs?  Do you have any other ways to support the growth of minority SBOs in their communities?  Tweet The Institute @SmallBizdomNews to let us know.

Business Partners ‘Till Death Do They Part: Tips for Couples In Business Together (Part 2)

Based on The Institute’s conversations with married small business owners the Hochdorfs, Mershons and Rindsbergs earlier this week, we pulled together a few tips for couples running (or thinking of starting) a business together. Dr. Patricia Greene, special academic advisor to The Institute, weighed in with her thoughts:

1. Evaluate each others’ strengths and weaknesses as business people and your ability to work well together. 

Dr. Greene adds, “The challenge is often to be able to separate personal and professional strengths and weaknesses and admit when one person is stronger (or weaker) than the other. Often it is helpful to have an external voice to evaluate these things.” 

2. Specify your individual professional goals as well as your goals for the business.  Make sure you are both aligned on those goals.

“The most important thing here is to be honest with each other, and to recognize that it is entirely possible that your goals will change over time,” said Dr. Greene. 

3. Designate specific roles for yourselves in the business.

“Don’t be afraid to be innovative with your roles and divide up the tasks in creative ways that fit you and your business.  You don’t have to match anyone else’s org chart,” said Dr. Greene.

4. Keep it professional in the work space.

"Not only for you, but for those around you,” said Dr. Greene.  “You are setting the tone for everyone that works in the business.  You need to respect each other so the others will do the same.”

5. Be diligent in engaging in open, honest communication. Learn to work through disagreements.

Dr. Greene advises that couples formulate a plan for how they will work through disagreements. “Determine what can be done in front of others (and how), what can go home, and what should never go home.”

6. Make time for yourselves as a couple. Make your marriage a top priority.

“And figure out how the rest of the family works into the picture as well,” said Dr. Greene.

7. Establish a game plan on what to do with your professional partnership if your personal partnership dissolves. Dr. Greene adds this final piece of advice for couples to consider.

We also discovered the following infographic by Column Five via the Intuit Small Business Blog that addresses husband and wife business partnerships.