By: Todd Luttenegger & Mark Ryan
phone: 859-442-1050
email: toddl@ez8a.com
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8(a) Analysis – New Mexico Study
This week I took a state (New Mexico) and wanted to look at the 8(a) firms in that state and how they were doing and to attempt to answer the question, why do some 8(a) firms hit it out of the park achieving millions in federal sales while some 8(a) firms never obtain a single contract.
Basic information, there are 106 8(a) firms located in the State of New Mexico. The 8(a) sales in that state have been the following over the past three years:
If we look at the data in terms of simple averages we can say the average 8(a) firm in the State of New Mexico does $3.5MM per year in federal sales.
When we look at the number of firms that actually have federal sales the number is reduced from 106 to 72. Therefore only 68% of 8(a) firms in the State of New Mexico are utilizing their 8(a) certification. The firms that actually do utilize their 8(a) certification do on average $5.1MM per year in Federal Sales.
So the first thing we decided to analyze was the industry of the firms to see if some industries were better than others. The following is the data summary from 2015.
As you can see aside from the catch all “Other” most of the industries had about average utilization of the 8(a) firms around the 68% overall average. Janitorial had 100% utilization however the contracts awarded to the three firms were much smaller than for the other industries. Generally speaking Janitorial firms in the 8(a) world are smaller businesses than the norm.
Next we looked at the number of years the firm had been in the 8(a) program in order to see if firms got better over time.
This data gives us evidence to suggest that the firms utilization rate does increase from the first two years compared with years 3-9 of program eligibility. But more importantly that the firms make their major push to multi-millions in federal revenue around year 4.
Finally we looked at the age or founding dates of the firms to see how much of an advantage longevity was for the firm when it came to 8(a) Federal Contracting.
To me this data tells me that a very old firm that finally gets its 8(a) commits the resources and aggressively enters the Federal Marketplace. The other is that firms that are 2010+ surprisingly have a higher than average utilization rate most likely because some of these firms are founded with the sole purpose of becoming an 8(a) contractor. I think it also demonstrates that a relatively young firm can be just as successful as an older firm.
Analysis
8(a)’s success varies from industry type, years in the program and age of the firm. These issues can be overcome with an active business development strategy. If a firm is entering into its 2ndor 3rd year in the 8(a) program and does not appear to be having success it should immediately revisit its strategy because it has missed the boat on what the firm needs to be doing in order to meet its full potential. For this reason ez8a offers both the means to obtain your certification as well as federal sales training so that our clients will be able to hit the ground running once they have achieved their 8(a) certification.
