On Monday, January 6th, 2020 the Small Business Administration's (SBA) final rule to implement a 2018 law took effect. The 2018 Small Business Runway Extension Act allows small businesses to calculate their revenue over 5 years instead of 3 years. The goal of this change is to allow more businesses to participate in small business set asides. This will allow the government to meet its goals for small business spending while allowing small businesses to better transition from small to large.
Big Opportunity for Larger Small Businesses
This change could potentially help businesses who are in the process of transitioning from a small to large business, or businesses that are typically a small business but recently experienced an unexpected boom. This could be the deciding factor on whether a small business is successful in moving to become a large business by increasing the time they have to take advantage of small business set asides. These set asides account for 23% of all contracting dollars. Calculating your business’s income over 5 years instead of 3 could mean cashing in on a million-dollar contract that otherwise could have been missed.
Minimizing Negative Impact
The Small Business Administration also realizes that changing the period from 3 to 5 years could potentially hurt some businesses. To minimize the negative impact of this change, they are giving businesses the option to chose whether they want to calculate a 3 or 5 year average. This could be beneficial for businesses who are downsizing from a large to small business or have had less profitable years recently despite historically making too much to be classified as small. The SBA’s goal is to be as accommodating as possible to businesses as they go through this transition period. On January 6th, 2022 however, all calculations must be based upon the 5 year average.
Do You Qualify as a Small Business According to the Government?
So, your business is growing, and you can now qualify as a small business for longer. Great! Now how do you know whether you qualify as a small business in the eyes of the government? For this you have to look to the Small Business Administration’s size standards. Depending on your primary NAICS code, your small business standard will be determined by either number of employees or average yearly revenue. There is an easy tool on the SBA website which tells you whether you qualify. You simply type in your primary NAICS code and either your number of employees or average yearly income over the past 3 or 5 years. If you are a small business, then you can qualify for the appropriate set asides.
Take Advantage of Set Asides
Certain small businesses can qualify for additional set asides. Women owned small, veteran owned, service-disabled veteran owned, disadvantaged, and small businesses in a HUB zone can all qualify for their specific set asides. A single business can also qualify for more than one. One example being a veteran owned woman owned small business. To qualify the small business must be owned by at least 51% by the demographic specified in the set aside.
Taking advantage of small business set asides can bring in more revenue for your business. You should get to know exactly which set asides you qualify for. If you qualify as a small business and are looking to break into the federal marketplace, you should look into pursuing a GSA Schedule. A GSA Schedule allows businesses to sell directly to the government through portals such as GSA Advantage. Once you are awarded a contract through the GSA you are preapproved by the government as having fair pricing and a history of reliability. This then allows you to sell to government buyers quicker with lower overhead. Certain state and local governments can also take advantage of the GSA Multiple Award Schedules program by buying from these preapproved businesses.
If you are thinking about pursuing a GSA Schedule or already have one as a small business, you should know the expenses that it will take. Preparing an offer can seem like a daunting task at first, and after award you need to maintain compliance with all the terms and conditions of the contract. For a small business one way to excel in the space of government contracting is to hire a GSA consultant to prepare your offer and manage your contract. This takes the burden off of your employees and allows you to focus on growing your business while Winvale works with you to maintain your GSA Schedule. If you are thinking about acquiring a GSA Schedule contract give us a call.
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