3 Good Reasons to Become a Small Business Mentor
The SBA’s All Small Mentor-Protégé Program established in 2016 is modeled after its 8(a) Business Development Program implemented several years earlier. However, it differs in one key respect. The “All Small” Program eliminates most of the eligibility requirements associated with its predecessor and similar agency-specific federal programs, opening participation to any company classified as small under its primary NAICS code.
For prospective protégé firms, the benefits of entering the program are clear.
These companies can gain everything from guidance on internal operations to business development assistance. They can also enter into Joint Venture Agreements with mentors that allow them to claim the larger firm’s capabilities and record of past performance when bidding on government work. That means they don’t just become eligible to compete for a much wider range of federal contracts, they also become much more likely to win those contracts.
What’s in it for you?
Though its stated objective is “to develop strong protégé firms through mentor-provided business development assistance” the All Small Program was designed to benefit mentors as well, and it certainly can. However, in order to maximize the value of participation, prospective mentors must be clear about their goals. With that in mind, here are three good reasons for becoming a program participant.
1. You want to go after more contracts
This one is fairly obvious. For most mentors, the biggest benefit of the program is that it allows the joint ventures established by participants to compete for federal small business set-asides, regardless of the size of the mentor firm. For 8(a) graduates and former small businesses that have outgrown that designation, this is an opportunity to keep the federal business revenue train rolling.
Participants in the All Small Program, unlike those in the 8(a) Program, don’t need their Joint Venture Agreements approved by the SBA prior to being awarded a contract.
While the small business must own at least 51% of the joint venture, mentor firms can complete up to 60% of the work after a contract is awarded, allowing them to capture a sizable chunk of the contract’s value. If you have the desire and resources to compete for the billions of dollars worth of government work set aside for small businesses each year, along with the experience and capabilities to execute, the All Small Program can open up big financial opportunities.
2. You’re exploring an acquisition
There’s no better way to vet a potential acquisition target than to work alongside them. The initial mentor-protégé agreement executed by All Small Program participants establishes a three-year relationship, which can be extended for another three years. During that time, mentors can purchase up to 40% equity interest in the protégé firm, though they’re not obligated to do so.
If you do take the maximum allowable equity stake, you’ll get up to 60% of the value of awarded contracts, plus 40% of the remaining value reserved for the protégé firm. Aside from the additional revenue, becoming an equity owner allows you to have a greater voice in the internal operations to help the protege make good business decisions.
Even if you don’t take a financial position in the protégé company, you’ll get a great opportunity to assess its strengths and weaknesses as a prospective target. Since the protégé must be a majority owner of the joint venture, you’ll get a firsthand glimpse of its management style and performance capabilities.
3. You want to develop specific domain expertise
Larger companies are often hampered by bureaucratic red tape and entrenched processes that limit innovative thinking. If you’re seeking to expose your employees to fresh perspectives or introduce them to new tools, the All Small Program can be a great way to facilitate an exchange of ideas.
It can also be a means of expanding your capabilities in order to compete for new types of contracts. Since large companies typically become large by doing a small number of things really well, they may have limited expertise in other areas where the government wants to see it. A protégé can complement your existing offering, allowing you to provide a broader range of services and to compete for a larger pool of federal contracts. Working with a smaller specialized firm, you’ll gain institutional knowledge that can serve as a foundation for expanding your in-house capabilities.
Finding the right protégé
The All Small Mentor-Protégé Program offers plenty of benefits for mentors and protégés alike. That said, participation comes with a large amount of responsibility. The SBA reviews the mentor-protégé relationship each year to ensure that program requirements are being met, and protégé firms must submit detailed descriptions of the assistance they’ve received. If you don’t have the desire or ability to aid a smaller business’ development, this program isn’t for you. If you do, however, it could present you with a significant opportunity to strengthen and grow your business.
If you’re currently searching for a small business partner to gain eligibility for the All Small Mentor-Protégé Program, we can help. We’ve facilitated partnerships between major government contractors and small businesses from a wide range of sectors, and we’d love to put our expertise to work for you. To learn more about our matchmaking process, email us at contact@8astrategies.com or visit our Mentor Protege consulting services page.