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When is a Small Business Not a Small Business (and will they tell you)?

Posted By Guy Timberlake, The American Small Business Coalition, LLC, Thursday, October 14, 2010
When is a Small Business Not a Small Business
(and will they tell you)?

Just as I am not a fan of the special and excessive benefits made available to Alaska Native Corporations and the unfair advantages applied to the smallest contingent of the federal contractor community, it really fires me up when companies who have outgrown the program continue to exploit the benefits to which they were previously entitled. It evokes the image of the Remora Fish and their one-sided relationship with Sharks and Whales. The Remora derives all the benefit of the work done by the Shark or Whale while no benefit is provided to them in return.

 Washington Business Journal and Washington Technology recently published their lists of 50 fast-growing companies. WBJ looks at a broad swath of companies regardless of their size or industry from the Washington area, while WT looks only at government contractors that are considered small businesses not necessarily from the DC area.

While checking to see which of our members made the lists, I noticed something peculiar about one of the companies and their reported revenues. Of the six companies making both lists, only this company had lower reported revenues on their WBJ profile than on their WT profile. This is funny because WBJ is looking at total company revenues whereas WT (Nick Wakeman, please correct me if I am misstating this) is only looking at revenues derived from federal/state/local government contracts and subcontracting, not revenues derived from other business segments.

Four of the other companies showed lower revenues on WT than on WBJ which is expected based on my previous assumption and one company had the same numbers reported on both lists which seems to be in keeping with their model of being a provider only to government.

Wait for it.

So the company we will refer to as Company NASB (Not A Small Business) provided the following information (we rounded the averages):

Washington Business Journal
Washington Technology
2007: $12.36 million
2007: $17, 987,451
2008: $39.01 million
2008: $58, 014, 671
2009: $69.69 million
2009: 226, 671,783
Average Annual Revenues: $40,000,000
Average Annual Revenues: $100,000,000

Based on the reported numbers being accurate, the first thing that comes to mind is why did the WT numbers outweigh the WBJ numbers?

The second thing that comes to mind about these numbers is (assuming they are accurate) why does Company NASB show in their CCR profile as meeting the size standard for a company with$25M and $32.5M average revenues? In fact, Company NASB shows up as meeting the standard for six different codes on their profile where the size standard is less than either of the average revenue numbers shown above. As a note, the last time the profile was updated was January of this year.

So what gives?!?

My other assumption is that WBJ and WT rely on the information they are provided or otherwise vet the data to ensure its accuracy. With that in mind, consider the source.

Here's a catch. Company NASB is in the SBA 8(a) Business Development Program until 2014 (but we hope SBA will find a way to help them graduate early!) so my question is, does this one loophole make you a small business? Never mind the discrepancies in their CCR profile versus publicly reported revenues, if a company is not a small business in any other way shape or form, do you consider them a small business?

Not me!

Based on how the 8(a) program works, participants are backed by SBA for a primary industry and NAICS Code. Which to me means they are only eligible to be considered an 8(a) for requirements issued under that specific NAICS Code.

I wonder what this company's original NAICS Code was before it changed to 517110 (Wired Telecommunications Carriers) with a size standard of 1500 employees? I wonder how many contracts they have been awarded (or even pursued) for "Operating and maintaining switching and transmission facilities to provide point-to-point communications via landlines, microwave, or a combination of landlines and satellite linkups or furnishing telegraph and other non-vocal communications using their own facilities."

It's not hard to go back and look at their previous awards.

Just in case anyone thinks I'm picking on Company NASB, don't worry as there are other questionable small businesses on the list.

In full disclosure, I already shot a message to Nick Wakeman at WT to discuss the criteria they use to determine "What is a Small Business?". I like Nick Wakeman and WT as a reliable industry-resource and look forward to engaging them and our friends at SBA to come up with a definition and process for future use.

So, when is a small business not a small business?


Guy Timberlake
Chief Visionary and CEO

"The person who says it cannot be done
should not interrupt the person doing it."

Identify, Qualify, Pursue and Capture B2G Business Opportunities.

Tags:  50 Fastest Growing Companies  Fast 50  Washington Business ournal  Washington Technology 

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