This article by Gal Borenstein was written with 8(a) firms who are approaching the end of their 8(a) life in mind, but it is useful for any company seeking to increase it’s value to a potential acquirer:
Avoiding the SBA 8A Graduation Trauma: Preparing Your Brand for Higher Valuation
Remember that feeling of accomplishment you had receiving your college diploma? “I’ve made it,” you probably thought. “I’m finally ready.”
Then came the sobering discovery—the realization that post-graduation life has its own challenges and impediments.
It’s the same story for SBA-certified minority-owned companies, designated 8(a). Once they’ve graduated from the SBA program, they find themselves competing in a different world. Their revenues drop; key employees get poached; worst of all, buyers use “comparables” to consistently undervalue their company’s true worth.
According to a study from the Merrill Advisory Group, the three critical components of Government Contractor Valuation are:
- Business Focus
- Financial Operations
- Unique Characteristics
But what are Unique Characteristics? That’s the question most minority-owned government contractors aren’t prepared to answer. Assuming all things are equal (including past performance, business focus, and financial operations), what makes your company worth more than your competitors’?
Often, the answer is rooted in a company’s Strategic Brand Management (SBM), or lack thereof.
SBM, like marketing in general, may sound superfluous to government contractors. But you’ll find it’s intimately and inextricably linked to your company’s growth post-graduation. Buyers and investors have many names for it, “Good Will,” “Intellectual Property,” and “Reputation with Customers, Suppliers, and Partners,” to name a few.
When stakeholders visit your Web site—your digital brand identity—what will they find? User experiences, thought leadership pieces, and collaborative technologies that demonstrate your unique value proposition? Or a hollow, unconvincing mission statement bootlegged from a competitor: “We’re the only company that’s truly customer-focused,” or “We deliver solutions!”
Few 8(a) companies have invested the proper time to position themselves for optimal value. The same IT systems integrator can be perceived as an “Architect” (highly skilled strategic partner), or as “Mr. Fix It” (low-cost vendor). Savvy entrepreneurs know that brand equity and the art of strategic communications can make or break perceived value to both Federal customers and potential buyers.
Often, we hear 8(a) graduates lament that they can’t afford marketing, advertising, or public relations. It’s the equivalent of bemoaning the need to buy a suit for your first real job interview. Image matters, particularly when you’re building your company for higher valuation. And that, 8(a) graduates, is the bottom line.
__________________________________________________________________________________
Gal S. Borenstein is the Founder & Chairman of The Borenstein Group. The Borenstein Group, Inc. is an integrated strategic marketing communications agency that specializes in supporting private and public-sector marketers in the areas of systems integration, information technology, homeland security, defense, telecommunications, aerospace, and government. For more information, visit www.BorensteinGroup.com