2007 Small Business Report | Learning tree
Mentor/protégé programs can help fledgling firms, but small companies need to be smart about using them
"If you think you're going to go in with your silver platter and wait for the mentor to throw food on it, that's not going to happen." Valerie Perlowitz, ATS Corp.
Many 8(a) companies eagerly enter mentor/protégé programs with larger firms hoping that they will earn revenues, learn business development skills, expand their market reach and lay a foundation for future growth.
Those programs are popular and often helpful, but smart businesses know how to avoid some common mistakes. As new players emerge and work their way toward becoming an established company's protégé, they should consider their motivations and expectations carefully, say some who have been there.
Many mentor/protégé programs exist in the government and are sponsored by various agencies. Although the details differ from one program to another, they share a way for disadvantaged small businesses, certified as such under Section 8(a) of the Small Business Act, to benefit from a close partnership with experienced companies.
But the programs are not meant primarily as a way to funnel contract revenues into the protégé companies, and companies who join them thinking they are mostly about earning subcontracts will struggle.
The Small Business Administration has approved about 52 mentor/protégé relationships under its program this year, and there are more than 150 active ones under SBA alone, said Joe Loddo, SBA's acting director of the 8(a) business development program. Other agencies' programs are separate from SBA's.
SBA sees it as a business development program, Loddo said, one that can often teach the mentors as well as the protégés.
"A strong point for 8(a) firms is that they may be strong in a particular market and the mentor is not in the market, they both can learn," he said. "It is required that the protégé do the majority of the work. We don't want aggressive mentors taking control. That's a violation of the agreement that would cause us to terminate it."Two-way street
Innovative Management and Technology Services LLC, based in Fairmont, W.Va., inherited a mentor-protégé relationship with Lockheed Martin Corp. when IMTS acquired DN American Inc. in 2005.
Chirag Patel, president and chief executive officer of IMTS, said the relationship has been helpful to his company.
IMTS, which will graduate from the 8(a) program in 2010, already had some federal business, including a contract with the FBI Criminal Justice Information Center in Clarksburg, W.Va. Also, DN American brought a relationship with a NASA facility in Fairmont. But in the years since the acquisition, IMTS has won work with agencies in Washington and Cleveland after the mentor/protégé program opened doors.
But the transition wasn't seamless. If Patel could start fresh, he said, he'd choose a group in Lockheed Martin more directly attuned to the company's plans. The companies had to make some adjustments to connect IMTS to the right parts of Lockheed Martin to square with the protégé's growth plans.
"We got into the mentor-protégé program not knowing we were going to get this far this fast," he said. "Post acquisition of DN American, we're now more focused on advanced IT services. We're fine-tuning our core competencies and our skill areas to where we want to be."
Being based outside the Washington metropolitan area can be a handicap for a small company trying to developing significant federal contracting business ? Fairmont is more than 200 miles from Washington ? but having a mentor situated there helps, said Allan Kalkstein, director of Lockheed Martin's Litigation Support Center of Excellence in Rockville, Md. Kalkstein is IMTS' point of contact at Lockheed Martin.
"There are advantages to being located within the D.C. area, but today we often work virtually," he said. "The good thing with working with Chirag and Jeff Tucker, his CIO, is that they make an effort to come to D.C. fairly often."
The right alignment of organizations is a crucial key to success, said Valerie Perlowitz, director of business development at ATS Corp., of McLean, Va. Perlowitz had been president and chief executive officer of Reliable Integration Services Inc., which ATS acquired earlier this year.
That acquisition ended Reliable's mentor/protégé relationship with L-3 Titan Group. Until then, Perlowitz and her team had been working to make the most of the partnership. However, the relationship got off to a slow start because of an early mismatch.
"You need to understand which part of an organization the mentor/protégé relationship is coming out of," she said. "Especially in large companies, there are multiple divisions that can and will have their own mentor/protégé programs. We were not aligned with the right business unit at L-3. The match at the beginning was not as good as it was when we transferred to a different division."
The division that Reliable was initially matched with was active in other business areas, and Perlowitz's firm didn't have any of the skills the L-3 unit needed, she said.
Large companies can benefit from mentor/protégé arrangements in several ways, and a significant one is by using the protégé's 8(a) status ? or other socioeconomic status ? to get access to set-aside contracts. That is what both sides should expect to happen, but the protégé should be watchful to be sure it is benefiting and not just being used for the mentor's business development, she said.
"Don't treat these programs as the holy grail," she said. "If you think you're going to go in with your silver platter and wait for the mentor to throw food on it, that's not going to happen."
Fil Vasilas, vice president of sales and marketing at ProSource Consulting LLC, said it helps to build a mentor/protégé relationship around a single contract the two companies can work on together.
"We look at the mentor as a big brother," he said.Realistic expectations
A key to success is thinking small, said David Young, co-founder and president at Oberon Associates Inc., a protégé since 2005 to Science Applications International Corp. The Oberon-SAIC program won a Nunn-Perry Award this year, a Defense Department honor to recognize effective mentor/protégé partnerships. Oberon is ranked No. 1 on the Washington Technology 2007 Fast 50.
"Limit what you try to accomplish to the things that are important to your business," he said. "What are your real needs? Some companies turn to these mentors for help with everything, and that is a little too much to expect. Even if the big company attempts to help them in such a broad way, they're not equipped to."
For example, Oberon is getting SAIC's help in achieving Capability and Maturity Model Integrated Level 2 certification, and eventually, Level 3. CMMI, a program developed by the Software Engineering Institute at Pittsburgh's Carnegie-Mellon University, validates an organization's engineering practices.
Oberon used the program for CMMI because Young and his Oberon co-founder Jodi Johnson are veterans of small-business contracting.
"We had an understanding of what it takes to be a government contractor. We didn't need help in finance and accounting and things like that," he said. "Companies that are coming into this without any experience will find more daunting the contract and accounting and compliance side of the business. That's probably where a lot of small businesses seek help."
Small companies should be prepared to invest time and money into the relationship, she said. The CMMI effort has already cost Oberon several hundred thousand dollars, said Johnson, the company's CEO.
"It's a huge investment for the small company," she said.
However, the investment is ultimately less than it would have taken to do it alone, she said. SAIC has kept Oberon from making some major mistakes and kept the company on schedule.
When the mentor/protégé relationship expires, in a year, Oberon expects to be at CMMI Level 3, an accomplishment the company considers more significant and with greater potential to be of help in the future than simple subcontracting would have offered.
"A lot of small businesses enter into these relationships thinking they're going to get work," Young said. "Some of them do, but that's the wrong reason."Associate Editor Michael Hardy can be reached at firstname.lastname@example.org.