Forecast 2008: Small business under the microscope

Small and woman-owned businesses will face more scrutiny this year and perhaps even fewer contract awards, largely due to the new recertification rule introduced by the Small Business Administration in June 2007 and a proposed SBA rule change to the women's contracting program.According to the recertification rule, any small business that is acquired or merges with another company must recertify its size. If the company no longer qualifies for small-business status, it can keep its contracts, but the government cannot count those awards toward small-business contracting goals.Proposed changes to the Women's Procurement Program would limit eligibility on contracts and tighten requirements on company ownership by women. The proposal would benefit only a tiny fraction of businesswomen while harming others, said Rep. Nydia Velázquez (D-N.Y.), chairwoman of the Small Business Committee."These entrepreneurs are being shut out of billions of dollars in federal contracting opportunities," she said.Businesses that do not keep up with the new rules and make the appropriate adjustments could soon find themselves out of business, said Mark Kagan, research manager at Government Insights and author of a new study on small businesses.Kagan said 2008 could be the start of a Darwinian era for small businesses. Many companies that don't grow will go out of business, he said, while many others will be acquired."The companies that survive are the ones that look ahead beyond the next contract," he said.Kagan said Wyle Inc.'s pending purchase of small business RS Information Services Inc. could be a sign of things to come."I'm predicting that we're going to see more of these acquisitions and mergers," he said, "because the small businesses which aren't small businesses anymore but aren't large businesses are going to start merging with other small businesses so they can better compete both in terms of size and in terms of what they can offer."