Sweet smell of success

Small businesses stand or fall on the strength
of their strategies. Although federal set-aside
programs and small-business contracting
goals give them a few advantages, they also
have inherent limitations.

But through a combination of good planning,
savvy leaders and a touch of luck, some
companies survive and thrive. Some grow
larger, some sell out or merge, and others chug
along for years, content to stay in the small-business
pool.

Regardless of the path, it all starts with
strategy.

ADNET builds on NASA launch pad

ADNET Systems Inc. started 17 years ago
when founder Ashok Jha left his job at NASA
and turned his experience and contacts into
contract wins at NASA's Goddard Space Flight
Center. Jha and college friend
David Humayun co-founded the
company.

Based in Rockville, Md., the company got a
boost in 2006 when it won the Sciences and
Exploration Data Analysis II contract, a
$220 million science and engineering contract.
The project was a significant shift for the
company, Jha said, "but it happened over 14 or
15 years because we were building on that
[earlier experience], building our horizons,
building our team."

Jha, ADNET's president, said the company
grew slowly and organically; it did not use
outside capital or loans. The company
expanded as needed to meet the demands of
the contracts the company won.

Two more major NASA contracts are due
out soon, and Adnet will be on both of them,
Jha said. Together they would be worth more
than $100 million.

"We could double our running revenue in
2008," he said.

Increasing revenue raises an
issue that many small companies
struggle with: no longer being small. Small
businesses that succeed eventually lose their
ability to take advantage of set-aside contracts.
ADNET, which earned about $40 million in revenue in 2007, still qualifies as a small buisness on some contracts because its average revenue for the past three years was under $23 million a year, Jha said. The company also has fewer than 500 employees, which is another measure of small-business eligibilty in some cases. But that could change, possibly as soon
as next year.

Jha has been preparing for the eventuality
by competing for contracts with full-and-open
competitions rather than set-asides.

"A lot of small businesses face that problem,"
he said. "I'm aware of that, we're not ignoring
that, but we're not really looking that far
ahead because then we'd lose sight of the
problem right now, which is to grow."

Market dedication

Successful small businesses are never alike,
but there are common threads and traits, said
Larry Allen, president of the Coalition for
Government Procurement.

"One of the biggest traits is patience," he
said.

Companies that succeed pick a niche or two
and develop depth, and they usually don't pursue
the commercial market at the same time,
he said.

"The successful companies I see are all fully
facing the government market," Allen said.
"Once they make the decision to go to the government
market, they're in with both feet. You
wouldn't go to the commercial market with one
foot in and one foot out, but I see companies do
that in the government market all the time and they wonder why they're not successful."

LanTech Inc., based in McLean, Va., fled to
the government market when the dot-com
bubble burst.

Co-founder Deepak Pal, also the company's
chief technology officer, decided to explore
the federal market in time for the fledgling
company's mentors and advisers to recommend
certifications and
contracting vehicles.

Designated as a
woman-owned 8(a) firm
until 2012, the company
specializes in reselling products and offering
professional services around information
technology and telecommunications security.
LanTech boasts four competencies, said
Carmine Taglialatela, vice president of business
development: professional services, software
applications, telephony and network
security.

LanTech has a three-pronged strategy,
Taglialatela said. First is to meld its abilities
and offer comprehensive services. The second
is to take advantage of partnerships with larger
contractors and develop new ones. And the
third is to use its status to pursue set-aside
contracts aggressively.

"You constantly have to change your strategy
to the environment," Taglialatela said.
"What's becoming very clear is that this strategy
is really the direction that we'll continue to
go. We'll make modifications as necessary."

Smaller companies can benefit from programs
such as Nortel Networks' SDB Prime,
a partnership in which small and disadvantaged
businesses can compete as prime contractors,
with the larger company as a subcontractor.

LanTech has had a partnership
with Nortel for reselling its products and is
about to become part of the SDB Prime program,
Taglialatela said.

LanTech also has commercial customers
that are other contractors. The relationship
can be an entrée into a partnership.
One such customer is Accenture Ltd.

"We're eventually going to get into their subcontracting
database," he said. "We're building
our relationship to where we're working
both aspects."

However, like ADNET, LanTech is preparing
for the expiration of its 8(a) designation.
"We've got 4 1⁄2 years of being better positioned"
due to the status, Taglialatela said. "We're very cognizant of the fact that in 4 1⁄2 years that's going to go away."

Into the breach

For Aegis Mission Essential Personnel LLC,
that time has already come. The company,
based in Columbus, Ohio, has succeeded as a
service-disabled veteran-owned small business
for five years. A recent contract win,
while good news for the company, is going to
put it over the small-business line, said Chief
Executive Officer Chad Monnin. When the
next deadline for certifying size comes up in
2009, the company is almost certain to lose
its small-business credentials.

But Monnin has been preparing for that.
The company has an office in Reston, Va., that
it is filling with people experienced at building
business development organizations.

The contract, worth about $415 million,
came through the Army's Intelligence and
Security Command and calls on Aegis to provide
Pashto and Dari linguists in Afghanistan.

The company specializes in translation services,
and has hired about 1,500 native Afghans to
meet the contract requirements.

Monnin, whose plans to serve in the Army's
Special Forces ended with an injury he suffered
in parachute training, launched the
company in 2004. To date, Aegis has earned
its revenue mostly through subcontracts, so
the Army contract is a big step forward for the
company.

The experience is proof that even the best
strategic plan has to be flexible.

"We had the business plan drawn up just as
a small business should," he said. That plan
included slow growth to gain experience and
build infrastructure, and it didn't include a
major contract win that would necessitate
putting those expectations away.

"They threw one that was right down our
strike zone so that we felt compelled to bid on
it," he said.

To handle that shift successfully, Monnin
said he kept the company's financial partners
and banks aware of what was happening.
Winning a large contract can "put a
small business out of business if they're not
prepared," he said, because the company
might need short-term loans to begin to fulfill
the contract before the revenue starts to
come in.

Define success

The diverse experience of companies shows
one important truth, said Guy Timberlake,
CEO and chief visionary officer of the
American Small Business Coalition.

"Success is really subjective," he said. "To
some folks it means the ability to create and
maintain relationships that allow them to
acquire business intelligence, and to others it's
all about 'how many deals did we close?'"

Michael Hardy (mhardy@1105govinfo.com) is an
associate editor at Washington Technology.