The federal marketplace is becoming increasingly difficult for small businesses. Today it’s more challenging than ever for small businesses to bid on projects and compete alone. This is due in large part to category management, consolidation, and bundling. Federal contracts are becoming larger and more complex.
Individually, small businesses are having a harder time being competitive. While a small business has several options for how to approach the marketplace, one solution is to create a joint venture.
What are the key competitive characteristics of a joint venture?
- A joint venture created under the SBA rules inherits the size and status of the managing venturer (such as small business, 8(a), HubZone, service disabled, woman-owned).
- It also inherits the qualifications, background, and past performance of both members.
This combination results in the creation of an entity that is highly competitive in the federal marketplace.
What are the benefits of creating a joint venture?
A joint venture is beneficial for a managing venturer because it gives them the opportunity to provide even more services and qualifications to compete for potential opportunities. A member venturer can fill gaps so the managing venturer can be more competitive. Additionally, it can help the managing venturer manage revenues to avoid size standard ceilings.
A partner venturer can benefit because it gives them more opportunities to qualify for set aside programs even if they do not have any of the designations that the managing venturer has, like small business, 8(a) certification, HUBZone certification, or a woman-owned certification. Partner venturers can be large businesses if a MPA is created first, so joint venturing provides a unique pathway to additional opportunities for both parties.
How does the Mentor Protege Program fit in?
A joint venture under the SBA Mentor Protege Program has benefits above and beyond contracting. These mentor protege relationships are set up so that the mentor is providing resources to the protege throughout the lifetime of the partnership. Joint ventures formed under the Mentor Protege Program receive protection from affiliation as an additional program participation benefit.
4 Questions to Ask When Choosing a Mentor or Joint Venture Partner
Choosing the right mentor or joint venture partner is critical to your success. No matter what kind of teaming arrangement you are considering, there are four important questions to ask.
- What qualifications is the potential partner providing? Get clear on which socioeconomic categories they are in. How is that beneficial to you? Do your due diligence on their past performance. How does it improve the capabilities you would bring to a customer?
- Is this a good fit for potential customers? Consider if you are working in the exact same programs or if the potential partner has complementary differences that will expand your opportunities.
- Do you have compatible values? It’s important to choose wisely. How do you fit? How do you want to do business? Is your culture similar or different?
- Are there other teaming relationships? If you are under a mentor protege agreement your mentor cannot have another partner that is your competitor. Also consider if your partner will or won’t disclose who else they are working with.
It’s important to consider the nuances of what a teaming relationship would look like. A well-matched partnership could be a great next step for your organization, while the wrong match could be a disaster.
If you’d like to learn more about what you need to know about creating a joint venture, don’t hesitate to reach out to us. We’d love to hear from you and answer any questions you may have.
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