Mar 22 2020

Surviving the Economic Typhoon

How large companies can do their part for small businesses

In stormy seas, it’s better to be on a capital ship than a smaller one. For those familiar with Naval History, Typhoon Cobra, did significant damage to the US Fleet in December 1944. The smaller escort destroyers, without sufficient fuel reserves to use as ballast or for maneuvering, were hardest hit. Three capsized with the loss of 790 crew.

Today, we face a similar crisis. As the economy comes to a halt due to the coronavirus (COVID-19) many small businesses are going to suffer the worst. Small business is the lifeblood of our economy. According to the Small Business Administration, 47.3% of Americans are employed by small businesses! That’s close to 120 million Americans whose livelihood are now at risk due to this new storm.

Arguably, capital ships are the most important ones in the fleet. We remember the names of the carriers at the Battle of Midway (USS Yorktown, USS Hornet, USS Enterprise) yet the other ships (8 cruisers, 15 destroyers and 16 submarines) all played a key part in this turning point clash. Without them, victory would not have been possible.

Large corporations with equally large cash reserves are likely to withstand this financial crisis, just as the larger ships did during Typhoon Cobra. But losing small businesses, just like losing destroyers, is bad for everyone.

I’ve been pretty vocal about my dislike for the Federal Acquisitions Regulations our government uses to standardize contracts for Federal businesses. I’ve felt reform has been desperately needed for many years. However, I’m going to acknowledge one area I believe the Fed has really done a great job: Small Business Set Asides.

The government has used this feature to enable many small, minority, women and veteran owned businesses to find and bid on government contracts. I recall hearing recently that as much as 40% of government contracts must be fulfilled by companies designated as small business. In many cases, a large ‘Prime’ contractor can win the business, but they are required to staff that contract with work from several small business ‘sub-contractors.’

I would like to see private industry do similar in this time of crisis and moving forward. CEO’s of Fortune 1000 companies, ask your Acquisitions teammates, “How much of our business is outsourced to other large companies, and how much is given to small business?”

Small business keeps America employed. Many are really suffering right now. Many more won’t survive this economic typhoon. And when 30% or more of Americans are unemployed, who will buy the products and services of the large corporations?

Large business likes to hire other large businesses as their ‘Go-To’ contractors. However, we need to keep our small business afloat if we are going to recover from this crisis. Business needs to keep moving forward, even if we are all working remotely.

If you are an executive in a large company, please find a way to give contract awards to small business partners. You will find them dedicated to your cause, willing to work very hard for lower rates, and ultimately, you will be doing your part to assist in the nation’s recovery.

Photo by US Navy – National Archives Photo