Industry Market Trends

Big Opportunities for Small Business Manufacturing in 2014

Feb 05, 2014

The world of manufacturing appears to be expanding in the United States during this slow and cautious upswing in the economy. What is new and most intriguing is that the growth is in areas of small business. Even though the U.S. economy as a whole isn't making tremendous strides in growth, entrepreneurs in the area of manufacturing are beginning to blossom into a very positive force in the marketplace.

According to the American Small Manufacturers Coalition (ASMC), U.S. manufacturing accounts for 12 percent of the nation's gross domestic product. Manufacturers employing less than 500 people are defined by the U.S. Small Business Administration as small business manufacturers. Some 98 percent of manufacturing firms in the country are small businesses, according to the Department of Commerce.

Small and medium-size businesses account for more than one-third of all U.S. exports by dollar value. No longer are the large manufacturing giants leading manufacturing growth in the U.S.; they have been outpaced by the innovative and entrepreneurial spirit of small businesses.

Small manufacturing companies appear to have four key factors that play a role in their ability to grow in current economic times. First, there is no doubt that they are deploying the strategic use of technology to support new ideas and entrepreneurial thinking. Second, one of the things that small companies have the ability to do best is develop personal relationships with customers and turn on a dime when one has a very special need.

Third, small companies can adapt to serve the specific needs of clients and become ongoing value-added partners because of their flexibility and entrepreneurial drive. Fourth, and most important, when you combine the previous three factors it opens the door to innovative product development with what a customer needs and when the client needs it.

For those small manufacturers that have grown their business and seen success, now may be the time for them to take a look at opportunities in the government marketplace. If you follow the media, no doubt you have continuously heard about the drastic budget cuts in the federal government. What media members are not saying is that because the government's buying power is still so great -- maybe the greatest in the world -- there is still a tremendous amount of opportunity for small businesses.

At the writing of this article, there are over 13,000 active solicitations for manufacturers to sell their goods to the federal government on Fed Biz Opps, a database of federal government contracting opportunities. Over 5,000 of those solicitations are targeted solely at small businesses as a set-aside. This means that only small businesses can compete for that work.

In addition to the active solicitations, there are over 1,600 pre-solicitation notices that are posted where a small company can, in fact, talk to that customer to prequalify for that opportunity, so it does not waste time chasing work it has no chance of capturing. One of the strategies that is considered in the federal marketplace is looking at how existing facilities and equipment can be repaired and rehabilitated instead of completely reconstructed or repurchased. This activity alone is where small business manufacturers may see a new world of opportunity.

The government has become a partner in some ways to small businesses. One of them is a program called the Manufacturing Extension Partnership (MEP). The MEP is not new but is significant as a type of public-private partnership. In addition, the Obama administration has pushed for the creation of manufacturing institutes around the country that align innovation efforts of big and small businesses. The federal government has focused on manufacturing to increase exports of more goods to expanding foreign markets. In addition, the "Made in America" trend is also gaining momentum throughout the country.

In fact, in his annual State of the Union address, President Barack Obama referred to the efforts: "We also have the chance, right now, to beat other countries in the race for the next wave of high-tech manufacturing jobs. And my administration [has] launched two hubs for high-tech manufacturing in Raleigh, North Carolina, and Youngstown, Ohio, where we've connected businesses to research universities that can help America lead the world in advanced technologies. Tonight, I'm announcing we'll launch six more this year."

The president continued, "Let's do more to help the entrepreneurs and small business owners who create most new jobs in America. Over the past five years, my administration has made more loans to small business owners than any other. And when 98 percent of our exporters are small businesses, new trade partnerships with Europe and Asia-Pacific will help them create even more jobs. We need to work together on tools like bipartisan trade promotion authority to protect our workers, protect our environment, and open new markets to new goods stamped 'Made in the USA.'"

In the past, we may have seen manufacturing led by huge, lumbering corporations. Now there are entrepreneurial startups across the country, making innovation and customization happen that had not been seen for a long time, and they are gaining momentum.

Today's entrepreneur has the ability to drive change. Partnership programs like the public-private MEP, and industry associations like the ASMC, allow entrepreneurs to do what they do best: use their expertise and their skills while surrounding themselves with educational and professional resources provided by programs offered by the government as well as private industry.

The federal government understands the value and power of small business. It is easier than ever before for small businesses to get that first government contract win. According to American Express OPEN's annual government contracting report, small businesses that have been involved in federal contracting for three years or less took just one year and 3.1 unsuccessful bids before notching their first contract wins. In comparison, businesses with a decade or more procurement experience took 2.9 years and 5.6 unsuccessful bids before landing their first government contracts.

This year can be a strong year for small business manufacturers. Opportunities still abound for those that are willing to take the time to research the marketplace, find where the gaps are, and see those gaps as opportunities for growth and development.

Photo credit: U.S. Department of Commerce

Doņa Storey is the American Express OPEN Advisor on procurement, advising small businesses on how to navigate the procurement maze and find success. For the nearly 20 years, Doņa Storey has played an active role advocating for small business in procurement and impacting public policy at both state and national levels.