Starting a government contracting firm requires navigating a dense web of federal regulations, compliance standards, and partner expectations. Most small businesses learn those requirements gradually, taking on simpler contract types first and building administrative capability over time. Margarita Howard chose a different path when she launched HX5 in 2004, investing in compliance infrastructure before the company’s first major contract required it.

The Accounting System Decision

The centerpiece of Howard’s early investment was a specialized accounting system built and approved for government contractors. The software cost more than typical small business back-office tools, required training to implement, and carried ongoing maintenance demands. For a startup, those costs represented a meaningful allocation of limited capital.

Howard viewed them as necessary. The Small Business Administration encourages new government contractors to maintain compliant accounting systems, but federal acquisition regulations only require them for certain contract types. Many small firms begin without such systems, limiting themselves to fixed-price work until growth justifies the upgrade. Margarita Howard and HX5 made the upgrade immediately.

“That’s something HX5 did very early on rather than buying big fancy furniture or offices or anything like that,” Howard said. “It was more important for us that we invest in things like a high-end accounting system.”

The Compounding Returns of Early Investment

The accounting system’s value grew with each contract HX5 executed. Successful audits built a track record. Teaming arrangements with prime contractors expanded the company’s network. The infrastructure that seemed expensive for a startup became essential for a multi-state contractor managing diverse contract types.

Howard acknowledged that most small businesses defer this type of spending. “A lot of small businesses usually wait many years before making such an investment, but we found tremendous benefit from having it in place early on,” she said. “That was one aspect that made HX5 very attractive to large businesses who were looking to partner with small businesses.”

HX5 today counts large defense firms among its own subcontractors on certain awards. The company that Margarita Howard built on operational discipline now occupies a position in government contracting that most small businesses take decades to reach if they reach it at all. Visit this page for more information.

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