Small government contractors face a common early dilemma. Money is limited, and every dollar spent on one thing is a dollar not spent on another. Margarita Howard’s experience building HX5 offers a case study in how that tradeoff can play out over the long run.

When Margarita Howard founded HX5 in 2004, she skipped the typical early purchases many new contractors make, like impressive office space or equipment meant to signal success. Instead she bought an accounting system designed and approved for federal contracting work, even though it cost more than most startups would set aside for back office software.

Compliance As A Growth Tool

The Small Business Administration asks new contractors to maintain accounting systems capable of meeting federal standards, but it does not require any particular software. That flexibility means many small firms delay building a fully compliant system until a specific contract demands it. Howard made the purchase immediately instead of waiting.

The lesson, according to Margarita Howard, is that infrastructure decisions made early can determine which partnerships and contracts a company can pursue later. She has framed competing for government work as something that starts with understanding the industry and assembling the right team before anything else falls into place. Firms that wait often find themselves limited to simpler, lower value contracts because they lack the systems larger primes expect from a subcontractor.

HX5’s own growth suggests the approach worked. The company has expanded from one employee to more than 1,000 people spread across more than 20 states and about 70 government locations. It now wins large prime contracts and maintains subcontracting relationships with major defense firms. For contractors weighing where to spend limited startup capital, Howard’s HX5 experience points toward compliance infrastructure over visible signs of success.

The broader takeaway is less about accounting software specifically and more about sequencing. Margarita Howard built the parts of HX5 that partners and auditors would actually test first, then let visible growth follow once the underlying company could support it. Refer to this article to learn more.

Find more information about Howard on https://www.youngupstarts.com/2025/01/10/how-hx5-and-margarita-howard-stay-ahead-in-government-contracting-as-a-women-owned-firm/