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Is There Real Government Contracting Opportunity for You?

Filed under Government Contracting. Fact checked on May 24, 2012.

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Government contracting presents a huge opportunity for small businesses. The government requires a wide variety of goods and services, and many are too small for big businesses to consider. As with any business deal, there are risks and rewards, and a government contract should be treated like any other.

Although you may be starting to get an idea of the magnitude of government contracting opportunities for small businesses, you may be wondering, and possibly even doubting, whether the government has any need for your particular product or service. Of course, we can't tell you with certainty that it does, but what we can tell you is that the government needs, and stands ready to buy, more types of products and services than you can imagine.

If you think this is too difficult for you, maybe this data will encourage you. In fiscal year 2007, out of 6,675,895 actions or contracts, small business received 3,964,375, not bad for a bunch of small businesses that don't do much. So, what's the difference between someone that just complains about not getting anywhere or not getting contracts? Basically, they didn't quit when they didn't win the first one. They kept going until they learned why they lost and what they needed to do to win. It's a learning process and the only way to learn is to bid and lose.

By learning process, we mean that they not only don't give up, they go to all the workshops, conferences, matchmaker events that are in their local area, but they also meet with the Small Business Advocate's at local arsenals, go the extra mile, giving information and helping the contracting office or buyer get what they need. They learn about the "old boys" and how they do it. And they never, ever, give up.

List of Potential Governmental Customers

So, just what is this "government" we're talking about? Here are some interesting figures:

  • 3,034 counties
  • 19,429 municipalities
  • 16,504 townships
  • 13,506 school districts
  • 50 states
  • 6 U.S. territories, and
  • 1, yes, only 1, federal government

There are over 300,000,000 people in this United States and, according to the US Census Bureau, one in eight people work for some level of the "government." When most people talk about the government they don't realize that there are many levels of it and each of them are buying agencies, so if you're in the right market, you can sell to many or all of them. The myth of the "government not paying" is usually reserved for any level other then the federal government. The Feds usually pay electronically in less then 30 days.

What the Government Needs That Small Businesses Can Provide

If you think that your company doesn't provide anything that the government needs, think again. Here are just a few examples about real-life companies much like yours. Notice that they didn't focus on what they made or the services they were currently providing. Instead they focused on entering the government market: They simply found out what the government needed that they were capable of supplying, and then supported those needs.

  • What are the chances of a one-woman company making clothing for special-needs individuals getting a government contract? As it turned out, pretty good. She simply kept looking for something that the government needed that she was capable of supplying, and she found it. Today the one-person company has grown to 40 employees and reports a gross income of $2.5 million making coveralls for the military.
  • A small, three-employee business started supplying fasteners to the military about 16 years ago. They started slow, but continued to make the effort to become more knowledgeable about the market and kept growing to where today they gross about $1 million a year. Not bad income for keeping the military fastened together.
  • A few years ago, a nine-employee precision machine shop looked to the government market to replace some of their lost commercial work. They decided to concentrate on opportunities where drawings are available and require precision work. Today, the company is making tooling for the aerospace and pharmaceutical industries.
  • Another minority owned business start-up is a one-man shop. He did not speak English very well, but he knew enough to hire people who did and had the knowledge to help him get the kind of contracts he wanted. He became 8a certified with the SBA and started looking not just for set-aside work but also for work with prime contractors. He has started to receive contracts on a regular basis and has had opportunities with primes that he had never been able to get before.

Actual Government Needs Small Business Can Fill

If you don't think the government needs all types of products and services, read on! These examples show that there is every chance that you provide, or have the capability to provide, a product or service that the government is looking for right now. (Believe it or not, all of these are fact—not fiction.)

  • What use would the government have for old wrecked cars? A small business owner who owns a junkyard near an Air Force base had that same question and actually found out the answer. He was awarded a repeat contract for his junk cars, which were used to train Air Force rescue personnel in the use of the "jaws of life" and other emergency situations.
  • Just a few years ago, the Department of Interior, U.S. Fish and Wildlife Service awarded an artist in Oregon an indefinite federal contract for wildlife artist services. This contract was awarded for various paintings portraying a variety of subjects.
  • How about pork rinds? A small business received a contract for manufacturing and providing pork rinds, tasty treats that lots of people love, to several military base stores that needed someone to supply them. The owner won the contract based on price, delivery, and his status as a minority business contractor
  • What's that about shooting pigs? An avid bow hunter who sold archery supplies and organized hunting trips won a bid from the Tennessee Valley Authority to get rid of the wild pigs that were living in and around the site and creating a safety problem. (Wild pigs tend to be a bit on the grouchy side!) Instead of bidding against firms that were going to charge and have employees do the work, he bid $1.00 and then scheduled hunters to go out and do the job. After clearing the hunters with the government to enter the area, he made his profit by charging the hunters just as he did for any other hunting trip to any other wilderness area.
  • The Fish & Wildlife Services in Atlanta, Georgia, awarded a federal contract for walking the beach, specifically "PR for Beach Patrol of Leatherback Sea Turtles." If you're going to walk on the beach anyway, you may as well get paid for it.

What Government Contracting Can and Can't Do for Your Small Business

So, just maybe, the government might want to buy what you have to offer. But will a government contract really be worth the trouble? What can it really do for your business?

While winning a federal contract is not akin to winning the lotto, as some would have you believe, in some cases, it can help you accomplish other goals, from jump-starting your business to helping to finance your retirement. Here are some examples of what government contracting can do for a business:

  • In just a few years, a small Midwest business that we know of went from being a one-man operation with a couple of thousand dollars in contracts per year to almost 125 employees with more than $400 million in contracts per year. The owner was able to take his expertise in MRO items (Maintenance, Repair and Operations materials) and win a major supply distribution contract from the Defense Department.
  • A larger business that manufactured wood products had tried for some time, although unsuccessfully, to get a government contract for wooden handles for stretchers. The owners even bought a special machine that could put out hundreds of handles a day. But a one-man operation, a semi-retired wood maker who worked just a few hours each day making the handles, won the contract and accomplished his goal of keeping busy while earning extra retirement money. He put out a quality product that the government was happy with and, because he had virtually no overhead, was able to quote a much more competitive price.
  • A small business owner who distributed diesel engines and engine parts, and was knowledgeable in government procedures, started a thriving business out of his dining room. He started with one client who wanted to supply the government, but didn't want to deal with the government. So he cut a deal with the client to do the government paperwork, organize the packing and shipping, take care of the problems with the government and become, in fact, the client's "contracting office." He now has several clients that supply different types of goods and works to various government agencies to the tune of several million dollars a year.

But even if your results are not as dramatic, getting a government contract can work to your advantage. What it can do is level out the hills and valleys during the business year. The usual margin of profit is never large, but if you utilize that portion of your business with the government for paying the overhead (i.e. lights, heat, a/c, etc.), you will find that the other contracts you have will be much more profitable. This is a very basic principle: If you can cover your costs with government contracts, you can be more selective with other, higher margin contracts.

What Contracting Can't Do for Your Small Business

On the other hand, if your company has fallen on hard times and is in financial trouble, a government contract will not be able to save you. In fact, a contract might push you over the edge and put you completely out of business if you cannot fulfill its requirements.

You also need to keep in mind that the government does not finance contracts upfront. You must be able to handle the financing of the contract until you are paid, just like you do with your commercial customers. If you need financial assistance, perhaps you can meet with your banker to arrange a loan.

Work Smart

Contrary to some late night talk show advice, the government does not have loads of free money to give to you that will set you up in any old business you want. It does have some programs that will help you find low interest loans; check out Government Financing Programs for more on these opportunities.

The government may sometimes allow for incremental payments based on incremental shipments or milestones of performance, but only if the value and duration of the contract are large enough. To receive any type of advance payment or progress payment, there must be a compelling reason, and not just the fact that a contractor needs money to stay in business.

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