The government is a major consumer. If
you think about it, there isn’t much
that government agencies don’t buy.
From highly technical intelligence services
to basics like food and lawn service, federal, state and local agencies require the
same products and supplies as any large
business — and then some.
You can take advantage of the volume
purchases and tap into this viable sector,
but success will depend on the way you
position and market your products and/or
services and on a thorough understanding
of how government agencies contract with
private businesses.
“There is a huge market opportunity for
private businesses, but many are reluctant
to enter the governmental marketplace,”
says David E. Shaffer, a director in the
Audit and Accounting group at Kreischer
Miller in Horsham, Pa., who specializes in
government contracting. “Business owners
think, ‘Too much red tape,’ or ‘It takes too
long to get paid.’ Or, they assume that they
cannot compete with larger companies.”
The truth is that if you can provide good,
quality services and products at a fair price,
plus abide by government contracting
requirements, the government’s business
can help expand your business.
“We have government contractor clients
growing at 15 to 20 percent a year,” Shaffer
says.
Smart Business turned to Shaffer for a
primer on the country’s largest customer
and how to position your business to successfully win government contracts.
Why should a business target the government as a potential customer?
First, government spending is expected
to exceed $4,877 billion during the fiscal
year that ended Sept. 30, 2007. Federal
expenditures comprise 55 percent of this
amount, with the remainder being spent by
state and local governments. The numbers
alone illustrate a significant market opportunity for businesses that provide services
and products that the government needs.
The good news is that the government
buys a lot of goods and services. So once a
business learns the rules and regulations
and understands the sales cycle — which
is exponentially longer than that of a typical customer — it will have an edge over its
competitors. Once a business learns the
rules of contracting and establishes government references, it can expand into
other government agencies. Governments
like to hire vendors who already understand the unique business environment, so
your products and services become more
attractive to other agencies once you know
the rules.
Larger government contractors have
been pushing up the multiples paid for privately held businesses doing business with
the government, and larger businesses typically get higher multiples when they are
sold.
Finally, government entities have good
credit. Businesses can rely on being paid
within 45 days or sooner, if you prepare
invoices according to the government
parameters.
How do you prepare to earn government
business?
The people you employ will open the
door for potential contracts. If you are serious about working with the government,
establish a business plan and consider
recruiting personnel experienced in selling
to the targeted agency. Like most customers, federal agencies deal with people
they feel comfortable with and know will
deliver quality work and products. Also, if
you are targeting a contract in the intelligence field, such as an agency that needs to
outsource ‘top secret’ work, your employees will need special clearances that can only be obtained from the government and
can take considerable time to acquire.
You’ll want to develop a business plan
that highlights the special products, skills
or services that would interest government
agencies. How is your business different
from competitors? Can your business
obtain small business certifications that
may get preferential treatment? The government will want a fair price, so consider
how you can deliver this and still separate
yourself from other providers. If you’re a
service provider, the government may
inspect your accounting records to determine that you are properly allocating costs
since many contracts are based on costs
incurred.
Next, target specific agencies and learn
their procurement processes and terms.
Study historical contracts and budgets.
Who are the program managers and current providers? Find out about new initiatives, rules and regulations that govern
their procurement opportunities. Meet
with government program managers to
learn about their needs; but before you do
this, know the rules. You can find them in
the Federal Acquisition Regulations, and
most agencies also have their own rules.
How can a business get its foot in the door?
Speak to current providers to see if there
are opportunities to partner with them as a
subcontractor. Also, be willing to accept
smaller assignments until you prove the
quality of your work and earn the trust of
the government agency. You may need to
dedicate resources specifically to managing government work. Most of all,
approach the work with patience. The
sales process may range from six to 18
months, and it may take you longer to really learn the ropes. But once you do, you
can sell a great volume to the government
because it buys so much.
Working with the government may not be
an easy process at first — there is a learning curve with most new target markets.
But once you ‘crack the code,’ you’ll have a
competitive advantage over other companies, and government agencies will continue to give you business.
DAVID E. SHAFFER is a director in the Auditing and
Accounting group of Kreischer Miller and specializes in government contracting. Reach him at (215) 441-4600 or
[email protected].
