Should your company pursue government services as a business line? The stimulus package has raised the issue with a lot of commercial businesses: Is it time to move into government services?

Almost daily, I talk with company principals considering a strategic move into the federal arena. Billions of dollars, seemingly suddenly available, are an attractive lure to strapped and struggling companies. Perhaps your commercial services firm is floundering in the economic downturn. Or maybe you are successful in your market and looking to take advantage of current opportunities brought about by recent administrative decisions to allocate funds to federal programs. Either way, stimulus dollars are tempting, but the essential truths of marketing to the Federal government remain constant.

Here, I address the top five myths I hear most often, counterpointed with the facts that belie them.

Myth #1: It is easy to sell to the government, especially if I have a “friend” on the inside.
Fact: The government is as savvy a customer as you will ever encounter.

The government has purchased goods and services for over two centuries and has a well-established and highly regulated system—backed by law—for ensuring best value, minimizing corruption and virtually eliminating subjective buying decision authority. People go to jail for contravening procurement law. Do any of your commercial customers face that risk for a bad buy decision? That said, all business development is about relationships. Having a “friend” in the agency can be advantageous as a door opener, and can be invaluable in identifying opportunities, but you must present a solid value proposition and highly competitive pricing to win.

Myth #2: Government contractors make a lot of money. It’s a great way to “get rich quick.”
Fact: It’s a long game.

Large contractors do generate a lot of revenue, the bulk of which is spent on overhead, salaries and benefits to employees and payments subcontractors and vendors. The story for small and new contractors is much bleaker. It can take many years to turn a profit, even if you win a contract or two in your start-up years. Even with prompt payment regulations, you may have to carry a substantial payroll and pay your subcontractors for a few months before you get paid by the Government.

You must factor in costs of recruiting, businesses development and other expenses you won’t recoup through the rates you bill the Government. A recent poll revealed the cost of recruiting one senior-engineer can be as much as $20,000. Also, you must be financially prepared for contract gaps, possible protests and furloughs during which you may have to carry employees on overhead for one or more pay periods.

The typical sales cycle in the Government for a known requirement is 18-24 months. That is up to two years for your business to support active marketing, business development, capture and bid and proposal efforts. Do you have the resources to sustain operations for two years?

Consider these burdens and the requirement to keep your salaries and your rates competitive and your accounting transparent to comply with DCAA regulations. Do not expect to operate on revenues for the first three-to-five years.

Myth #3: I have a (Woman-owned, Veteran-owned, minority-owned) small-business set-aside status, the government has to give me business.
Fact: The competition just got tougher.

Disadvantaged business set-aside requirements can be a great accelerator to a qualified small business and can open opportunities not available to other firms. The bad news is, you aren’t the only one who knows this and the competition among these groups is as tough as any. Many contracting offices are leery of “carpet baggers,” companies formed for the sole purpose of gaining a set-aside advantage. There are many experienced small-businesses competing for set-aside contracts. You must lead with capabilities and have the financial ability to support the work once you win.

Finally, the purpose of set-asides is to create a level playing field on which you may build your business to compete for unrestricted opportunities. Your aim should be to break through those size-standards with momentum as you grow and make way for the companies that still need the leg up.

Myth #4: Government small-business offices are there to help my business.
Fact: They aren’t there for you.

Small business offices ensure their respective agencies meet mandated contracting objectives for small and disadvantaged business utilization and to ensure the Government receives best value through the contracting process when utilizing small businesses. You will not find individual small business advocacy in their charter. Bottom line: they work not for you, but on behalf of the customer to whom you are trying to sell.

That doesn’t mean small business offices aren’t a great resource for your company. They can help you navigate many of the sticky wickets you will encounter. Just don’t lean too heavily on them for your marketing or business development and never forget for whom they exist.

Myth #5: If I respond to enough RFPs, I am bound to win some work.
Fact: Submitting many proposals is one of the least-efficient business development strategies.

Iona Moon wins over 94% of all proposals we prepare because we concentrate your business development toward opportunities with the highest win probability. We offer a rigorous, objective bid/no-bid process which we apply early and often to every opportunity at every stage prior to submitting a bid. Writing good proposals is critical. Knowing which proposals NOT to write can make or break your business.

Final thoughts

There are many variables to consider with any new business strategy. The decision to pursue Federal contracts is a big investment. It should planned carefully, well-funded, and—most importantly—led by a commitment and ability to provide quality service at competitive rates to the toughest customer you will ever love.

Best of luck.

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