Here’s the premise in 24 words: Small business owners can add a revenue stream by selling to the federal government. It’s complicated. You can manage the setup process for them.
The federal government spends about $500 billion dollars annually on goods and services. Of the contracts awarded, 23 percent must go to small businesses. According to the Federal Times, “many businesses find government contracting is their secret weapon for profits.”
Here are the questions: Should your business owner clients start selling to the federal government? Should you learn the procedures and offer this as a value-added service to companies you are prospecting for business?
Five Reasons Your Client Wants to Become a Federal Contractor
There’s a process to follow, but it can be worth your client’s time. And true, it’s difficult, but if was easy, everyone would do it. Here are a few reasons your customers might be interested in this:
- Expansion: Their future largest customer may be the federal government.
- Found Business: According to a 2009 article in INC Magazine, the government wants smaller contracts in the $3,000 to $100,000 range to go to small businesses. Better still, company owners don’t have to spend money on advertising to attract customers. Instead, they are bidding on contracts.
- Good Revenue Stream: Once the government knows you can deliver, they may come back to you to buy more and more.
- Set Asides: If you are in an underprivileged area or population group or if you are a woman- or a disabled-veteran-owned company, the government wants to send business in your direction.
- Recession Resistance: The government spends money regardless of the condition of the economy. And, if you take the Stimulus into account, you can make the case they shell out more when consumer spending drops.
What’s the Easiest Path?
The simplest way to get started may be getting involved as a subcontractor. The American Express OPEN program provides advice in this area to small businesses. The federal government requires prime contractors to utilize subcontractors if the size of the job exceeds $700,000.
Fortunately, there’s an online guide giving a high-level view of the process. It spells out seven steps:
- Think About It: Is this a good idea? Can you put in the time and effort as well as make and keep commitments? The Vendor Toolbox can help. You will notice a “Catch 22” listed, relating to their Multiple Awards Schedule (MAS) program, where prices are negotiated in advance and agencies come to you to buy. Your chances of success increase if you’ve already been a prime or subcontractor for 2+ years, which could be accomplished by working as one for someone else. It also mentions you should be expecting to spend $80,000 and $130,000 to find and manage your first contract.
- Research the Demand for What You Are Selling: The Contract Opportunity Finder tool is useful. You can enter keywords (like “painting”) and find contracts up for bid including that skill. You can search geographically.
- Learn About the Laws: This is an area where the Small Business Administration can help, since they have a site addressing regulations and there are Procurement Center Representatives available to answer questions. There is also a list of geographic territories.
- Create a Business Plan: Why is this going to work? How much business do you think you can get? Your client likely already has a plan. This is specific to the government contracting side of the business.
- Find Your Code: This might be the easiest step! Find where your industry is classified under the North American Industry Classification System (NAICS).
- Learn About “Set Asides”: Your small business owner might have additional advantages. The government wants to help Women Owned Small Businesses, Service Disabled Veteran Owned Businesses and HUBzone businesses (historically underutilized areas). There’s also the 8(a) program for social or economically disadvantaged people. If you fit into a category, you get classified and can use this to your benefit.
- Register: The System for Awards Management (SAM.gov) is the database of contractors. It’s free and accessible to the public. You can go online and check out the other companies in your area already doing business with the federal government.
How to Bid
The “How to Become a Federal Contractor” guide referenced in detail above also explains how you can start bidding once you are certified. These are the steps listed:
- Find a Good Match: You researched opportunities to learn if there’s demand for your services early in the above process. Now, use the Contracting Opportunity Finder tool again to find specific bidding opportunities.
- Read Thoroughly: Understand the requirements. The government is very specific. You need to give them what they want if you expect to be paid.
- Figure Out if It’s Really a Solicitation: Sometimes, the agency involved is simply gathering data, not putting a job out there. Read everything carefully.
- Ask Questions Before Submitting: The above procedure mentioned Procurement Center Representatives. Reach out to them and clarify whatever you don’t understand.
- Submit Your Bid: Do this carefully. The government has a specific format and their own forms. They also have regulations on pricing.
- Prepare to Negotiate: Expect the government to take one to four months to respond after you submit your bid. If you don’t hear back, you can reach out to them.
Where’s the Opportunity for Accountants?
This can be a windfall of business for small firms in your market, but where do you come in?
Well, the procedure to register and compete is complicated. A good analogy is business owners deciding if they will file their own tax returns or hire an accountant. In both cases, opting for expert help is the prudent choice. You are a professional who can help them bring in additional revenue.
Here are three areas of opportunity for you:
- Clients Who Are Already Certified: Are they actively looking for contracts? Are they registered in the right categories? Can you help expand this side of the business?
- Clients Who Aren’t Selling to the Government: You can show them why this is an overlooked revenue stream and help them through the registration and bidding processes.
- Businesses That Aren’t Your Clients: Do a search to learn what the government is buying locally and then identify local, certified contractors. Additionally, figure out who their competitors are, and approach these individuals with the idea of becoming a government contractor. Show them the competition is already in this space.
This is a complicated and competitive field to break into initially. However, it can be profitable to your small-business-owning client and to you as well.