Is government contracting right for you?
According to USASpending.gov, the government purchased nearly $440 billion in goods and services from the private sector in 2015. From construction to computer systems, supplies and commodities, the government has a wide range of needs to support its many agencies and if your business can meet the demand, there may be a great opportunity for profit. Of course, not every business is a good candidate for benefiting from this particular customer base. Here are some questions to consider when deciding if government contracting fits your business model.
Are you able to pass initial screening? When looking to get into business with the federal government, it's important to note that the government has certain limitations on who they will work with. To qualify, your business must be registered with Dun and Bradstreet (D&B) and the System for Award Management (SAM). Registration with D&B creates a nine-digit unique identifier number that will be used when agencies are looking to assess the financial stability of your business. SAM is the government's central registration repository for all businesses. In addition, you must also ensure your business:
- Has a checking account
- Is not declared an excluded entity by the government (You can search for exclusion records using SAM)
- Has no legal judgments with the government
- Is up-to-date on taxes
Is there a government agency that needs your services? When exploring possible opportunities, one of the best ways to see what is available is through FedBizOpps. This site run by government agencies allows you to search for active federal opportunities. You'll find details about each request and you can use the site to monitor chosen opportunities or even add your company to an interested vendors list.
Can you prove a history of providing required work? Most federal government requests require that a contracting entity have at least two years of experience performing the type of work outlined in the contract. However, this does not necessarily have to be work done by your current business. If you have employees with experience, or you yourself have experience prior to forming your current company, these may be taken into consideration.
Do you have time to commit to this venture? Getting into business with a government agency can take a lot of patience and persistence. Just as with any new customer, you'll need to convince the agencies that you are the best company to fulfill requests. The approval process when dealing with government clients can be longer than usual with multiple individuals and departments possibly needing to approve any proposal. Keeping an orderly office, including government issued documents, financial statements, receipts and employee records can help move requests along more quickly.
Can you afford the starting costs? Government entities do not typically prepay for materials and other goods. This means your business must have good cash flow to be able to pay for materials upfront. If you do not have excess capital, you may want to consider gaining access to a line of credit to prepare. Once you manage to secure a contract, getting paid can also take a bit longer — sometimes up to 45 days or more after you submit an invoice.
Making adjustments to get your business ready to be a strong contender for government contracts can help open up an entire world of new business possibilities. For more information that can help grow your business through government contracting, visit California Bank & Trust's Business Resource Center and our Blog.