My answer to What are some inspiring and successful business models of startups?
Answer by Ken Larson:
Trends on the horizon point to a bright future for small business in federal government contracting. The federal government is meeting small business contracting goals. In 2014, for the first time, the feds exceeded the legal requirement of 23% with a 24.9% achievement or $91.7B in contracts to small business.
The 23% goal mandated by Congress had not been met at the total government level for years.
The feds are also moving to lowest priced, technically acceptable contracting, driven by budgetary pressures.
Small business is uniquely qualified for this type of work, particularly in the services sector, due to lower overhead and G&A rates, as well as agility in work force development.
New industries like Robotics, 3D Printing, Energy, Environmental Protection, Security IT and Geo-spatial IT are creating fields for small enterprises to compete against bigger firms or lead teams involving larger businesses on large scale projects.
Government small business set-aside procurement is on the rise and becoming recognized by many agencies as a way to remove stodgy, entrenched companies when long term contracts come up for renewal. These agencies look to smaller firms for cost effective, vibrant management, while inheriting an existing, trained, incumbent work force available to the winner.
The process can dramatically grow smaller firms.
A small business anticipating participation in the federal contracting market must make pursuing it part of a long term strategy. Success in government contracting does not happen overnight.Like any other market venue, a niche must be located, market research must confirm the need for products and/or services and the competition; the customer and the potential sales must assessed. Unlike many other fields, success relies on early requirements identification and strong marketing.
The government contracting market allows a small business to pass on the costs of operations at a project level as well as write off company-wide expenses if allocated in a defined manner to single government cost objectives (contracts).Small business can also operate in a lower risk environment with contract types suited to the challenges involved. The trade-offs to these features are requirements for audits and job cost accounting that require verified consistency from cost estimating to billing and contract closeout. This does not occur without preparation.
Entering the market requires carefully sculpting commercial past performance into prospective government contract performance and accumulating strong customer satisfaction ratings. The feds talk to each other.
With the right combination of planning, preparation and opportunity, a small enterprise can seize the moment with:Identification of specific opportunities that fit company capabilities
Astute bid/no bid decisions
A solid team of resources both internal and external
A Winning proposal, effective project start-up/execution and quality products and services
The small business segment of the huge federal government contacting market is poised to grow exponentially due to advances in technology and the need for flexibility, mobility, agility and economic performance.Rule changes are being considered to enhance entrance of commercial enterprises into the government contacting venue. Congress and the federal agencies are looking hard at constructive changes to make the challenges we have discussed here easier to meet for the small enterprise. But the rules change slowly.
Seize the small business contracting moment by being diligent in learning about the market and pursuing it. Make your company well equipped to succeed:
- Define your niche
- Learn the rules