As we frequently mention in class, Entrepreneurship for Transitioning Warriors, the government is the largest buyer of stuff and buys almost everything. Because each of you worked in the government, to me it only makes sense that you would sell to the government if your product or service meets their needs. Here is an article by Marco Terry, the managing director of Commercial Capital LLC, a company that provides invoice factoring, purchase order financing, and asset-based lending to small and midsized companies. Terry offers some great points about selling to the government.
Terry writes--Many small companies shy away from doing business with government agencies. The government sales process seems complex, burdensome, and unlikely to produce a meaningful return on investment.
While becoming a government supplier is not for everyone, it is certainly worth looking into.
The government buys almost every kind of good and service. If you sell it, the government probably buys it. Government sales can offer your company an important opportunity for growth and can provide access to a marketplace you had not previously considered.
Advantages of government sales
The most important advantage of selling to the government is that government agencies — federal, state, and local — buy goods and services year round. They buy in good times, and, more importantly, they buy during recessions. Government agencies can be good, steady clients and a reliable source of income.
Government agencies also buy goods and services in large quantities. Large orders can be a double-edged sword for small businesses. However, if managed correctly, they can help you grow substantially and rapidly.
Lastly, government agencies have mandates to work with small companies and have numerous programs designed to give small businesses an advantage. These programs include special designations such as HUBZone, 8(a) small business, and women-owned small business(among others).
Disadvantages of government sales
However, there are some disadvantages to selling to government agencies. The process can be cumbersome and has a steep learning curve. Furthermore, the process varies at federal, state and local levels.
Although most small-business owners see large orders as a benefit, they have drawbacks. Large orders may financially overextend your business and may limit your ability to take on other clients.
Lastly, government agencies can be slow payers. It’s common for some agencies to take 30 or even 60 days to pay an invoice. Unless you are financially prepared, slow payments will impact your cash flow.
Finding government contracts
Federal agencies post all their contracting opportunities at FedBizOpps.gov. It’s a good idea to browse through the site understand the kinds of opportunities that are available in your industry. The site also offers useful market intelligence, such as lists of interested vendors or past winners of orders.
Consider hiring a consultant with government procurement experience to help you start this project. Working with an expert helps you avoid common pitfalls and positions you for success. You can also try the Small Business Administration’s SCORE program, which has a great small business mentorship program. Look for a mentor with a government sales background.