Doing Business with Uncle Sam: The Pros and Cons

Talk about stimulus! The U.S. government spent nearly $423 billion contracting with small businesses in 2011.

Nearly every federal agency, from the defense department ($289 billion), to the Smithsonian Institute ($259 million), enlisted private sector vendors for the delivery of goods or services.

Before wondering why you’re not getting your piece of the action, it makes sense to figure out if selling to Uncle Sam is actually a good deal for your company. Here are some factors to consider:

The Pros of Doing Business with the Government

Volume is huge. The government spends a lot of money (see above) in a lot of different areas. Even if political calls to reduce government spending are successful, expenditures will always be substantial. And the government is never going out of business.

Uncle Sam pays on time! Everyone, at some point in their life has a gripe about some experience they had with government at some level…but getting paid probably isn’t one.

In September, 2011, the federal government committed to improving small business cash flow by directing that agencies should make their payments to small business contractors “as soon as practicable, with the goal of making payments within 15 days of receipt of relevant documents.” Fifteen days beats 30…and it certainly beats 60.

Government can be trendy. Is your company involved in green technology, clean energy, or bio-tech? You might be in luck. If your business provides products or services in a “hot” area, there are plenty of opportunities to explore.

It helps if you’re special. The government gives special consideration to businesses owned by women, veterans, and minorities. But you have to be certified to be awarded that designation. Contact the Small Business Administration for information.

So what’s the downside to potentially working with Uncle Sam?

The Cons of Doing Business with the Government

Patience, please! You probably already guessed, but it can take time to win a government contract – 18 to 24 months on average, for first-time vendors. Be careful before you count potential payments from the feds in next year’s revenue projections.

Limits of contact with the buyer. Government contracting can be regimented and automated. Your communication with the actual buyer may be extremely rare, especially the first few times you put out a bid.

That’s reassuring, in that what you’re selling gets to stand on its own merits. But it’s also troubling, because you get very little feedback during the decision process. Many of the old rules of selling, in terms of nurturing a customer relationship, don’t always apply. Some would-be contractors even complain of being “stone-walled.”

Price justification and audits. A private sector customer can just decide to not buy from you, or stop doing business with you in the future. That’s the free market at work. Uncle Sam can take different, more aggressive action.

It’s not very common, but even if you’ve already successfully delivered your product or service, you might be asked to explain how you arrived at your pricing and even have to produce records for hours billed and materials supplied. If you sell to the government, be prepared to be held very accountable for what your charge.

Unpredictability. Some companies, particularly those selling to the Defense Dept. and other agencies with long-term stability, can count on consistent sales for extended periods of time. However, other budgets, programs and expenditures are much less predictable. You’re smart to consider possible government work as part of your revenue stream, but not a permanent, or growing component.

Getting Started

If supplying to the government could be a logical extension to your sales plans, there are good resources to help you get started.

The U.S. General Services Administration (GSA) accounts for significant federal expenditures, and also provides good information for any company trying to investigate opportunities. There are specific places on the GSA website that outline small business opportunities.

The Small Business Administration’s contracting opportunities page lists current requests for bids put out by dozens of federal agencies. The page is updated almost daily. Once you’ve figured out the navigation, it’s easy to zero in on potential fits for your company.

And of course, there are many consultants in most areas of the country that can help you navigate the process of selling to the government. Run on online search, or ask your accountant or attorney for a referral.

 

Stop waiting 45 or 60 days for payments! MP Star Financial can help you get a better handle on your company’s cash flow management. Call for more information. (800) 833-3765, extension 150.

 

  • Was this Helpful ?
  • yes   no

Leave a Reply


Get your Free E-Book: How Invoice Factoring Can Help You Grow Your Business!

About Us

Since 1995, MP Star Financial has helped more than 1,000 businesses and people like you resolve cash flow issues.

Areas We Serve
Request a Quote
Start Your Application
Client Login

Contact Us

Phone: 1-800-833-3765
MP Star Financial
33519 Solon Road, Cleveland, OH 44139-2918

Member of:

AFA Together

Accredited by:

AFA Together