Debunking the Myths of Small Business Government Contracting
The federal government purchases everything from spaceships to paperclips and has a goal to award 23 percent of their prime contracts to small businesses. For the first time since 2005, the government met that goal -- awarding 23.39% ($83.1 billion) to small business owners in 2013. More agencies than ever before achieved an A+ or A rating for their work in meeting their small business and socio-economic contracting goals.
Since Congress approved a $1.1 trillion spending bill in January, agencies are eager to spend their fiscal year-end budget by September 30 in preparation to move forward in 2015. It is a great time to get started, but entering the federal marketplace can be a daunting idea. I regularly speak at American Express OPEN’s small business government contracting events and workshops, and I have heard the same concerns from business owners time and time again: “It’s too complicated.” “I’ll never get paid.” “It’ll take years for me to win a contract.” To help businesses through this process, I will clear up some of these common misconceptions.
MYTH: I’ll be going up against large corporations that have more competitive offerings.
FACT: There are a number of small business “set-aside” programs and certifications available that allow you to compete only with other small businesses. Some examples include the Women-Owned Small Business (WOSB) Federal Contract Program, the Service-Disabled Veteran-Owned Business Concern (SDVOBC) Procurement program, and the Historically Underutilized Business Zones (HUBZone) program for businesses in urban and rural communities. You can learn about these and other small business contracting programs on the SBA website.
MYTH: Government contracting is complicated, and it takes forever to get paid.
FACT: While there is steep learning curve to understand the process, doing business with the government is often similar to working with any other large corporate customer each having its own bureaucracy. The government uses many commercial business practices, such as buying off-the-shelf and using credit cards for payment, so you do not have to wait a long time to receive payment. In fact, the federal government generally pays within 30 days of invoicing and will pay interest if the late payment is their fault.
MYTH: Opportunities are scarce since budgets have been drastically cut.
FACT: The U.S. government is still the world’s largest customer and as such, can provide a significant revenue stream to increase your bottom line. The government is in constant need of goods and services and is legislatively mandated to work with small business contractors.
MYTH: I’ll invest a ton of time and money and may not even win a contract.
FACT: That holds true even in the corporate world. Although government contracting takes a good amount of time, effort and resources, a report by American Express OPEN found it is easier than ever for small businesses to get that first contract win. The report found small business contractors who have been seeking contracts for three years or less stated it took just one year and 3.1 unsuccessful bids to land their first contract. The survey also found that 47 percent of active small business government contractors have revenues of $1 million or more, compared to just five percent of all small businesses.
Take advantage of free resources to get you started. For instance, American Express OPEN hosts free events around the country, helping small businesses get the tools and connections they need. In fact, the next event is in Washington D.C. on August 14th – where business owners can meet one-on-one with procurement officials and government buyers. Registration and program information is available here.
While government contracting can be a lucrative opportunity for small business owners, it’s not for everyone – only those who are willing to dig in and work hard to make things happen. As someone who has spent years contracting with the federal government, I urge you to consider the opportunity to diversify your customer base and take your business to the next level.
