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Should Small Businesses try to Sell to the Federal Government? If so, How?

Contributed by Steve Gluckman

When talking with owners of small companies, I often get one or both of the following questions: “Should I be selling to the federal government?” and “How do I sell to the government?”

Let’s start by taking a quick look at the first question. According to the Small Business Administration (SBA), the federal government buys more than $100 billion from small businesses every year. This stems in part from the fact that federal agencies are required to set aside 23% of their prime contracts for small businesses. They are also required to dedicate five percent of prime and subcontracts to women-owned small businesses; five percent of prime contracts and subcontracts to Small Disadvantaged Businesses; three percent of prime contracts and subcontracts to HUBZone small businesses; and three percent of prime and subcontracts to service-disabled veteran-owned small businesses.

The federal government is the largest buyer in the world, with federal spending in 2013 of approximately $3.5 trillion. Chances are whatever business you’re in, the government is buying.

But wait! Before we answer a resounding “yes” to the first question, let’s take a look at “How” to go about selling to the government and what kind of effort that will entail:

  1. It’s a different world out there. It is important to recognize the fact that selling to the federal government is very different than selling to the private sector. To be successful, you will need a different business development approach and go-to-market strategy in place before you dive in. The SBA has many programs to help small businesses prepare to compete for government business, so be sure to take advantage of them.
  2. It won’t come to you. One of the biggest mistakes I see small businesses make when attempting to work with the government surrounds how they go about seeking new opportunities. Reviewing databases like FedBizOpps.gov or FindRFP.com, which summarize current federal procurement opportunities, should absolutely be part of your business development strategy, however, it cannot be your ONLY strategy.  You will need to pound the pavement, learn about the needs of potential client agencies, derive solutions, build relationships, craft opportunities and then capture the work.
  3. Do your homework. Some agencies are better than others at meeting their small business goals. Pursue relationships with those that have met their goals in the past and make contracting with small business a priority. You can see how agencies have done in the past on the SBA website.
  4. Build some solid “past performance”. For small businesses, past performance can be a bit of a “chicken and egg” scenario. Past performance is a significant evaluation factor in most solicitations. However, how does a company get that past performance if they need past performance to get a contract in the first place? One great way to address this is by teaming with a larger, more experienced business (or businesses). Teaming is extremely commonplace in federal contracting. It is in your best interest to start building strong relationships with prime contractors and then serve as a subcontractor on a government engagement to begin building your past performance.
  5. Understand preference programs. Some small businesses will be eligible for certain set-aside contracts based on different socioeconomic factors. These set-asides are designed to help small disadvantaged businesses compete by providing specific advantages and benefits in the federal procurement process. It is important to determine if your company qualifies for SBA socioeconomic categories (small disadvantaged, HUBZone, woman-owned, etc.). There are a variety of different preference programs in place. By working with the SBA to understand each of these programs you will know how best to categorize and represent your business.
  6. Get ready for year-end. The federal government’s fiscal year ends on September 30th of each year and government contracting organizations historically do a significant amount of their purchasing in Q4 of their FY (July through September). A good goal is to spend the preceding 9 months preparing and positioning your company so that you can make the most out of this busy buying season.
  7. Get to know agency OSDBUs. OSDBUs (Office of Small and Disadvantaged Business Utilization) act as the primary advocate within each Federal Executive Agency responsible for promoting the maximum practicable use of all designated small business categories within the Federal Acquisition process. They are always looking for small businesses who can meet the agency’s needs so be sure they get to know you and your capabilities. Check out OSBDU.gov for more information.

Just as with anything else in life, success in this market will require a willingness to learn and a constantly evolving strategic approach. However, the rewards that come from building your business and supporting the mission of one our country’s federal agencies can make it definitely worth your while. There are considerable opportunities to do business with the federal government no matter what your company offers. Best of luck!

Steve Gluckman is a former Senior Fellow with Harvard’s Center for Business and Government. He served on the executive leadership team of a middle market government contractor and has built and sold companies in the legal, government and online learning markets. He can be reached at [email protected].

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