With federal law dictating that the U.S. government award 23 percent of federal contracts to small business (that’s roughly $80 billion to $90 billion each year for their products and services), landing agencies like the DoD, General Services Administration and the U.S. Army as clients can be extremely lucrative, even during recent years, when budgets were squeezed and the threat of government shutdown was a real risk.
Securing such contracts isn’t easy, though. Months spent on paperwork, investigating credentials and writing faultless proposals don’t guarantee work for companies that must compete with a pool of equally capable competitors. And federal agencies, which set aside a percentage of contracts for minority-, women- and service-disabled veteran-owned small businesses, almost always prefer to award the work to companies they’ve worked with previously.
The government path to a significant revenue source won’t be easy—yes, it’s the government, so expect this business battle to include a fair share of bureaucracy.
“There is so much red tape, so much stuff I didn’t know—it’s a complete maze,” said Kristen Nevils, co-founder and vice president of M.R. Crafts in Davie, Florida, a six-employee firm that won its first contract in 2009 and today makes roughly 50 percent of its revenue from supplying, reselling and sourcing maintenance, repair and operations products to VA hospitals in Florida and California. “There are so many companies that refuse [to work with the government] because it’s so complicated.”
For Royce Leather, a Secaucus, New Jersey, manufacturer of handmade wallets, bags and briefcases, it took more than a year to secure its first contract. On the risk side, “You never really know how profitable the opportunity is going to be, given the allocation of time and human capital you put into these bids,” said CEO Andrew Royce Bauer. Three percent to 5 percent of his company’s revenue comes from selling personalized leather journals and padfolios to the U.S. Senate. Royce is making “hundreds of thousands” of dollars selling to the federal government, and the company plans on increasing that business in time.