There is no one answer to this question. It depends on your industry, the strength of your company, the type of past performance/clients, you have, etc. Below are several strategies for you to consider.

1. B2G (Business to Government) – You are the prime contractor on the contract. While this is the strategy most companies think they will start with on their government contracting journey, is it really the case? It takes time to establish yourself in the government space and to build a reputation and relationships. There are cases where it will work for you, and it looks like this.  You win a government contract, and you deliver your products or services directly to the agency. You may or may not use subcontractors or suppliers.

2. B2B2G (Business to Business to Government) – You are a subcontractor or supplier to a company who is the prime contractor. This allows you to start getting experience working on government contracts without having to actually write the proposal and submit it to a government agency. Many companies start this way while they are building experience in contacting in the government market. It looks like this. You will have a subcontract agreement with the prime contractor that spells out your responsibilities and compensation. Depending on how the subcontractor agreement is written, you may be able to gain past performance, which will help you win future contracts.

Below are some strategy ideas for you to consider:

Short Term Strategies:

1. Start by being Subcontractor.
2. Start with micro-purchases (<$10K) and simplified acquisition procedures (SAP: <$250K)
3. Build your Capture Team: your Gov’t dept, teaming partners, board of advisors.
4. Build your past performance: start with low dollar value contracts, use teaming partners’ past performance, do more commercial projects to build past performance.
5. Choose low profit margin vs high profit margin to get your foot in the door. Two terms that will be helpful as you understand how the government buys. Best value – May not be the lowest price, but the agency feels it will be a better overall value. LPTA – Lowest Price Technically Acceptable, as long as a company is providing a product or service that meets the minimum requirements of the agency, the company submitting the lowest price will win the contract.
   • The federal government tends to buy 60% Best Value vs 40% LPTA.
   • State, Local, & Education (SLED) tend to buy 20% Best Value vs 80% LPTA since they have fewer resources than the federal government.
6. Start in your niche market where you have the most experience. Do great with that and then expand into parallel niche markets.
7. Coopetition: Cooperate with your Competitors (Teaming Relationships). Work with other companies to meet the needs of a contract. While they may be competitors, it may still make sense to work with them. About 70% of all government contracts require more than one company to meet the needs of the agency.

Long Term Strategies:

1) Be a Generalist: Expand into other markets/industries based upon your teaming partners’ capabilities and the capabilities you can build internally.

2) In the commercial world celebrity status commands higher dollars. This is rarely true in the government market. They want a product or service that meets their needs. They are not impressed with how well known someone is. Generalists tend to make more money, this is true because once you are known to be a competent vendor who is easy to work with, government buyers will want to do more business you. If they are going to buy 3 services and 2 products, they would rather buy all of them from one vendor instead of five. It cuts down on paperwork and expenses. Lockheed is a perfect example. They are the largest government contractor.  While they are a defense contractor, they win more IT contracts ($15 billion/yr.) than IBM does ($2 billion/yr.). They win billions of dollars in logistics, billions in temporary and full-time employee placements. Think about what industries you can easily expand in too.

3) Choose a strategy that’s right for you: (different end goals)

• Legacy Corporation: build to leave to your family.
  • Cashflow after you retire.
  • ROI/Profit can be passed to family members.
• Sell your business: build to sell
  • Contracts/Past Performance – these have a great deal of sellable value.
  • IP/Assets – included in the company valuation.
  • People/Staff – allows the new owners to seamlessly meet obligations.
  • Brand/Reputation – helps win future business.
  • Relationships – critical for success in the government market.
  • Systems/Operational support/Infrastructure/Processes – all of you work setting these up contribute to the overall value of your company.
  • Profit (ROI)/Financials – You get paid for the equity you have built, and the new owners get a financial return on their investment.

4) Create a passive revenue stream.

• Government contractors go from project to project. Even though you may be on a multi-year contract for 5 years, it will eventually end. You need to develop a recurring and/or passive revenue model for long term sustainability.
• Understand the 3 types of revenue model
  • 3 L’s: L+L+L=L
  • Linear Revenue
    • Quick revenue, can happen very fast.
    • Transactional.
    • Exchange of value (product for money, services for money).
    • Time for money.
  • Leverage Revenue
    • OPM (Other People’s Money) – using investors’ money to grow your business.
    • OPT (Other People’s tTme) – your earn money form the work of your employees, teaming partners and subcontractors.
    • OPS (Other People’s Services/Products) – you become a reseller using you skills to navigate the government market using someone else’s product or service.
    • Other People’s money, time, services.
  • Longevity Revenue
    • Passive (money while you sleep).
    • Recurring.
    • Do it once and money keeps coming (with minor upkeep/updates).
    • Informational products / software.
    • Building a brand/systems/name sells itself.
    • This can be done thorough investing or in creating product or service once that allows you to be paid over and over again with minimal or no effort. If you create an online course and people from your website, you get paid with no new effort.
• Create your own product
  • Develop a software solution.
  • Develop a widget.
  • White-label (private-label) some else’s product.

Government Contracting is about one word:

Key word: CONTROL

Control what?…. control CONTRACTS.

You win the contracts, there are plenty of other companies that can perform the work.

You will need to decide which of these strategies is right for you. If you have question or would like more information, check out some of our resources.