The U.S. government constantly adjusts and grows as new needs arise. The government needs an army of contractors to support its massive consumption requirements. As a result, the benefits available through government contracts are abounding. Veteran contractors are perfect candidates to fill this growing landscape because of their previous employment by the government. They’ve also learned lessons, acquired tools, and made contacts from your military experience that could be valuable in the government contracting space.
The demand is real and possibilities are substantial, but not every step will be easy. If you’re a veteran, here are some secrets to help you become more successful.
1. Build Relationships
As with any venture in life, relationships are key to your success in establishing and maintaining government contracts, bidding on contracts and getting government contract financing. While the government is a huge consumer, there is a lot of competition to break into this space. As veterans, you have a leg up on your competition because the government sets aside procurement specifically for veteran-owned small businesses. But how do you know where to start or what’s available for veterans?
This is where relationships come into play. Relationships with leaders of businesses you’re interested in bidding for will give you an advantage in securing a contract later. You have to be willing to put yourself out there to grow you network.
For veterans, a good place to start building those connections is to know what events are going on at a local base near you and in the veteran community. These could include open houses at college campuses or companies, events at your local Veteran Business Outreach Center or local contracting incubators like Eastern Foundry.
Get yourself out there, get in the mix, and make connections that will enable you to win contracts. This is not an industry you should enter alone.
Building relationships with government contract financing partners at an early stage can also be helpful.
2. Team Up With a Prime Contractor
While building relationships and making connections individually with fellow veterans and businesses may be all the help you need, for some, the contracts you’re bidding on will need more resources than your company alone can provide. Maybe you’ve done a ton of networking and you’re still not winning contracts. In either of these cases, teaming up with a prime contractor may change all of that.
A prime contractor is the owner of the project and has full responsibility for its completion. They may do the work themselves or hire other contractors, known as subcontractors, to carry out specific parts of the contract.
Working With a Contract Officer
Your small business has to move from “unknown” to “known” in the government contracting space. Many contracts you bid on can have several proposals per contract. The contract officer’s time is valuable. They’re the ones who are working on the contract day in and day out. They administer the full life of the contract and can even terminate it. So building relationships with contract officers can take time. If you’ve teamed up with a well-known prime contractor, the contract officer may already know them. So, it may be more likely they will choose your bid.
Become a Subcontractor
This is why teaming up can be helpful. For example, there may be large, well-known government contractors who would take you in as a subcontractor if your specialty fills a need for them. You’re able to get a foot in the door, gain experience and start proving the excellence of your product, all with the end game becoming a “known” business.
Government Contract Funding
Another hidden benefit of teaming up is that it might help ease the financial burden of the contract as well. With multiple parties involved, the expenses no longer rest solely on your small business’ shoulders. Leverage your relationships and strategically partner to expand your business’ possibilities.
3. Make Word of Mouth Work for You
It can be easy to feel discouraged as a veteran small business owner when you only seem to win small contracts because you don’t have enough revenue for bigger contracts.
Hone Your Strategy
We encourage you to not feel disheartened about winning smaller contracts. Changing your business from an “unknown” to a “known” in the government contracting space can be hard. You have to build relationships. You might have to partner with a larger parent company. But you should stick to your guns and hone your strategy. Do each job with diligence and excellence, no matter how small it may seem.
Any contract you win gives you a chance to prove the worth of your company and your product. If you take every small contract you win and complete it in a high quality manner, those smaller jobs may earn your company a good reputation, which might help you break into larger circles. If you’ve made the companies and customers you’ve worked for happy, they might be willing to refer your services to someone else, who might refer you to someone else and so on. Don’t stress about starting off small – you never know where a job well done might lead you.
4. Think About Your Government Contract Financing Plan
As with any business venture, know the financial facts from the get-go. Government contract financing is no exception because it can be tricky. It often takes a great deal of time to actually win a government contract. You have to establish yourself in various bidding spaces, such as FedBid. You might be looking at six to 12 months just to win the contract after you’ve made a bid.
Bidding Takes Time
There may be several months of negotiations once you’ve won the bid, before doing any work. If your contract provides a down payment, receiving the payment can sometimes take 30 to 75 days to arrive. The full payment comes only when the product is completed and received. It takes a long time between being awarded the contract and actually getting paid. Thinking about how you will afford the expenses accrued during this time better positions you and your business for long-term success.
The Contract Financing Challenge
Traditional bank loans present a challenge in this financial space because you don’t have much collateral to offer the bank as a small business owner. You may put your home or your child’s college fund at risk if a contract falls through. While credit cards are another financing option, they’re far from ideal. If you’ve been awarded multiple contracts but haven’t been paid yet, it’s possible to exceed your card limits. (See how credit card spending affects your finances with a free credit report snapshot on Credit.com.)
Another route contractors take is raising equity funds. However, this risks diluting the veteran’s business ownership to the point where a Veteran-Owned Small Business may no longer qualify for contracts set aside for veterans. Therefore, financing your government contract and veteran-owned small business through veteran business loans makes more sense.
How to Finance Your Government Contract
It’s important to think through exactly how you’re going to afford the expenses your business will face before you bid on a contract. Some invoice factoring or invoice financing providers, make the process painless. After you have provided your goods and services, your invoices to the government might be sold at a discounted or advanced rate of up to 90% to a finance company. You also have the option for recourse or non-recourse factoring, which means the financing company is willing or unwilling to take on certain risks. A good government contract financing partner may combine their invoice factoring options with term loans or lines of credit to mobilize funding and help you get started on the contract work.
Image: Steve Debenport