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For the advancement of Entrepreneurship, Sustainability & the Ecology of Everyday Life

Selling to Governments (Reasons of Failure)

I’m subscribed to Canada Export a newsletter released by the Foreign Affairs and International Trade Canada, in it I came across the below article and thought it could be beneficial to those businesses trying to win government contract bids.  I had previously hosted a seminar around selling to the government which included presenters who were purchasers and buyers all the way from SAP to the Provincial Government. It covered some of the in’s and out’s of the bid process and I think this  article touches briefly on some of the issues businesses face.

………………….

An OOPS! sign

Too often, entrepreneurs spend thousands of dollars trying to win U.S. government contracts with no results. According to one expert, the reasons for failure come down to three common mistakes. Avoid them, she says, and increase your chances of success.

1. Entrepreneurs set unrealistic expectations.

“There is a myth out there that to win a government contract, all you have to do is follow the instructions,” says Judy Bradt, a former trade commissioner who is now Principal and CEO of Summit Insight, a firm that has guided over 5,000 clients to over $200 million in U.S. government contracts.
“Thousands of business owners have discovered that when they follow the instructions on websites like FedBizOpps [the U.S. federal government site that publishes opportunities], diligently hunt down bid notices and pump out proposals, the process does not usually reward their hard work” says Bradt. “They get frustrated by failures, especially when the contracts always seem wired for somebody else. Success takes a lot more than just writing proposals.”

The fix:

Companies that consistently win contracts research those opportunities a long time before competitions begin. They take the time to build relationships with buyers, influencers and partners. They adapt products or services for government buyers, and collaborate with those buyers to develop the specifications that will be published. They create targeted marketing campaigns and tactics to attract these new buyers, says Bradt.

This also applies if you’re a supplier or subcontractor to a bigger company that holds the prime contract with the government. Be sure that investment of time and money fits your risk threshold as well as your plans to grow your company.

Before your next proposal, understand every part of the government business development cycle that your competitors had to master to win their contracts. Decide if you’re ready for that investment. If so, then approach government contracts as a long-haul effort with your eyes wide open and your team ready to learn what winners have already figured out.

2. Businesses pursue opportunities on a shoestring budget.

“If your business is struggling, going after government contracts can hurt more than it helps,” says Bradt. Cash-flow horizons are longer in the public sector than in the private sector, both to develop business and to get paid for your work. Typically, government buyers are risk-averse and cautious about trying new vendors and ideas.

Runaway success in the first year is rare, says Bradt. Expect to spend 18 to 24 months investing money and time to develop relationships, find opportunities and partners, and prepare proposals before you turn a consistent profit. “Many managers rightly decide that it takes too much time and risk to develop a new market. And, unlike in the private sector, most government contracts don’t pay you up front. Unless you negotiate progress payments, you need enough funds to survive until after you do the work, invoice and get paid. That big contract can put you out of business.”

The fix:

First, explore alternate forms of financing. Your current line of credit is often not enough to pursue the contract, win it and finish the project. Even healthy companies are shocked to find that their bankers do not simply extend that line to finance a signed government contract. Asset-based financing is your cheapest money, but takes time to arrange. Alternative financing (aka “last-minute money”) is always more expensive and will evaporate your profits.

Bradt recommends that entrepreneurs forge a closer relationship with their banker. “If you’ve decided to pursue government contracts, and have revised your marketing budget to support that pursuit, review your access to working capital and financing. Then visit your banker to find out about financing options before you launch your campaign.”

3. Resist the temptation to use shotgun tactics.

“Too often, entrepreneurs go to FedBizOpps and pump out proposals for anything that appears relevant,” she says. The result is that most of their efforts are just as scattered and not much reaches the target. “If you go after everything, you might win something but most of your resources will be wasted and nobody has that kind of time and money to spare.”

The fix:

Focus. “When you want to win government contracts, you have to research and focus tightly to win,” says Bradt. Otherwise, you’ll go broke trying, she says. Savvy companies scope out the competition and possible partners in order to position themselves to win the projects that really fit them long before they put serious resources into pursuing those opportunities.

Free websites offer extraordinary amounts of federal contract market intelligence. Look into USAspending.gov, Central Contractor Registration, GSA Advantage, and Schedule Sales Query. These are all good sources if you’re testing the waters and not ready for a big investment yet.

Looking ahead

U.S. federal contract spending in 2009 topped a record $550 billion. And Bradt expects 2010 to look much the same. “The U.S. government has set a goal of spending 70% of the stimulus money by fall of 2010. Twelve months out, almost 47% had been allocated for specific purposes. Of that, only 16% has been spent. That means there’s a very stimulating year ahead—if you’re developing opportunities long before the competition begins.”

For more information, visit the Canadian Trade Commissioner Service in the United States.

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January 16, 2010 - Posted by | Business, Business Development, Great Ideas, Investment, Marketing, Sales, Services | , , ,

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