This post was originally published on the StreetShares blog. Copyright © 2017 StreetShares, Inc. All Rights Reserved.
The U.S. Government constantly adjusts and grows as new needs arise with changes in technology and resources. As the nation's largest consumer, 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 your previous employment by the government. You'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. We thought we'd give you a behind-the-scenes glimpse from other’s hard-earned wisdom to help make your journey easier. Service-disabled Veteran Dennis Roark's inside Q&A offers a specific example of some of these tips in action as he described his government contracting small business Terra Ferma's journey.
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. Bottom line: relationships with leaders of businesses you're interested in bidding for, such as a prime contractor, will give you an advantage in securing a contract later. You have to be willing to put yourself out there to grow you network, by taking the initiative to meet people, and exchanging contact information.
For veterans, a good place to start building those network 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 (VBOC), or local contracting incubators like Eastern Foundry.
Eastern Foundry is focused on creating a collaborative workspace designed to assist small business contractors; by analyzing your business and giving you resources. You can check out other special events, such as the Veteran LDRSHIP Network events. Additionally, Objective Rally Point in Washington, DC, hosts several events throughout the year to connect government contractors with Service-Disabled Veteran-Owned Businesses and Veteran-Owned Small Business looking at entering the government contracting space to team up.
Get yourself out there, get in the mix, and make connections that will enable you to win the contracts you need. This is not an industry where you should enter alone.
Building relationships with government contract financing partners at an early stage can also be helpful. For example, learn how different government contract lenders get invoice factoring or invoice financing with contract officers and prime or subcontractors to successfully fund a contract.
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 may change all of that.
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 as many as 50 to 60 proposals per contract! The contract officer's time is very valuable. 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's more likely that they will choose your bid.
Become a Subcontractor
This is why teaming up can be such a helpful tool. For example, there may be large, well-known government contractors also known as prime contractors who would allow your specialty niche to fill a needs gap and take you in as a subcontractor. You're able to get a foot in the door, gain extremely important experience, and begin the processes of proving the excellence of your product, all with the end game of eventually working your way to becoming a "known" business.
Government Contract Funding
Another hidden benefit with 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 and some of the risk is diversified away. Leverage your relationships and strategically partner to expand your business' possibilities in the space.
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 yet to afford to make products or bids for bigger contracts. Here at StreetShares, we are excited to help fill in the gaps with government contract financing. But more on that later.
Hone Your Strategy
In the meantime, we'd encourage you to not feel disheartened about winning smaller contracts, and here's why: As we mentioned above, the process of getting your business changed 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, stick to your guns and hone your strategy. Do each job with diligence and excellence, no matter how small it may seem at the time.
There is a positive side to any contract you win—it gives you a chance to prove the worth of your company and your product. If you take every small contract that you win and complete it in a high quality manner, you never know how those smaller jobs may earn your company a good reputation, which might eventually help you break into larger circles. This is where word of mouth comes in. 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, at StreetShares we always encourage you to 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 network and get yourself established 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, and at this point you haven't even started doing any work yet. If your contract provides a down payment, receiving the payment can sometimes take from 30 to 75 days to come through. In the end, the full payment comes only when the product is completed and received. Clearly, it takes a long time between being awarded the contract and actually getting paid, so thinking through 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 as a small business owner, you don't have much collateral to offer the bank. Your home or your child's college fund are huge personal risks that have truly dire consequences 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 eventually exceed your card limits. You could have multiple cards from different banks, which just adds unnecessary complexity.
Another route contractors take is raising equity funds. However, this risks diluting the veteran's business ownership to the point where a SDVOSB or VOSB may no longer qualify for vet-only set asides. 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 even bid on a contract. At StreetShares, we're happy to come alongside and make the invoice factoring process as painless as we possibly can. Our invoice factoring option might be just thing you need to stay afloat in the midst of the revolving financial doors of government contract financing.
With your government contract, we can provide up to 90 percent cash advances for the invoice so you can get the supplies and pay the employees you need in order to fulfill the contract. To see some of the specifics of our receivables financing solution, click here. We also can combine our business financing options to provide mobilization funding through StreetShares' Simple Term Loan and/or the flexibility of our Patriot Express Line of Credit.*
StreetShares contract financing is designed for contractors who are "contract rich" but cash flow poor. As fellow veterans, we know what it means to work hard with a purpose and mission, so let us see how we can help you fund your government contract invoice. Get started with contract financing today.
*This program is not associated with the SBA Patriot Express Loan Program, which was discontinued.