What Contracting Can Do for You

So, just maybe, the government might want to buy what you have to offer. But will a government contract really be worth the trouble? What can it really do for your business?

While winning a federal contract is not akin to winning the lotto, as some would have you believe, in some cases, it can help you accomplish other goals, from jump-starting your business to helping to finance your retirement.

• In just a few years, a small Midwest business that we know of went from being a one-man operation with a couple of thousand dollars in contracts per year to almost 125 employees with more than $400 million in contracts per year. The owner was able to take his expertise in MRO items (Maintenance, Repair and Operations materials) and win a major supply distribution contract from the Defense Department.
• A larger business that manufactured wood products had tried for some time, although unsuccessfully, to get a government contract for wooden handles for stretchers. The owners even bought a special machine that could put out hundreds of handles a day. But a one-man operation, a semi-retired wood maker who worked just a few hours each day making the handles, won the contract and accomplished his goal of keeping busy while earning extra retirement money. He put out a quality product that the government was happy with and, because he had virtually no overhead, was able to quote a much more competitive price.
• A small business owner who distributed diesel engines and engine parts, and was knowledgeable in government procedures, started a thriving business out of his dining room. He started with one client who wanted to supply the government, but didn't want to deal with the government. So he cut a deal with the client to do the government paperwork, organize the packing and shipping, take care of the problems with the government and become, in fact, the client's "contracting office." He now has several clients that supply different types of goods and works to various government agencies to the tune of several million dollars a year.

But even if your results are not as dramatic, getting a government contract can work to your advantage. What it can do is level out the hills and valleys during the business year. The usual margin of profit is never large, but if you utilize that portion of your business with the government for paying the overhead (i.e. lights, heat, a/c, etc.), you will find that the other contracts you have will be much more profitable. This is a very basic principle: If you can cover your costs with government contracts, you can be more selective with other, higher margin contracts.