The New Frontier

Thou Shalt . . .

To get in on the action, entrepreneurs should follow the four commandments of privatization:

1. Do your homework. Davis, Penney and Walker say bidding for a service can be a complicated endeavor--especially if the municipality doesn't provide interested parties with a detailed analysis of the service up for bid. (Fortunately, most do provide such information.)

"You have to know the full scope of your work and how much it's going to cost you," Penney says. "There's definitely a learning curve with bidding."

2. Open your own doors. One problem for savvy entrepreneurs looking for information on privatization is the lack of places from which they can get it. That creates the second commandment, the one that separates the successes from the still-out-wandering.

"If you wait 'til the RFP [request for proposal] comes out, you've probably already missed the deal," Walker says. "You need to have face-to-face meetings with department heads so they can get to know you. Your chances are enhanced if they do."

"At the small-city level, legwork becomes an issue," says Moore. "Go from town to town and meet with city managers. Tell them what you can offer and ask if they've thought about contracting that out. It may not get you the contract immediately, but it can get them to open up bids. A lot of business is drummed up that way."

3. Be innovative. Gary Jensen says finding a new way to accomplish something can give an entrepreneur an edge. "Do some innovative things municipalities don't do," says Jensen, owner and president of American Emergency Service Corp., a fire protection provider in Wheaton, Illinois, with annual sales of $1 million. "We build and rebuild our own fire trucks. Trucks are very expensive and complicated--and we save money by creating our own facilities to do the work."

Prison manager Walker says innovation pays extra dividends in his business--one in which he's responsible for the lives of many people. At his Texas facility for female inmates, Walker has a special program for families. "Once a quarter, we have a sleepover," he says. "Families can bring a sleeping bag and videos and stay the night."

In Phoenix, city officials once considered closing a landfill that had reached capacity, until a private company found new ways to compact garbage and keep the landfill open longer than expected.

4. Specialize. Small-business owners shouldn't gobble up every opportunity they can find. "They have to find the right jobs," Penney says. "And the more they specialize, the more cost-effective they can be."

Penney and others warn it's easy to get in over your head, so it's crucial to know your limits. "We found our niche--public right-of-ways, landscaped areas by freeways, tree care," Penney says. "We can't, for example, [landscape] an apartment complex. We do well with contracts that are about $10,000 a month. When it gets down to $2,000, we can't be competitive."

Entrepreneurs who assess the pros and cons and follow these commandments can become part of America's economic history. And, with the federal government even privatizing parts of the space program, it's obvious the practice will extend far into the future.

Contact Sources

American Emergency Service Corp., (847) 364-7163, fax: (847) 364-9746

Commerce Business Daily, (202) 512-1800

DLC Resources, fax: (602) 243-5575

GRW Corp., (615) 373-5703, fax: (615) 373-0224

Reason Public Policy Institute, (310) 391-2245, http://www.reason.org

Temple University's Privatization Research Center, http://www.temple.edu/prc

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This article was originally published in the May 1998 print edition of Entrepreneur with the headline: The New Frontier.

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