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Is the Government Market Right for You?

Answer these questions to determine if you should be selling to the federal government.
June 13, 2006
URL: http://www.entrepreneur.com/article/159646

Let's take a look at the numbers: $2.5 trillion per year. $8.49 billion a day. $28.5 million per hour. $475,000 per minute. Almost $8,000 per second. These figures represent the total annual spending of the federal government. If you're not currently doing business with Uncle Sam, some other company--one that sells the same product or service that you provide--is getting a nice slice of the government pie.

So why aren't you in business with Uncle Sam? One of the myths that scares companies--both large and small--away from doing business with the government is the old "You have to be in DC, and you have to know people." This myth has only been exacerbated by the news surrounding the Jack Abramoff affair and its never-ending aftermath. And while it never hurts to "know people"--especially those who might buy your product or service--you certainly don't have to have a lobbyist on your payroll to sell to the government.

Before I tell you just how to sell to the government, however, you need to determine if you really have what it takes to play in the largest market in the world. Here's a short "quiz" that'll help you figure that out.

1. Are you comfortable with long-term sales cycles? Although the federal government would be ranked No. 1 if it qualified for the Fortune 500, and all governments in the United States--federal, state and local combined--account for 25 percent of all domestic spending, the government sales cycle can be slow. For one thing, you'll be competing against some very entrenched companies. If you sell products (vs. services), the process may be a little quicker, but not by much. This doesn't mean you can't succeed, but it does mean it'll take some time and effort. The government buys every legitimate business product and service available, and there is competition for that business. Successful market entry takes dedication.

2. Are you willing to learn how the government buying process works? At the federal level, most buying is done under contract. Do you have the time and interest it takes to properly follow procedures? A detailed description of the types of contracts used can be found at the Federal Aviation Administration's site. (One other way the government buys is discussed in question No. 8.)

3. Do you know what resources are available to help you out? One of your best resources will be the Defense Logistics Agency, which sponsors the Procurement Technical Assistance Program, which operates Procurement Technical Assistance Centers (PTACs). A complete list of PTACs and many other web-based resources are available at GovernmentExpress.com. Click on "Resources."

4. Do you know what a GSA "number" is or what it's used for? The General Services Administration (GSA) does two major tasks for the government: It's the government's property manager and also its contract manager. The GSA Schedule is a collection of forty-three contracts--also known as schedules--that each cover a group of products or services. Schedule 70, for instance, covers all information technology products. These individual schedules (or "number") are a contract that allows you to do business with any federal agency. To get a GSA schedule, you must submit a proposal to the GSA. There are currently more than 12,000 schedule contractors, and in fiscal year 2005 (which covers the dates October 1, 2004 through September 30, 2005), GSA schedule sales accounted for $33.5 billion.

5. Do you legally qualify as a small business? The SBA sets the criteria for what is considered "small" by federal buying standards. To make a determination, go to this section of the SBA site. You'll need to know your NAICS (North American Industrial Classification Standards) code to be able to make this determination for your business.

6. Is there anything else that you need besides a GSA number to legally qualify as a small business before you attempt to do business with Uncle Sam? You bet! You need to have a DUNS number, which you get from Dun & Bradstreet (D&B). D&B assigns a DUNs number to any company that wants a credit rating from D&B. Companies and government agencies subscribe to the DUNs service to be able to determine if another company is in good financial shape.

After getting your DUNs number, you'll need to register at the Central Contractor Registration site (CCR). You have to register with this site if you want to do business with the federal government. In order to register, you must have a DUNs number.

7. Can your business qualify as a "disadvantaged business"? There are a number of classifications for contract preference that may apply to your business. For instance, some bids are "set aside" for qualified minority businesses. To find out if you qualify, visit this pageon the SBA's site that answers questions about the minority business program.

To determine your eligibility for other disadvantages business categories, here are the classifications:

8. Is it possible that you're already doing business with the federal government? If what you sell costs under $2,500, you may already be doing business with Uncle Sam and just not know it. Orders under $2,500 fall under the "micropurchase threshold" and don't require any government contract or paperwork so federal departments can make purchases under this dollar amount without the normal amount of red tape. If you want to see if you're already doing business with the government, run this simple test. Check last year's purchase receipts and see if any of the credit cards used for ordering began with any of these numbers: 4486, 4716, or 5568. These prefixes are used on federal credit cards (called SmartPay cards) exclusively.

While there are many nuances, rules and regulations you must learn in order to do business successfully with the government, if you're persistent, you'll find this to be a very rewarding--and surprisingly loyal--market.

Mark Amtower is the founding partner of Amtower & Co. in Highland, Maryland. Since 1985, Amtower, who's still home based after 21 years, has established himself as the leading advisor for those wishing to market to the government. See and hear some of his work at GovernmentExpress.com.