Small businesses who land government contracts can make big money. However, as a small business owner, you may feel that lucrative government contracts are out of reach. That’s a reasonable concern. The Small Business Administration (SBA) reported that 45,661 distinct small businesses received contracts in the top 100 NAICS codes in 2020. The previous fiscal year, 46,661 small businesses received contracts. Four years ago, when SBA first started including this statistic in its annual reports, the number stood at 51,866.
It’s clear that these numbers are going in the wrong direction, but that shouldn’t deter entrepreneurs. Due to the 2020/2021 pandemic, there’s been increased emphasis on support for small business recovery and growth. You’ve probably heard the claim that “small businesses are the backbone of the American economy.” It’s true: over half of America's workers own or work for a small business, small businesses have generated over 64% of new jobs in the last 15 years, and small businesses create 2 out of every 3 jobs today. If your small business is in a position to bid on government contracts, here’s some information to consider.
2021 spotlight on small businesses and government contracts
There is change on the horizon for government contract procurement. President Biden announced in June he seeks to double the share of contracts that go to small, disadvantaged businesses by fiscal 2025. Part of his administration’s goal is to narrow the racial wealth gap. The administration released an outline of Biden’s management agenda in November that prioritizes creating more opportunities for underserved entrepreneurs and all businesses in the federal marketplace:
“The federal government is the largest purchaser of goods and services in the world, buying everything from software and building construction to financial and asset management—making its procurement a powerful tool to advance equity and build wealth in underserved communities ,” said a fact sheet from the White House. “ Despite this, less than 10% of federal agencies’ total eligible contracting dollars typically go to small, disadvantaged businesses, a category under federal law for which Black-owned, Latino-owned, and other minority-owned businesses are presumed to qualify.”
The White House commitment to small business survival and growth is a step in the right direction.
Databases to help small business owners find government contracts
The SBA is committed to helping small businesses hand-in-hand with the government. You should register with two databases to cover all the bases and get noticed.
Dynamic Small Business Search (DSBS)
Your first step to locate government contracts to bid on should be searching the Dynamic Small Business Search (DSBS). This database helps government agencies find small business contractors for upcoming contracts. Small businesses can also use DSBS to find other small businesses to work with.
System for Award Management (SAM)
SAM, the System for Award Management, is a database of companies that are interested in government contracts for government agency decision-makers to identify potential vendors.
The information you provide when you register your business in is used to populate DSBS (outlined above) so create a comprehensive business profile. While your SAM profile must be updated at least once a year to remain active, firms committed to obtaining government contracts should update and refine their SAM profile at least quarterly, if not monthly or more frequently. SAM has a Quick Start Guide for Contract Registrations. An online search will provide several YouTube® videos and user guides. The search will also turn up a 382-page paper guide if you want to understand all the technical aspects of the database).
Pro tip: small businesses looking to obtain government contracts should put effort into creating a compelling and search-friendly SAM profile. The strategy is similar to a spend for SEO strategy or your company’s LinkedIn ® profile.
Engage directly with agencies
If you operate within a specific industry or have found the agency that’s the best bet for your business, you can market directly to those contractors. To do this, you would use SAM.gov and SUBNet to identify existing procurement needs. SubNet is the SBA’s Subcontracting Network System that bridges the gap between businesses seeking small businesses and small businesses seeking contracting opportunities. You can then communicate directly to those agencies to reinforce why your business is a good fit.
Pro tip: Consider procurement conferences, industry events, and even contract matchmaking events to elevate your business’ profile and attract decision-makers.
Consider a bid-matching service
For small businesses unsure of their ideal government agency fit, signing up for a bid-matching service can be a great way to find government contracts. Most local Procurement Technical Assistance Centers offer free bid-matching services, but you can also retain private and more customized services at a reasonable cost. Working with a bid-matching service also offers the added benefit of connecting you to experienced government contracting mentors who can help guide you through the proposal and procurement process.
A bid-matching service should provide the following actions to help your business:
- Determining whether federal, state, or local contracting is right for your business
- Market research to identify agencies that buy what your business sells or offers
- Assistance registering with government procurement portals
- Help meeting requirements necessary to compete for contracts (like local, state, or federal certifications)
- Explaining complex regulations
- Reviewing bids and providing guidance and feedback on proposals
- Optimizing capabilities statements and marketing strategy
How to get government contracts
Working on a bid or proposal for a government agency has been compared to tedious doing business taxes or a stack of forms for the DMV. Here are steps to take. There might be different requirements for specific contracts so be sure to follow their specific instructions.
- Prepare your proposal
Pay attention to the agencies' requirements for specific products or services. To bid on these jobs, you must submit a proposal—but as you can imagine, there is often a lot of competition. Strive to answer these questions:
- What problem does your product or service solve?
- What does it take to win this contract?
- Are they currently contracting with another business?
- Follow the format
Agencies require business owners bidding on a contract to adhere to a specific format. Following formatting instructions and the submission process is important. You don’t want to be turned down before anyone scores your proposal. Follow the details like the order of paperwork, the structure, and time frame requested.
- Price bid appropriately
Strive to set fair and reasonable prices. Market research can help you understand typical pricing in your industry. Balancing a competitive bid while maximizing your profit potential should be your goal. Consider your costs associated with fulfilling the contract and how much cash flow you’ll need during the process.
Government contracts are a tremendous financial opportunity for small businesses. The U.S. government is the largest customer in the world. The government wants to buy from small businesses for several reasons, including:
- To ensure that large businesses don’t “muscle out” small businesses
- To gain access to the new ideas that small businesses provide
- To support small businesses as engines of economic development and job creation
- To offer opportunities to disadvantaged socio-economic groups
The SBA has additional information for business owners interested in landing a government contract. Visit their website: Basic requirements
WHAT YOU NEED TO KNOW: The SmartBiz® Small Business Blog and other related communications from SmartBiz Loans® are intended to provide general information on relevant topics for managing small businesses. Be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed. Please consult legal and financial processionals for further information.