“Strive not to be a success, but rather to be of value.” – Albert Einstein

Top 5 Reasons Why You Should Pursue Government Contracts

Government Contract Financing

By Dane Panes

February 24, 2022

The United States government sets aside billions of dollars for government projects each year that small business owners can bid on. These projects can have a value ranging from a few thousand to millions of dollars, so if a business wins a bid, the government contract could serve as the catalyst for business growth.

But despite the bright future that government contracts promise, many small business owners are still apprehensive about pursuing government contracts. Government contracts involve a lengthy process, a long list of documentation, and certifications, making the process more intimidating.

However, if you’re willing to put in the time and effort, government contracting can be a great way to scale and boost your company’s performance.

 

1. The Federal Government Favors Small Businesses

The federal government has approximately $500 billion set aside for government contracts, and 25% of the budget is allocated to small business contracting. To put it into perspective, roughly $1.1 billion worth of contracts are awarded to small businesses each year. That means if you’re pursuing a government contract, your competition will most likely be small businesses as well. With that, you have equal chances of getting awarded with the government contract.
Moreover, small business owners can actually know whether the 23% small business allocation has been met or not through the Federal Procurement Data System. As you respond to a proposal request posted by a federal agency, you’ll most likely be given priority over larger firms.

2. Steady Monthly Income and Timely Payments

A steady income is imperative to the success of every growing business. If you land government contracts, you can expect the government to pay their dues on time and according to the terms as long as you don’t fall short on your deliverables. This reduces your chances of encountering cash flow issues along the way.

Most government contracts are at least one to three years long. And, if you consistently go above and beyond what’s expected, you can expect the government to sign you up for a contract renewal.

3. Boosts Your Company Reputation

Working with the government also gives your business’ reputation a significant boost. By accepting a federal contract, you’re showing your clients (whether existing or potential) that you’re in complete compliance with government standards. This boost will come in handy, especially if you’re planning to apply for a loan, attract investors, or sell your business.

4. Potentially High Profit

The U.S. government is the biggest consumer of goods and services in the world. Considering that their projects are valued anywhere between a few thousand to millions of dollars, you can expect your profit to be higher than non-government contracts. In general, government contractors can make around 15% profit for every government contract they work on.

That means that if a government project has a budget of $100,000, you can take home much as $15,000 in profit.

5. Attract more customers

When you list the government as one of your clients, potential customers will automatically assume that your business is credible and reputable. Otherwise, you wouldn’t have landed a government contract. With that, government contracts can be a great way to strengthen your customer portfolio and attract more customers to your business.

 

The road to pursuing government contracts is not an easy one, and many small businesses might find the lengthy and complicated process an intimidating route to go. However, winning a government contract can afford you with the benefits outlined above – good profit, a boost in your reputation, stable income, etc. – which are imperative to your company’s success.
It’s also worth noting that government contracts can be capital-intensive. With that, you want to make sure that you can secure the right government contract financing if your business wins the bid on a government contract.

About The Author

Dane Panes

Dane Panes is one of Gillman Bagley’s main content writers. Although she loved learning about every living thing on Earth, she decided to pursue her passion in writing in 2017 after getting her degree in Biology. Since then, she has written about various topics, including business-related ones, specifically in the financing and marketing niche.