John Strathy's company, Idea Entity, hopes to capitalize on its 8(a) federal certification as a small, disadvantaged business to sell online training software to the federal government. "We're currently a subcontractor but we hope to get more government contracts or become a prime contractor," says Strathy, the company's chief financial officer.
In order to do that, the $6 million, 50-employee business, based in Bellevue, Wash., is adding an advisory board member who has connections with federal agencies and prime government contractors. The company worries that its distance from the capital puts it out of sight and out of mind. "We need someone who has federal contracting contacts and experience, ideally someone in Washington. That's where all the action is," Strathy says.
The U.S. government is the world's largest single purchaser of goods and services, spending more than $500 billion annually. An additional $275 billion is set to be spent on contracts, grants, and loans stemming from the 2009 recovery bill; $112 billion had been paid out as of early this month, according to Recovery.gov, which tracks stimulus spending.
Yet 40 percent of 1,100 small business owners surveyed recently by SCORE said they had no idea how to apply for federal contracts. The same percentage said they did not know if the federal government purchases the products or services they sell.
five-year plan and website overhaul
The complex contracting process takes time and money that many small business owners are reluctant to risk, particularly in an uncertain economy. Small business owners who answered a recent American Express (AXP) survey devoted to government contracting reported that they spent an estimated $86,000 in time and money during 2009 just seeking contracts. Federal contracts accounted for 38 percent of their revenues, the survey says, and they reported median sales ranging from $1 million to $4.9 million.
Last year, Turnersville (N.J.)-based CDM Electronics broke its annual sales record, bringing in revenues of $16.8 million, despite funding cuts in the F-22 fighter jet program with which CDM was involved. "When most of the industry was down and we had to make up the loss of the F-22, we were up 15 percent," says Carmen J. DeLeo, general manager of the 61-employee, light manufacturer that sells electronic connectors, cables, and high-end manufacturing components.
DeLeo credits CDM's success to a five-year plan to double revenue and to an overhaul of the company's website. Despite his own background in computer programming before he joined the family company, CDM maintained a brochure-style website that displayed little more than its name, contact information, and an "about us" page. "It was the equivalent of a Yellow Pages ad," DeLeo says.
He realized that with prime defense and aerospace contractors such as Raytheon (RTN) under pressure to cull their "preferred vendor" lists, CDM's website was serving it poorly, positioning the company as a mere regional player.
CDM's site now bespeaks procurement
Over about six months, CDM's engineers worked with consultants from ThomasNet to set up a detailed, searchable, and easily navigable online product catalog. Putting thousands of product specifications, drawings, and photos on its site gave the company instant credibility and boosted its once-lagging search engine rankings, DeLeo says.
"Engineers and highly technical procurement officers speak their own kind of language. With our new site, we have a psychological advantage because—before we even speak to them—our site communicates that we know what they're looking for and we can supply it," he says.
The company is on track to do $20 million in revenues this year, about 60 percent of it from government subcontracts. Although CDM is one of the smaller suppliers in the electronic connections niche, it was one of only three to post revenue growth last year, DeLeo says. The company also received Northrop Grumman's (NOC) Supplier Excellence and World Class Supplier Award. "It was our proudest year since my father founded this company in 1993," he says.
There are several resources that small business owners can tap to help them crack the contracting code. The Give Me 5 program is intended to help female business owners qualify for the 5 percent federal contracting set-aside for businesses owned by women (currently some female-owned companies receive 3.4 percent of federal contract dollars).The U.S.Women's Chamber of Commerce and the National Association of Small Business Contractors co-sponsor regional events that introduce small business suppliers to government procurement officers and prime contractors in their area.