GovCon small biz lessons I learned recently

by Dale Davidson

I've been trying to grow my small government contracting business and have been looking for advice from folks more experienced than me.

I have spoken with:

  • A GovCon business owner with $30 million in revenue (100+ employees)
  • A former GovCon business owner now working for a large government contractor
  • A Principal Managing Director (PMD) at a large government consulting firm

Here are few things I've learned:

  • The first stage of growth is to get to 15-20 employees most likely by being a sub-contractor. Once you're at that size you can work to get on a government contract vehicle that your current government clients would use, and then try to persuade them to throw you some work on that contract.
  • Another path to growth, once you're at the 20 person mark, is to bid on a small business set-aside contract with a larger company that sub-contracts to you. This gives you more credibility to the government and a higher chance of winning. If you win this will give you a track record as a prime.
  • If you're willing to take some risk, you can buy a smaller company to grow at 3-5X earnings. This is a quicker path to growth.
  • One way small businesses can become primes is through "Mentor-Protege" programs. These are typically government programs that promote bigger companies mentoring smaller companies through a joint venture or teaming agreement. However, these are mostly successful when there is a previous prime-sub relationship on a contract and the contract is going to flip to a small business set aside. Then the small becomes the prime and the former big prime becomes the sub.
  • To add value as a small sub-contractor to a larger prime, you need to bring one or more of the following to the table: the ability to recruit high quality people consistently that the prime can't get, a unique technical capability or solution, or a client relationship.
  • Big companies acknowledge that they can't always recruit good people who would do good work because they don't fit the company culture. If you can get those people, you can become valuable as a sub-contractor and word gets around internally that you're a good sub to work with.
  • At large primes, you need to find decision makers. A PMD is an example of one. They can sign contracts and teaming agreements.
  • Until the formal "Request for Proposal" (RFP) comes out, you can basically talk as much as you want with future government clients. I used to think there were rules against this but it's actually encouraged. Establishing relationships early matters. Once the RFP comes out though communications become more formal and process driven.
  • If you're willing to take on the risk of a firm-fixed price project (FFP), there can be significant opportunity for high margins. However, you have to have clear requirements or else your client is going to want more and more stuff for the same price.

My meetings yielded lots of good insights that are hard to find on the internet.

I'm considering starting a podcast and newsletter that tries to get into more of these insights and documents my own attempts at implementing these lessons.

If you're interested in learning more about growing a small GovCon business, click below.

Growing a Small CovCon Business

If there are specific topics you want to cover let me know!

Want the full playbook? Check out Going 1099.

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