Business growth in the federal market does not happen by accident. Many companies grow to a certain point through hard, albeit, rather chaotic efforts. Many are stuck, however, at a certain size, and their ability to compete for new market share begins to shrink. We recommend that you implement proper strategies to grow aggressively in the federal market.
The first strategy is to employ a strategic business development planning process. There are a few techniques to run this process; but, essentially, all the key decision makers in your company have to get together and answer the following questions:
• Are you in the right market?
• What is the market currently pursuing? What are the trends?
• What is going on with your current customers, and what other customers should you pursue?
• What competencies should you develop in addition to what you already do?
• What growth strategies should you employ?
• What are your financial goals for the year in sales and bookings?
• How much should you bid on to achieve the goals you set?
• If you are of a certain socioeconomic status, such as an 8(a) program, how will you avoid size triggers that will get you out of the program prematurely, and cause you to lose all the great benefits it provides?
• What are some of the key pursuits in your pipeline you have to win to achieve your goals?
• What is the budget to achieve your goals? Will this budget be enough?
Speaking of budgets, you need to determine how much you should bid on government contracts annually and each month. Your first step is to determine a reasonable goal for your bookings by the end of the year. Bookings are money from your wins that you expect to receive from your customers based on signed contracts. Then, you need to determine how many bids you are going to submit to reach that goal. You can do this easily. Simply, take your year-end bookings goal and divide it by your win rate.
Your next step is to determine how many proposals you have to write to reach your goal. For example, if your goal is $20 Million for the year and your win rate is currently 33%, then this means you need to bid on $60 M in contracts to achieve your year-end goal. How many proposals you would have to write depends on size of the efforts. Let’s say you have decided you’d rather bid on three RFPs worth $20 million, hoping to win one. You could also bid on six RFPs worth around $10 million each, hoping to win two. Another option is to increase your win rate by using professional services companies such as OST to augment your current staff (training, consulting or simply business improvement).
Note that your past performance will also be a factor in your planning, because the government is unlikely to award you a contract with a dollar amount drastically higher than what you have performed on in the past. If you have not managed a prime contract for more than $5 million, it is unlikely that you will get an award for a prime contract of $20 million or more. The exception is when you have done significant preparation to build a compelling case to a specific government customer, and your competition’s past performance record turned out to be no better than yours.
In all your planning, you will have to take into consideration that there is a lag time for government awards. Some awards take one to three months, especially as task orders on MACs. Others could take up to a year or two to award.
Depending on the specific opportunities, you might realize that you will have to bid on your $60 million worth of opportunities in the first two quarters of your fiscal year to hit the $20 million mark by year end, because you have to give the government roughly six months to award.
You will then figure out how many proposals you have to produce per month to get there. You will have to factor in your cost and capabilities when making your determination. How many projects can you handle at one time? How many resources can you commit to one project? How much money can you afford to commit to going ahead on multiple RFPs?
When planning your budget for pursuits, it is best to use a top-down method. Take the money you have committed to business development, or are willing to invest, and divide that by the number of pursuits you have to have. You should note that for small businesses that work their staff around the clock and where the owners will invest a lot of their sweat equity, the cost of capture and proposal pursuit varies from 0.5 percent to 0.75 percent of the total booking value.
Your math will be telling during your strategic business development planning session-where you will either adjust your goals, decide to shift resources, or make additional investments. You also might want to continue to subcontract to others a little longer than you had hoped, to reduce your expenses, but do not use it as a crutch. It is usually better to be a prime.