Your Best New Customer Could Be Uncle Sam

Advice on how small businesses can get a slice of the large government market

What small business owner wouldn't leap at the chance to have a slice of a $400 billion budget? Every year the federal government spends that amount procuring everything from pencils and office furniture to construction work and human resource consulting, yet far too few small businesses benefit from this extraordinary opportunity. What's more, the cards would appear to be stacked in favor of small businesses, with a Congressional mandate requiring that 23% of federal contracts be directed toward small businesses. Nonetheless, the Small Business Administration reported this year that the federal government actually fell short of this figure.

Although there are various factors behind this shortfall, two things are pretty clear. First, if more small businesses were competing for these contracts, more would win them. And second, small business owners who are savvy about how to get government contracts are the most likely to land them. To make sure you're among the savvy, the following tips are designed to help you navigate your way from the very first steps to the final steps of promoting your goods and services to the right agencies.

Prep for Success

There's no doubt that bidding for government contracts can sometimes require more perseverance and paperwork than bidding in the private sector. That said, you can make the process a lot easier if you have some basic information lined up in advance. When dealing with the government, a handful of ID numbers and codes are critical to identifying your company and what it does. To acquire this important information about your company, a good starting point is the Data Universal Numbering System (DUNS) number, which the government users to identify all contractors. You can receive one for free from Dun & Bradstreet (http://www.dnb.com/US/duns_update/index.html).

You will also need to apply for a Federal Tax ID number -- also known as an Employer Identification Number (EIN) or Taxpayer Identification Number (TIN) -- if your company doesn't already have one. You can acquire one through the IRS using Form SS-4.

To classify potential contractors by their line of business, the government relies on both the NAICS (North American Industry Classification System) code and the SIC (Standard Industrial Classification) code. To find the out which codes apply to your business, visit www.census.gov/epcd/www/naics.html for a NAICS code and http://www.osha.gov/oshstats/sicser.html for a SIC code.

Finally, make sure you have accurate financial routing information for your business. Since the government prefers to pay invoices by electronic-funds transfer, you will need to contact your bank or financial institution to verify this information.

With these basics at your fingertips, you have all you need to make things official, by creating a profile on the Central Contractor Registration (www.ccr.gov) database. The CCR is where all government agencies and prime contractors turn when they're looking for potential vendors. While entering your data, keep in mind that your profile will be doing all the talking for your company initially, so make sure your message comes through loud and clear. You should, for example, fill out more than just the mandatory fields, because the optional data can provide valuable details that will help your company stand out. Just be sure to treat your profile as an online elevator pitch, because it's important to be clear and succinct.

Take Advantage of Special Certifications

The federal government is obligated to award a certain percentage of its contracts to various underrepresented and disadvantaged groups. If you think your business may qualify, you should register with the U.S. Small Business Administration (SBA), which has several programs, such as the Small Disadvantaged Business (SDB) and 8(a) programs, that are designed to help specific groups secure federal contracts and subcontracts. Businesses owned and controlled by African Americans, Hispanic Americans, Asian Pacific Americans, Subcontinent Asian Americans, and Native Americans are likely to benefit from the programs.

Also keep in mind that your background or gender may help you compete in the bidding process. Veteran-owned businesses, service-disabled veteran-owned businesses, and women-owned businesses all may qualify. Among these groups, women business owners particularly stand out, since legislation passed in 2000 stipulates that the federal government should award 5% of all contracts to women-owned businesses, even though women business owners today receive just 3.4% of contracts awarded by the federal government, according to the SBA.

To help educate women about how they can apply for and secure federal procurement opportunities, American Express OPEN has partnered with Women Impacting Public Policy (WIPP) to launch "Give Me Five: Education and Access for Women in Federal Contracts" (www.giveme5.com), a national program designed to educate women business owners on how to apply for and secure federal procurement opportunities. It is the first program of its kind to help women business owners reach the 5% mark in federal contracts.

As part of the program, OPEN and WIPP have also coauthored a helpful guide called OPEN BOOK: Government Contracting, which is available for free to all small business owners on OPENForum.com, an online resource designed to help small business owners better manage their businesses. Download a PDF version of the book at http://www.openforum.com/finance/pdf_openbook2.html.

Start Selling

Once you're registered with the CCR and have investigated all applicable certifications, you can begin promoting your company's goods and services much as you would in the commercial sector. Like any good sales and marketing effort, you will need to target a limited group of prospects. One helpful resource is the Federal Procurement Data System (www.fpds.gov), which contains government-contracting data that can help you identify agencies with a history of buying the kinds of goods or services you offer. Another important resource is the Federal Business Opportunities site (www.fbo.gov), also known as FedBizOpps, which features postings of all contract opportunities of $25,000 or more. To narrow your search, use the advanced search feature for listings matching your NAICS code.

Once you have a list of target agencies, take advantage of events for potential vendors. Many agencies host monthly vendor outreach sessions that provide unbeatable face-to-face opportunities. Some also have Officers of Small and Disadvantaged Business Utilization (OSDBUs). Speak with these officials for leads on marketing options and for advice on navigating the bidding process.

Small business owners sometimes imagine that landing government contracts will be too daunting, or somehow out of their reach. But by tackling the process with a straightforward approach, you'll find that the same skills you've developed to grow your business in the commercial sector will serve you well. Commitment, hard work, and smart networking, after all, are just as valid in the government sector. So put your strengths to work and find your place among the many small businesses that find success through government contracts.

Anne Robinson is vice president and senior counsel for American Express OPEN. She provides legal guidance for all small business products and services and serves as a subject matter expert on government contracting. www.americanexpress.com/open

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