It is intuitively obvious that at each stage of growth as a federal contractor from start-up to large business, there are sure to be challenges. The daunting part is—just like in life, as soon as you overcome one set of challenges, new ones always pop up—new levels, new devils— as they say. In this article I share my observations on some of the key indicators and hazard signs at each stage of the journey from my experiences working for the largest federal contractors to the smallest of start-ups.
Small-to-Mature Small: The progression from a start-up to a mature small business is difficult and exciting at the same time. I noticed a few key differences that made the distinction between the two noticeable.
Niche: The mature small businesses had a crisper understanding of their niche i.e. who they serve and how they serve. Their leaders identified a niche and ensured the team understood and stayed within that niche. The start-ups were still defining their mission, vision, and core values.
From Subcontractor to Prime Contractor: Everyone has to start somewhere, and for most federal contractors that means subcontracting to gain past performance references and to build corporate capabilities. As these companies mature, they recognize the need to control their own destiny and the financial stability that goes along with prime contracting.
Contract Vehicles: The mature small businesses had federal contract vehicles in place that allowed them to earn predictable revenue streams. The start-ups were still trying to put together all the pieces to go out and compete for a place on these vehicles.
Processes: Though still nimble and certainly not process-heavy, these mature small businesses had just enough business development, proposal, and contract and compliance management process in place to ensure no one ended up in jail.
Mid-to-Large: Having worked in business development for both mid-sized and large federal contractors, this is one of the toughest transitions to make as a federal contractor. No longer eligible for set-aside competitions, this tricky transition is when business execution really matters. The best companies will make it to the next level, be sold to private equity, or be acquired for a fortune.
Blurred Niches: As these companies grew from small, to mid-sized to large businesses, their niche sometimes became fuzzy. They did a little bit of everything and started blending in with the competition. At this point, it was time for leadership to come together and take a step back on where they wanted to go strategically and sometimes do an overhaul or re-brand to carve out their niche in the federal contracting space.
Capture Management: The small businesses often just bid on anything they saw coming out on sam.gov without a thought of early meetings with the customer, shaping, teaming, or solution development. In contrast, the larger more mature federal contractors started to do capture management and were more keenly focused on and invested in winning key opportunities.
Contract Vehicles: The larger more mature businesses at this stage really begin dialing in their processes around bidding on contract vehicles. They have dedicated program management offices, and business development teams to capitalize on winning tasks on their hard-earned contract vehicles.
Mature Business Development Processes: As the companies transition from mid-to-large they leave less to chance and begin to mature their BD processes— particularly around proposals. They have been burnt too many times before as small businesses— missing proposal deadlines, non-compliance, or failure to understand contract terms and conditions.
Public versus Private enterprises: Going public changes everything. The good news is greater investment in the infrastructure and resources… The bad news is more pressure to execute and hit quarterly earnings targets… The ugly news is the focus may shift from long-term to short-term, and earnings versus mission, customer, and employees.
Large-to-Top 10 Large: The distinction between a large federal contractor and one of the top 10 large contractors is nuanced and may not be immediately obvious. From my time working at the top federal contractors, I noted a few distinctions.
Strategic Planning and Execution: It is no accident that the elite companies make it to that coveted rank on the list of top contractors. These organizations’ have management discipline around annual strategic planning exercises along with execution against these plans so they stay focused on achieving the desired goals and objectives.
Focus on Profitability: The top companies are willing to say no to business if the profitability is too low— even if the revenues are high. They are big enough to know that low-margin work dilutes their ability to invest, build capabilities, and talent.
Mega Captures: The top large companies don’t shy away from very large captures. They tend to weed out the small, inconsequential captures and focus their time and resources on the large, legacy-building captures.
Inorganic Growth: They don’t solely rely on growing by winning bids. They are willing to acquire companies with complimentary capabilities to grow the enterprise.
As a federal contractor, can you identify where are you in this journey? At least a few of these challenges should resonate with you. The question is where will you find the hidden opportunities that you need to uncover to unlock your access to that next level of success?