Newsletter 2: Make the World’s Biggest Customer Your Own
By Richard White

Outsider Perception: The federal market is enormous.

Reality: The market is much bigger than you think. In order to enter the market, your sales staff should tackle the federal market as they would any new customer in the commercial setting.

Lesson: The federal market is virtually identical to the commercial market. The major difference is that your business must have to have a way to close (transact) a deal that it has sold under the federal purchasing rules.

Background:
As discussed in the previous newsletter, the federal government spends approximately $500 billion on an annual basis. Half of all federal contracts are awarded through limited competitions or sole-source awards. By any measure, the federal government is the world’s biggest and most lucrative customer. Study the federal market and then go after the business in the same way as you do in your current market. If your company qualifies for a small business preference program, it can quickly become a $100 million company if it learns to play the federal game.

What is needed to make the federal government your customer?

1. A unique product or one with a feature that distinguishes it from all of the rest or a demonstrated history of providing exemplary, high-quality services
2. A sales staff member who can focus his or her efforts on federal sales
3. A pre-awarded federal contract which provides for pre-approved pricing for federal agencies

Doing business with the federal government may seem mysterious on the surface. At its core, it is virtually identical to the commercial market or any other market in which you might be selling. Government red tape makes the process seem daunting but the sales process is the same as the commercial market up to the point where the sales is transacted. In order to actually make a sale to a federal customer, your sales staff must:

1. Identify a federal buyer who is looking for what you sell;
2. Knock on the buyer’s door;
3. Weather the buyer’s initial reluctance to partner with new companies; and
4. Convince the federal buyer that your business will provide value that your competitors can’t offer.

Think about it. Don’t you have to do all of the foregoing when making a sale to your current customer base? Now for the variance; federal rules require varying degrees of competition before your sale can be transacted. The reality is that in the majority of federal sales, there is little or no competition. Contrary to popular belief, federal purchasing rules allow limited competition. The insiders or experienced federal contractors know how to close their sales within the rules. The rules are different under different circumstances. Determining factors are those such as the dollar amount of the buy or the availability of vendors with an approved price list. So what’s the secret? Learn how to play within the federal rules which limit competition.

There is a growing trend in federal procurement offices to transact purchases using pre-approved price list contracts. Your company can close your sales quickly – while still following the procurement rules - if you hold this type of contract (e.g., a GSA Schedule contract). When an approved price list is in place, a purchase can be closed quickly because federal procurement rules presume that the competition took place when you negotiated the price list. The standard rule requiring that competition take place at the time of the order is either reduced or eliminated. Future installments in our newsletter series will help to clear up any confusion regarding the level of competition required under the rules.