Virtual businesses take off with a big boost from a variety of technologies. Here’s how to make virtual work for you.

It doesn’t matter where your office is located. It doesn’t matter how many employees in cubicles you have. You may be working from a room in your house and still marshalling the skills and experience of five, 10 or 20 workers that are scattered around the globe. When a customer visits your web site or calls your phone, you give off the impression of a much larger company. You’re a virtual small business and it takes the smart use of the right technologies to make your business tick.

Not every business is built to be virtual. Professional services like consulting, public relations, web design, real estate services and graphic design are all good candidates. Businesses that require you to be mobile or visit your clients on location can benefit from a virtual setup. When you don’t have to have employees at desks underneath the same roof, you can build a lean company that relies on trusted contractors, freelancers and virtual workers to get the job done.

NONTRADITIONAL EMPLOYEES
No business is an island. Whether you need full-time employees, temporary contractors or partners, finding the right people in the virtual world requires just as much due diligence as it does in the physical world. Kathy Donnell, founder of Donnell Meeting Management in Colorado, found her virtual workers in a decidedly old-fashioned manner. She met her future administrative assistant while working on-site in Los Angeles, and her travel and transportation expert is a friend she already knew who lives in Orlando, Florida. Being able to offer staff the flexibility of working for a virtual business has allowed her to attract top talent. “I don’t want the people who work with me to feel I own their souls,” says Donnell. “I want them to enjoy the same flexibility that I have.”

There are many web sites that can help you find virtual workers to complement your business. Elance (elance.com) lets you search for workers and sort the possibilities by criteria like feedback, reviews and hourly rates. Guru.com is a massive online service marketplace where you can look for freelancers, post your projects and get quotes. Business focused social networking site LinkedIn.com is a great way to stay in touch with colleagues and get recommendations for and view the work histories of potential employees.

YOUR HOME ON THE WEB
As a virtual business, your web site is often your main calling card to the world. You may decide to hire an independent web designer to get you started, or you can look to one of the many affordable services available online. It doesn’t get much cheaper than the Microsoft Office Live Small Business program (smallbusiness.officelive.com).

A custom web site domain name, hosting, multiple email accounts and simple do-it yourself web site templates are all free for the first year and $14.95 per year after that. Yahoo! Small Business (smallbusiness.yahoo.com) recently unveiled an $11.95 per month web hosting plan with unlimited disk space, data transfers and email storage. Straightforward web site design tools get you up and running quickly. With either of these services, it’s an easy step to move into ecommerce and online sales using Microsoft’s Store Manager or Yahoo! Stores. Many web hosting companies also offer their own template- based site design programs. Look for a company with extensive small business experience that can help you as you grow.

TALK UP A STORM
A lot of business can be conducted over the internet, but phones aren’t going away anytime soon. “For many of our businesses, their phone system is their lifeline. It’s the first thing that their customer interacts with,” says Erik Arvidson, public relations manager of GotVMail (gotvmail.com). A virtual phone system features an automated attendant that answers all incoming calls and then connects the caller to the appropriate person (regardless of where they are). Extra features like fax handling, toll-free numbers and having calls forwarded to multiple numbers (including your cell phone) can accommodate the particular needs of any virtual business. All of this comes without having to invest in any new phone hardware. Providers like GotVMail, OneBox (onebox.com) or RingCentral (ringcentral.com) can give you a professional edge while accommodating remote offices, home offices or your mobile lifestyle. Monthly subscriptions can start as low as $10 per month.

If you have more complex needs and are interested in consolidating your internet, wireless internet and voice services, an option like AT&T’s Business in a Box (att.com/businessinabox) can handle your calling requirements as your virtual business grows. This Voice over Internet Protocol (VoIP) solution is an all-in-one hardware and services system that is designed for small businesses that don’t have their own IT person. On the other end of the scale, simple home office setups can take advantage of VoIP cost savings through service providers such as Skype (skype.com) or Comcast Digital Voice (comast.com) if you have a cable internet connection.

SOFTWARE EVOLVES
You don’t necessarily have to give up your familiar desktop software when you run a virtual business. These applications are all finding ways to connect with the web to help you share and collaborate with far-flung workers. “Sometimes it’s important to have information when you’re not online,” says Beth Kohler, director of product management for ACT! from Sage Software (sagesoftware.com). Customer relationship management software ACT! is a desktop focused program, but add-on services can turn it into a web hosted product. Most virtual businesses will find it takes a mix of online and offline applications to run smoothly.

Web applications are a great way to keep your team in touch, your business streamlined and your costs down. Microsoft Office Live Workspace (workspace.officelive.com) is an online site for storing and sharing Office documents. If you want to go completely web-based with your document needs, Google Apps (google.com/a) and Zoho (zoho.com) are two popular providers of net-based office, communications and productivity applications. You can create, edit, share and collaborate on documents with your virtual workers or clients.

With so many web applications available, chances are you can find one that will fulfill your particular business needs. Even though Kathy Donnell’s meeting management company is virtual, she still has to handle real-world tasks like registrations, name badges and travel preferences for attendees. She uses the Isis GoldReg (goldreg.com) web-based attendee management system that can be accessed from anywhere–whether she’s at her home office or on site at a meeting. These sorts of industry-specific niche web applications can be smart tools for a virtual business.

While web applications can fill the shoes of desktop software, web services are a compelling way to handle many of your virtual business necessities. Even your printing can be done without ever having to set foot in a copy shop. VistaPrint.com is a popular stop for low-cost business cards. 48HourPrint.com is geared up to quickly handle demanding virtual business print needs ranging from business cards to brochures to pocket folders. “We are a virtual business ourselves. What we’ve done is leverage the internet and very advanced technology. People all over the U.S. are getting their printing needs fulfilled from wherever they are,” says Ray Pinard, president and CEO of 48HourPrint.com. “This is a much, much more efficient, streamlined and cost-effective process.”

TAKE YOUR ACT ON THE ROAD
Most virtual business owners can’t keep still. With no main office to tie them down, they’re apt to be found on the road, in vacation spots, traveling to clients’ offices, logging onto wireless hot spots in airports and checking into hotels all over the world. Having a reliable cell phone and trusted software and services to turn to is half the battle of being a successful mobile and virtual entrepreneur. Another part is having the hardware that gets you online and keeps you in touch.

Laptop computers are still the top tools for working on the road. Since your business is virtual, you can’t afford to be out of touch with your web tools. Wireless hot spots can be useful, but wireless broadband is gaining in popularity as an anytime, anywhere way to get online. Older laptops can be retrofitted, or you can now purchase a new laptop with wireless broadband that works out of the box. “We’re starting to really integrate broadband technology into notebooks with the card, antenna and software pre-installed,” says Lisa Baker, director of Small and Medium Business Marketing with

Hewlett-Packard. “It provides that really high-speed internet connection through 3G (third-generation) wireless networks.” AT&T, Sprint and Verizon cover most of the larger cities in the U.S. with wireless broadband and are expanding their networks all the time.

GET THE WORD OUT
Your virtual business is off and running. You have a professional web site, phone system, web applications and virtual workers in your corner. Now it’s time to attend to some virtual business marketing. “If you don’t have that physical presence, your communications play an even greater role in connecting you and your customers or prospects,” says Eric Groves, senior vice president of worldwide strategy and market development with email marketing and survey products provider Constant Contact (constantcontact.com). “In many respects, your communications are your storefront.” A professional looking email newsletter, web site and search engine ad word buys can all help generate sales. If marketing isn’t your strong suit, don’t hesitate to bring in a virtual assistant or other remote worker to help shoulder the load

Virtual businesses make sense for a lot of reasons. “The greatest advantage is that you can offer the same quality of service to your clients and you don’t have to charge them for the overhead you would normally have,” says Donnell. “I can well compete with the bigger companies.” The biggest point to remember when you’re launching or growing your virtual business is that you are not alone. You’re connected by technology to your employees, contractors and customers. Experiment with the available tools, take advantage of online communities and prepare for virtual business technologies to just get better and better.

AMANDA C. KOOSER is a journalist with nearly a decade of experience covering small business and technology issues.

By Marlene Bauer Pissott

“A small business’ first instinct is to cut spending when the market slows,” says Marlene Bauer Pissott, Founder and President of InGroup, Inc. and WebSwagger.com. “Where they make a mistake is cutting their marketing budget altogether. Now is actually the time to step-up marketing efforts.”

The Center for Research and Development conducted a study during the 1990 recession that reported businesses who increased their advertising during the economic downturn obtained 4 ½ times the market share gain of competitors who did not increase marketing spending during the same time period.

Pissott explains however, that when the economy is suffering, small business owners need to market wisely. Here are some ways to focus your strategy:

• Stick to the basics of marketing. Every small business should have at least a Web site, brochure, and proper signage with important contact information including a Web address. 
• Evaluate your marketing budget by reviewing previous campaigns to weed out any that did not have a favorable return on your investment. Repeat what worked the best.
• Consider staying local with marketing and advertising campaigns. Target a smaller audience in your surrounding area. When times are tough communities become tight-knit and prefer to support local businesses that they know and are close-to-home.
• Target your message to the audience (or demographic) you are reaching out to.  Speaking specifically to them will more likely get you a response.  
• Call to action!  Every advertisement, direct mail or e-mail campaign, and Web site should have an incentive to motivate a response such as a free consultation or limited-time offer.
• Don’t rush to offer deep discounts. This can affect the perceived value of your business, which can have a bigger impact on your bottom line once the economy turns around. In addition, the customers you gained while you reduced your prices will most likely leave as your prices return to normal.
• Offer referral incentives to maintain long-time customers and encourage new business. Your loyal customers can bring in qualified leads and new clients who are ready to purchase the great product or service they heard about from their friends.

 “The most important thing to remember is that the economy will turn around,” says Pissott. “You want to maintain your visibility so that you’re the first name on customers’ minds when they start spending more freely again.

Marlene Bauer Pissott is the President and founder of InGroup, Inc. and WebSwagger.com.

Serving the needs of small businesses and professional service firms around the nation, WebSwagger.com offers unique, professional and affordable Web sites and co-branded marketing materials. Web services include creative development, hosting, e-mail, basic site optimization, e-commerce and more.  Print materials include brochures, folders, announcement cards and other collateral to assist with sales and marketing efforts.

WebSwagger.com is managed by InGroup Inc.— full-service creative agency, in Bergen County, N.J., providing innovative marketing and communications services since 1995.  For more information visit www.WebSwagger.com or call, (888) 772-6400.

By Marlene Bauer Pissott

“Marketing is such an essential aspect of running a business,” says Marlene Bauer Pissott, Founder and President of InGroup, Inc and WebSwagger.com. “For small businesses, getting the most out of their marketing dollars – no matter how much they are spending – is vital.”

Ask a sample of small business owners how they determine how much of their budget is allocated to marketing, you’re likely to get many different answers. Most however, fall within one of three categories.

Some small business owners are very aggressive and use a large portion of their budget for marketing. “This group tends to spend a lot of money on many different marketing campaigns,” explained Pissott. “While they are actively marketing, they can fine tune their efforts to get a better return on investment.”

Pissott offers the following suggestions for this type of marketer:

• Measure the success of the strategies currently being used to see what is working and what's not. Concentrate on those efforts that had favorable results and consider pumping them up.
• Try something new and unexpected. It can be surprising what attracts and motivates people to purchase something or use one service provider over another.
• Evaluate the type of customers they want to attract and focus efforts on getting the message to that group. Targeted, purchased lists can be very effective tools.

Then there are the middle-of-the-road marketers. They distribute a fixed amount for marketing, equally dividing it between tried and true methods including the yellow pages and standard ads. “This is a conservative group,” said Pissott. “They decide how much they will spend and then use cookie-cutter efforts. They will get results, but they could be doing much better.”

Pissott recommends these adjustments to help get more out of their spending:

• Break out of the mold and think outside of the box. Look at the current strategies and replace tired, old efforts with fresh new ideas.    
• Ensure a portion of the budget goes toward having a presence on the Web. Be sure to have the Web address on all print ads, brochures, business cards, etc.
• Zero-in on the type of customer they want to target. Create a campaign that focuses on attracting that type of person.

There are also a number of small business owners who do not budget any money for marketing endeavors. “A business cannot grow without any type of marketing,” said Pissott. “These businesses will not survive if money or time is not put into promoting themselves.”

To get their marketing efforts off the ground, Pissott proposes these ideas:

• Get going and go grassroots. With no money in the budget for marketing, start off by focusing on free marketing. Send out press releases, begin a referral program for existing customers, and make sure your business listings are completely up-to-date.
• Try industry specific or niche marketing. Use what little money you do have and focus on a very small target group or stick to advertising within your specific industry.

Whatever your budget, you can improve your marketing efforts. Start by revaluating your current strategies and go from there. And, don’t be afraid to reach out to experts for ideas. Marketing agencies are not just for big companies.

 Marlene Bauer Pissot is the founder and President of InGroup Inc, and WebSwagger.com. Serving the needs of small businesses and professional service firms around the nation, WebSwagger.com offers unique, professional and affordable Web sites and co-branded marketing materials. Web services include creative development, hosting, e-mail, basic site optimization, e-commerce and more.  Print materials include brochures, folders, announcement cards and other collateral to assist with sales and marketing efforts.

WebSwagger.com is managed by InGroup Inc.— full-service creative agency, in Bergen County, N.J., providing innovative marketing and communications services since 1995.  For more information visit www.WebSwagger.com or call, (888) 772-6400.

“Now, staying in-touch with your customers is easier and more cost effective than ever thanks to e-mail,” says Marlene Bauer Pissott, Founder and CEO of WebSwagger.com,  “E-mail can be as effective as any marketing tool and best of all it’s delivered to your customers instantaneously.”

According to December 2007 statistics reported by JupiterResearch, 87 percent of consumers spend their time online reading e-mail. “The e-mail inbox has replaced the mailbox for direct marketing,” explains Pissott. “This shift is a big advantage for small businesses given that the cost to distribute an e-mail is significantly less than traditional printing and mailing.”

A report from Shop.org of the National Retail Foundation in conjunction with Forrester Research stated that in 2006 the return on investment for e-mail marketing was $51.45 per $1 spent. In addition, the projected sales from e-mail for this same time period was $18.5 million. 

There are several ways to send marketing e-mails, which vary depending on the cost. “Simply typing your message using the e-mail account set up for the company is a great way to start for beginners,” added Pissott. “Then, there are easy-to-use e-newsletters offered by Internet e-mail marketing services, such as IntelliContact or

Constant Contact, that allow you to create eye-catching marketing e-mails.  Professional marketing agencies also handle the entire development process from design to distribution.”

Pissott offers these tips to help make marketing e-mail as effective as possible.

• Build your database by collecting e-mail addresses every chance you get. Include a sign-up feature on your Web site and have a way for in-person customers to give you the information.
• Stay in contact, but don’t overdo it. Send regular communications to your e-mail database, but don’t exceed a reasonable frequency.
• Make your subject line interesting and enticing. The subject line is what your customers will base their decision on whether or not to open the e-mail.
• Include a link to your Website in every e-mail you send. Make it easy for your customers to get to your site immediately while reading your message and, when possible, make the link specific to a page of the site relevant to your e-mail.
• Ensure your e-mails make it to your customers’ inbox. Ask customers to add your e-mail address to their contact list, safe list, address book, etc to avoid being blocked by spam filters.
• Give your customers opt in/opt out options.
• Ensure your customers’ privacy. State up-front that you will not sell your customers’ e-mail addresses and that you will only use them for the purpose of sending informational e-mails.

Serving the needs of small businesses and professional service firms around the nation, WebSwagger.com offers unique, professional and affordable Websites and co-branded marketing materials. Web services include creative development, hosting, e-mail, basic site optimization, e-commerce and more.  Print materials include brochures, folders, announcement cards and other collateral to assist with sales and marketing efforts.

Outsider Perception: The market is impenetrable.

Reality: Entering the federal market is no different than entering a new segment of the commercial market; it just appears mysterious from the outside.

Lesson: Don’t shy away from the federal market. Entering the market can transform your company and it is an effective way to counter a slowing economy.

Background:
The federal market is growing so fast that it’s virtually impossible to determine its size. Experts theorize that between $450 million and $500 million is spent annually.

Do you find yourself asking, “Why did my competition win that big federal contract and not me?” You deserve some of the $500 billion being spent annually so go after it. It isn’t as mysterious as you think.  Succeeding in the federal arena requires a focused effort up front to unravel the red tape and figure out how the game is played.  Consider entering the federal market as a defensive move against a slowing economy. So what if the economy doesn’t slow down? You will have increased sales and strengthened your company. 

Although deciding to tap into the federal market is generally a smart business strategy, companies often shy away from the prospect. The most prevalent reasons for this are:

1. The apprehension concerning the red tape associated with federal work
2. The perception that the market is a closed one dominated by the big players
3. The misconception that if your business is not located in the nation’s capitol, it won’t be successful in the federal game
4. The fear that the federal market is completely different from the commercial market

Most of the reasons outlined above boil down to a lack of understanding of the market or a fear of the unknown. With just a little bit of research and the knowledge gleaned from such research, you may find federal business right in your backyard. From a political standpoint, both Congress and the White House favor small businesses because of their voting power and importance to the economy. Recent legislation enacted by Congress encourages federal installations to purchase from small business owners. Why shouldn’t these customers do business with you?

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.

Outsider Perception: The federal government keeps detailed statistics on what it purchases.

Reality: The tracking of federal spending is marginal at best.

Lesson: Do what you can and then apply your "street smarts."

Background:
The size of the federal market is not a particularly meaningful number if only a tiny slice of the market is really available to your company. A janitorial services company in the Chicago area has a limited geographic area in which it can realistically deliver its services. The key questions for this type of company are "Are there federal offices or installations in our locale and do these entities need our services?" Once the foregoing question is addressed, the next question becomes "How much of the available work is currently held by incumbent contractors and how much of it is new work?" By doing research, your company should be able to target the sources and amount of work available to local vendors. Once the analysis is completed, your business should have a list of federal customers it wants to pursue.

A company selling office supplies has a different set of questions to answer because office supplies can be sold by telephone to virtually any federal customer regardless of his or her location. The critical unanswered questions are:

• Where should our efforts be focused when attempting to sell to a federal customer?
• When and how does price enter into the picture?
• What importance does the customer place on service?
• How difficult is it to replace an entrenched office supply company and how can it be done?

Now we are in the world of what we call "street smarts". Your sales staff will most likely have to get on the telephone to answer these questions. You could test the market by making small sales to federal buyers who use their government credit cards to transact the sales. In the long run, your business will most likely need a pre-approved federal price list in order to compete (such price lists will be discussed in greater detail later).

The federal government’s product and service coding system is not detailed enough to make research by product type very meaningful although some raw data is available in the following public contract award databases.

Federal Funding Accountability and Transparency Act (FFATA) Database: http://www.ffata.org/

Federal Spending.org Contracts Database: http://www.fedspending.org/fpds/index.php

Outsider Perception: The federal market is dominated by insiders.

Reality: A large portion of the federal pie is given to insiders who know how to play the federal sales game.

Lesson: Become an insider by selling in your own backyard with an aggressive sales program.

Background:
Consider becoming an insider and share in the fruits of the world’s largest market. Remember, the insiders were outsiders at one point in time and the game is not that tough to play once you understand it. In order to become an insider, you must first understand how competition (or the lack of it) influences how buys are made. Furthermore, your company must hold a direct contract with a federal customer. It only takes one. Having an existing federal contract allows your business to demonstrate, through your partnership with the government, that your product or service provides value to the federal buyer or end user. This partnership becomes the path of least resistance. It is the path that minimizes the federal buyer’s risk and the path that allows buyers to obtain what they want quickly and efficiently. As in the commercial market, federal buyers go with the proven vendor. Think about it. You do the same thing when purchasing goods or services.

You may be saying to yourself, "This sounds easy. So, what’s the catch?" Landing the first contract requires the establishment of a business relationship with the buyer and you probably don’t have one. Any sales person will tell you getting through the glass wall to a new customer can be a formidable task; the potential customer most likely already has business partners and may not realize that she needs you. But getting through the glass wall is not any more difficult than selling to a new commercial customer.

Don’t go the Washington, D.C. area initially. There are too many entrenched insiders playing there. Find federal buyers in your locale or region. You will be dumbfounded by the volume of federal work to be found in your immediate geographic area. Use federal directories published by military bases, federal agency web sites, and your local blue pages (which list federal telephone numbers and addresses).

Military bases and the federal installations and offices located outside of Washington, D.C. prefer to buy locally. If you were a federal procurement officer, you would probably prefer to buy a dozen digital cameras from a local photo shop rather than a national chain. You would have better access to service and it is the politically correct thing to do. Natural disasters and the threat of terrorism have also resulted in new, more flexible purchasing rules that allow sole-source buys under emergency situations and specify that preference should be given to local sources for products and services.

Ask for introductions to federal buyers through your current network of existing customers, neighbors, fellow church goers and the like. Attend local chamber of commerce events, business conferences and industry events. Attend local or regional business opportunity conferences held by federal agencies. Make cold calls beginning with the contracting offices for those federal agencies in your area.

In short, selling in the federal market is just like selling in the commercial market. People buy, not agencies, and most sales are based on the development of strong relationships with federal buyers. The two markets diverge when it comes to closing the sale you have made with the buyer. Market characteristics and how they impact closing the federal sale will be the subject of the next two newsletters.

Outsider Perception: The federal market is open and competitive.

Reality: Competition does take place but, for most transactions, it is limited so that purchases can be made quickly and at reasonable costs to the taxpayer.

Lesson: Learn how purchases are made under the rules for limited competition and use this knowledge to win business.

Background:
It is a fallacy that federal purchases are made only after full and open competition takes place. Competition may or may not occur but, when it does, it is usually limited. In most instances, a company is not going to win a federal bid opportunity it stumbled onto online. The truth is that your competitors met with the federal buyers long before the opportunity was publicly announced and the federal buyer already has one or more companies in mind. Federal bureaucrats do not like to admit this reality because they are tasked with the responsibility of getting the best value for the American taxpayer. The reality is that federal purchasing rules not only allow federal buyers to meet with vendors prior to the announcement of a public bid but they actually encourage it. How else would a federal buyer assess the value of proffered products and services?

On the surface, this reality may seem discouraging. On the other hand, those companies with aggressive sales people and a distinct message should have no problem becoming one of the few companies being considered for a contract or order. Learn how to limit competition and become one of the chosen few. Treat the market just like your current market and go after federal end users.

A second myth is that federal buying decisions are made based solely on price considerations. Once again, the federal market is like the commercial market in that you can sell based on value rather than on price. And best value is defined broadly in federal purchasing rules. My father used to say, "Son, you get what you pay for." While it is true that, at one point in time, federal government buyers made purchasing decisions based primarily on price, the government has modernized its regulations to allow buying decisions based on best value.

As a taxpayer, you should be happy that best value can now be considered. As a sales person, it’s an answer to your prayers. It gives government buyers the latitude to use their judgment and the sales person the opportunity to sell quality, features, benefits, results, and past performance. All of these factors can be considered in determining best value. Making direct sales calls to government buyers will pay off in the long run as long as you are selling quality and value.

Most federal sales, like commercial sales, start with a customer relationship. To be successful in the market, you must consider the entire sales cycle as a business process. Many outsiders think that they can jump into the middle of the process. Because the federal government publicizes its bidding opportunities at a central web site, companies hoping to win government business think they can simply conduct a search and pick and choose projects on which they hope to bid. They are setting themselves up for failure. Your company must commit to doing the dirty work prior to the bid’s announcement or it will have no chance for success.

Outsider Perception: Most federal bids are wired for insiders like Halliburton.

Reality: The term "wired" is too strong a word. Companies which pre-sell federal opportunities are in a favored position.

Lesson: Identify federal opportunities early, sell your solution, and place yourself in a favored position.

Background:
Many members of the American public believe that federal bids are "wired," implying that the bid is set up or rigged to favor a particular company. Although public bids are not wired in the truest sense of the word, the truth is that decision makers may favor the incumbent contractor or one or more companies that have done the following:

• Convinced the end user, through pre-selling, that they offer a superior product or service
• Taken the time to get to know the agency and the specific requirements of the procurement through pre-selling or through having done prior work for the agency
• Demonstrated in previous contracts with an agency that they are proven performers
• Proven to the agency, through references from other customers, that they are a reputable vendor

Purchases made through public bids represent a relatively small percentage of buys made in the federal market. More often, purchases are made through pre-approved price list contracts or modifications to existing federal contracts.

An opportunity may be put out for public bid if:

• The agency knows a number of companies have been aggressively pre-selling the opportunity and the only option, from a political standpoint, is to conduct a public bid.
• The project is large and highly visible.
• The vendor the agency wants to work with doesn’t have an approved price list and there isn’t a prime contractor available to use as a conduit.
• The contract that was originally bid publicly comes up for re-bid.
• The agency needs to pad its public bid numbers.
• The agency truly doesn’t have a vendor pre-selected (yes, this happens on occasions).

Don’t bid on a public procurement if you haven’t done significant advance research. A bidder must have all of the background information in order to understand the nuances of the deal. There is always a back story and the vendor which eventually wins the contract will have uncovered all of the intelligence well in advance of the posting of the bid.

Outsider Perception: In order to participate in the federal market, you must accept the mountains of red tape that come with handling such business.

Reality: The red tape is not so onerous that it should scare your business away from participating in the federal arena.

Lesson: Don’t let the red tape scare you. It’s a series of administrative tasks which, although tedious, can be easily tackled.

Background:
Many people lose sight of the fact that doing business with the federal government is done according to a contract. A federal contract is nothing more than an agreement between your company and the federal government under which your business agrees to provide a product or service in accordance with the terms of the document. The contract dictates the parameters of the deal and is the underlying basis for your relationship with the customer. Federal contracts contain countless pages of boilerplate language and convoluted clauses. Don’t let the terms of the contract scare you – the contract is only onerous on the surface. Pick out the wheat from the chaff and perform as you would with your commercial customers. Go to the contract when issues arise and let the contract dictate how disputes are resolved or an issue should be addressed.

The role of the federal contracting officer is central in the federal purchasing process. The contracting officer is the person authorized to execute federal contracts and orders. He or she is the only person with the legal authority to act for the government. Think of the contracting officer as the equivalent of the purchasing agent in a larger company. The contracting officer is charged with ensuring that, as required under the Federal Acquisition Regulation, the required amount of competition occurs. To say the least, the procurement rules are complex and long.

The contracting officer has considerable latitude in determining how a buy is made and can consider subjective factors in determining how to close a sale. "Factors" is the operative word here. Factors that can affect the contracting officer’s final decision include the dollar amount of the buy, when the product or service is needed, the type of businesses competing, the qualifications of the bidders and more.

When commodities are purchased (such as office supplies), contracting officers are often the sole decision makers in determining who gets the business. In contrast, the federal end user is the person consuming or using what you sell. They buy to support their program or operational responsibilities and make the final purchasing decisions concerning the acquisition of more complex products and professional services. An end user makes procurement decisions based on opinions they have formed from meetings or telephone discussions with corporate sales people and through their experience in working with a particular company in the past.

End users often find themselves in conflict with contracting officers. They are averse to taking risks and, as most of us do, they generally protect their self interest. Furthermore, end users usually want what is needed quickly and without hassle. The purchasing process is often slowed down by contracting officers who are charged with ensuring that the rules are being followed. Because a contracting officer cannot realistically monitor a particular company’s performance or make substantive decisions regarding a particular product or service’s value, he or she will delegate these responsibilities to the end user.

Think of the end user and contracting officers as partners. Then think of yourself as the third partner in the deal who has been entrusted with the responsibility of performing and delivering under the terms of the contract. This may seem trite but your key to success will be constant (sometimes daily) communication with both government partners. They want to know and trust their business partner. This is why it is critical that you become a partner (or an insider) and gain this trust.

Outsider Perception: Federal agencies order products and services only from their favored vendors.

Reality: People buy -- not agencies -- and favored vendors have to sell to government buyers just as any other company hoping to do business with the federal government.

Lesson: In the federal market, products and services are sold by people to people. You must sell an end user first and then close the sale within the government’s purchasing rules.

Background:
Contrary to popular belief, people buy in the federal market, not agencies. The best way to make a federal sale is to contact a buyer through a direct sales call. Making direct sales in the federal market can be challenging, just as it is with your commercial customers. Yet the dollars are there if you make a determination to go after them. Don’t let your inexperience in the market deter you from going forward.

The primary difference with the federal market is that it is critical that you have a way to close the sale. And, of course, it is more difficult to find the end users who buy what you sell because you are new to the market. Federal end users, such as human resource program managers, engineers, or facility managers, make most purchasing decisions. As the term implies, the end user is the person who will actually use the service or product bought. Services and complex products and solutions must be sold to the end user because this person is the one who determines if the service or product meets their needs and solves their problem.

Although rules and regulations often tie a government buyer’s hands, they don't turn the buyer into a robot. Federal buyers are people with the same general motivations and inclinations we all have, rules or no rules. Federal end users buy from vendors they know and trust. The government employee’s success and future promotions depend on the value of the products and services they buy and, because of that, they want to be assured that their vendors will perform well.

It's not just about getting the best deal for the taxpayer. Although certainly a factor, "taxpayer protection" is often a fuzzy, nebulous concept. The reality is that the federal buyer wants to get the deal that works best for him and his superiors. From a federal buyer’s perspective, a good deal is one in which risk is minimized.

Almost all newcomers to the federal market make the mistake of thinking that a sales opportunity arises when a request for a proposal or bid is published. In truth by the time a bid is published, the sale has probably already been made. Successful vendors have long-standing relationships with the end users and contracting officers with whom they work and, in many cases; help identify problems and solutions before any thought of issuing a contract has arisen.

How many vendors will be selling the same opportunity? It depends on both the size and type of opportunity. The level of competition increases proportionately with the size (in terms of dollars) of the contract to be awarded. Some vendors will have the opportunity on their wish list but will burn out in the proposal-writing phase. Others may want to bid but simply haven't laid enough groundwork to be serious contenders. Others will be dead serious, focused, have a relationship with the end user and the willingness to spend the time and money it takes to win a bid opportunity. The amount of competition also depends on the risk perceived by the end user. The question to be addressed is whether the federal officials involved believe there is a practical and economical solution to their problem. The more uncertainty, the more likely it is that the procurement will be competitive.

Outsider Perception: Federal sales are almost always announced through public bids which are open to all; federal buyers then evaluate vendors’ responses and pick the eventual winner.

Reality: Federal sales are closed (transacted) in a number of ways and the least preferable way is through a public bid.

Lesson: Learn the ways sales are closed and use the most appropriate way to your advantage.

Background:
Closing a sale in the context of this newsletter means getting the order, winning the contract or collecting the money (e.g., in the case of a credit card purchase). Closing a federal sale is where the rubber hits the road; it is the fundamental difference between the federal and commercial markets. Experienced federal contractors know how to close their sales. They also know the "closing rules" and the rules are not that mysterious once you boil the rules down to their bare essence. Outsiders mistakenly believe that federal agencies have to open an opportunity to all who want to bid. As previously discussed in this series, this is a fallacy.

As public policy dictates, federal contracting officers must strictly follow the procurement rules. When the government has a need for a product or service, the federal end user generally meets with one or more vendors to obtain information about the features and benefits of a particular product (or service) and the past performance (or experience) of the company offering it to the government. The end user then meets with the contracting officer to discuss the issues concerning the procurement.

The contracting officer will then close the deal using the quickest method allowed under the rules. This is where the process becomes complex. The contracting officer may or may not seek additional competitors depending on the amount of money involved and whether or not the companies involved have pre-approved price lists.

The following summarizes the methods in which a federal purchase can be closed or transacted:

• By a government credit card buy (the quickest and simplest method)
• By the issuance of a purchase order for amounts under $100,000; the federal purchaser must first obtain at least two quotes (relatively simple)
• By the issuance of a public bid (a long, lengthy and expensive process which is usually avoided if possible)
• Through a contract which allows the government to purchase from a select list of companies which have pre-approved price lists (e.g., a GSA Schedule contract)
• Through a subcontract with a prime contractor that already has a federal contract
• Through a subcontract with a "preferred" small business with which the government can contract quickly and with limited or no competition (e.g., a small disadvantaged business, Alaskan Native Corporation, etc.)

The manner in which a purchase is completed depends on the size of the transaction. More information about the differing sizes of transactions and purchasing procedures will be presented in upcoming newsletters.

Outsider Perception: Federal purchases are made the same way regardless of the amount of money involved.

Reality: The rules regarding credit card purchases and quick buys make it easy to do business in the federal market for transactions of less than $100,000.

Lesson: Use the rules concerning credit card purchases and quick buys to your advantage. Federal buyers located outside of Washington’s Beltway use these procedures extensively to do business with local small businesses.

Background:
The uninitiated do not realize how easy it is to do business in the under $100,000 segment of the federal market. Federal purchases of less than $100,000 are theoretically set aside for small businesses (although there is a current dispute between the Small Business Administration and GSA regarding whether this is indeed true). Think about it. Many small businesses across the country would not consider a $99,000 sale insignificant. The federal small buy market is divided into two sectors.

Credit Card Procedures for Single-Source Purchases

A federal buyer may place orders of less than $3,000 using a government credit card. Such orders can be placed without the necessity for competition and with a company of the buyer’s choice. These buys are usually made by end users and can be made without the need for a contracting officer’s involvement.

The following example demonstrates how a credit card purchase may transpire. Let’s assume that a federal end user’s hard drive crashes. He has an immediate need for a replacement so he buys a new computer by credit card from a local retailer. Under this scenario, the end user is up and running in a matter of hours. How much closer to the commercial market can you get?

If the purchase is made in support of a contingency operation (in simple terms, one that is made for military purposes during a time of war or natural disaster) or to facilitate a defense against terrorism, the credit card limits increase to $15,000 for purchases made inside the United Sates and $25,000 for buys outside the United States.

Quick Buys from $3,000 to $100,000

Small buy rules also apply to orders of between $3,000 and $100,000 but the procedures are slightly more stringent. We call such transactions "quick buys." In the federal vernacular, the procedures used for quick buys are called "simplified acquisition procedures." Quick buys can be made after obtaining quotes (by methods such as fax, e-mail or orally) from a minimum of two sources. If the purchase supports a contingency operation or is necessary to facilitate a defense against terrorism, the quick buy limit increases to $250,000 for purchases made within the United Sates and $1 million for buys outside the United States.

National Emergency Procedures

In this scenario, contracting officers may set aside opportunities for businesses located or doing business primarily in the area affected by the disasters or emergencies. In essence, the new legislation allows contracting officers to make sole-source purchases from companies located within areas affected by disaster without Congress coming down on them for rule violations. Keep in mind that the President must make a formal declaration first.

Outsider Perception: Most federal business is conducted with direct contracts between the end users and the vendor.

Reality: A large amount of federal business is done through commercial subcontracts with federal prime contractors.

Lesson: Subcontracting is a valid way to close a sale when your business doesn’t have another method to do so.

Background:
Companies which don’t have pre-approved federal price lists usually have to start out as a subcontractor to a company that already has a contract with the federal agency.  These insiders are commonly called “prime contractors.” Assuming they want to do business with you, contracting officers can elect to have one of their existing prime contractors execute a subcontract with your business as a way to close a deal under the rules. For example, your company could sell a product or service to an end user at a particular agency and the agency may decide that the best way to close your sale is through a subcontract with a trusted prime contractor (as opposed to going through a lengthy and expensive public bid process).

The contracting officer may also elect to put you in contact with a small business which holds a preference certification (such as a Section 8(a) small disadvantaged business certification) because the government can sole source to this type of business if the transaction is under $3 million. Under this scenario, a new contract would be executed with the certified small business and your company would become a subcontractor under the new preference contract. Convoluted as it may sound, many federal sales are closed using commercial subcontracts.

Outsider Perception: Selling products and services to a federal prime contractor is easier than selling directly to the federal government.  

Reality: Selling services and solutions to a prime contractor can be as frustrating as selling directly to federal agencies.

Lesson: You must sell your products and services to prime contractors in the same way you would to your prospective federal customers.   

Background:
As discussed in the previous newsletter, most small businesses start out in the federal market by serving as subcontractors to federal prime contractors. These companies are forced to do so because they don’t have ways to close their sales. In fact, most small businesses don’t know about pre-approved price list contracts until they have been in the game for six months or more.

Prime contractors are required by law to subcontract a percentage of their federal work to various types of small businesses (e.g., small disadvantaged businesses, veteran-owned businesses and the like). This is a major element in the federal government’s small business advocacy program and it works. Most people believe that mandatory subcontracting is a good approach but small businesses beware. There is an inherent flaw in the system in that prime contractors agree on paper to use good faith efforts to use small businesses but do not do so in practice. The way to keep the primes honest is to force the prime contractor to sign an airtight teaming agreement which obligates the prime contractor to send small companies the work outlined in the bid proposal.

Selling services and solutions to a prime contractor can be as frustrating as selling directly to federal agencies. The primes usually have a plethora of varying types of small businesses under their umbrella and making cold calls to a prime contractor is like any other cold call. Your first task is to find the key decision makers in the organization and most are buried deep within the inner layers of the prime’s bureaucracy.

If your primary contact directs you to the prime contractor’s Diversity Department or Small Business Advocacy Group, you have been given the kiss of death. These departments will ask you to submit your capabilities statement for entry into their small business capabilities database. Your proffered statement will most probably wind up in the department head’s circular file and it is not likely that your business will hear back from that prime.

In contrast, there may be limited scenarios under which the prime contractor will welcome you with open arms.  They are as follows:

1. Your sales staff has sold your company’s services to an end user at a military base near your hometown.  The end user wants to do business with your company and has money to spend. You don’t have a closing mechanism, such as a GSA Schedule contract, so the base referred you to the contract manager for their favorite prime contractor.  Under this scenario, the prime will embrace your company because you have brought an unforeseen opportunity to its attention and also because it will make a handsome profit by marking up your fees and costs.
2. You have a unique capability that the prime contractor needs and therefore can’t find elsewhere.
3. Someone in your network of contacts knows a decision maker in the prime contractor’s organization and has provided an excellent reference for your company.

Outsider Perception: Federal work is awarded only after a lengthy public bid process takes place.

Reality: A great deal of federal business is conducted through companies with “pre-approved federal price lists” rather than through the public bid route.

Lesson: In order to compete, you must get one of the aforementioned pre-approved federal price lists.

Background:
We have previously discussed how closing a federal sale is different than closing a sale in the commercial market. Federal sales must be closed under federal purchasing rules which most often require that some type of competition take place.  Established federal contractors usually close their sales using pre-approved federal price lists. These special contracts are awarded to a selected number of companies (those which submit an offer for consideration and are deemed of merit by GSA). The contracts reduce, and sometimes eliminate, competition because sales opportunities are offered to only the companies holding the contracts.

From our perspective, the best pre-approved price list contracts for small businesses are General Services Administration (GSA) Schedule contracts. To get a GSA Schedule contract, you must have sold your offered product or service to others first.  As a result, GSA Schedules have limitations for start-ups and for companies hoping to offer new or beta products. In spite of these limitations, Schedule contracts are ideal for small businesses because they are open to all qualified businesses.

In the simplest terms, GSA Schedule contracts make your company’s products and services available to any federal buyer at prices pre-negotiated with the federal government.  Products prices are negotiated on a unit basis; service prices are negotiated on an hourly basis. In essence, the Schedule contract is a pre-negotiated federal price list that can be used by federal buyers to make purchases from your business quickly and with limited paperwork or red tape.

The following is an example of how a GSA Schedule sale is transacted.  Let’s assume you run a small office supply business located near a military base.  Your sales staff has been calling on the base for an extended period of time but has not yet had success.  In fact, the base has been using the same large office supply company for years and is reluctant to change this practice. It is late August and it appears that the base’s printing center will have around $300,000 remaining in its annual budget.  Furthermore, the government’s fiscal year ends on September 30th and the printing center doesn’t want the $300,000 to go unspent (under the axiom “use it or lose it”). The base’s management directs its procurement staff to send work to small businesses so that the base meets its annual small business participation goals. 

The printing center manager calls and asks if your company can deliver 10,000 cases of multi-purpose printer paper to the base for the sum of $300,000. Because he is familiar with the costs associated with office supplies, the manager knows that $30 a case is a fair price for a high-volume order. He tells your sales person that the base has several thousand cases in inventory but it can always use printer paper and that the $300,000 needs to be spent by September 30th. He further states that you may take your time in delivering the product since the base’s store room is fairly full at this point. The center manager then says, “I hope you have a GSA Schedule contract because we do not have time for a public procurement and this buy needs to be inked ASAP.”  Thankfully, your company does indeed hold a GSA Schedule contract for office supplies and your pre-approved price for the product in question is $36 per case.  Knowing that GSA allows a Schedule contractor to agree to pricing that is lower than your awarded GSA pricing – especially in instances in which a high-volume order is involved – you strike a deal.  Imagine if your business had not held a Schedule contract. The opportunity would have slipped through your hands. 

Outsider Perception: Doing federal business requires that you jump through bureaucratic hoops.

Reality: In order to get a pre-approved federal price list, your company must jump through several hoops.

Lesson: Although the process is tedious and often painstakingly slow, take the plunge and work towards getting your pre-approved federal price list.

Background:
The previous newsletter stated that having pre-approved federal prices is critical to sales success because competition is limited to companies with approved price lists. The best of these types of approved price contracts for small businesses are General Services Administration (GSA) Schedule contracts. They are ideal for small businesses because companies can apply for them at any time and they are open to all qualified businesses.  Companies should apply for a GSA Schedule contract immediately upon deciding to enter the federal market.

Getting pre-approved federal prices requires considerable red tape. Companies submitting a GSA Schedule proposal must, among other things, describe their corporate experience, provide their commercial prices for the offered product or service and disclose their commercial discounting practices. There is an entire industry devoted to helping companies get through the application process (our company, in fact, is one which offers GSA schedule services).  Companies can complete GSA Schedule proposals on their own provided they have a person with government contracting experience or they have a senior financial person with lots of time and the tenacity of a pit bull.

Although GSA Schedule applications are tedious, the critical components of your company’s GSA offer are the disclosures concerning your commercial pricing and the level to which you have discounted off your commercial prices. GSA uses these commercial discounting disclosures to seek the lowest price you have offered others.  The American taxpayer should be pleased that GSA contracting officers have this mandate. 

Outsider Perception: The federal government likes to do business with small businesses.

Reality: Federal buyers need incentives in order to convince them to contract with small businesses because the same buyers perceive that there’s more risk with small companies. 

Lesson: If available to your company, use any and all small business preference programs to help you close business with the government. 

Background:
Federal purchases of less than $100,000 are, in most instances, set aside for small businesses. This program helps small businesses considerably but keep in mind that there is competition for set-asides. As discussed in previous newsletters, you must pre-sell these opportunities rather than bid on them blindly.

A similar program requires that federal prime contractors subcontract a percentage of their federal contracts in excess of $550,000 to small businesses. Like set-asides, this program helps small businesses.  However, your company still must sell itself to a federal buyer before it will be considered as a subcontractor. Or you have to become a favorite in a prime contractor’s stable of small businesses which requires direct sales efforts to prime contractors just like your current market.

It is not uncommon for a large prime contractor to use small businesses programs as a way to close a federal sale if they can’t close it in a better way. Under this scenario, the prime contractor becomes a subcontractor to the small business with preference status. The terms of the federal contract will most likely specify that at least fifty percent of the contract’s personnel costs must be spent on work performed by employees of the prime contractor (the small business) or personnel of other small businesses. This stipulation is in place to keep prime contractors from using small businesses and preference programs as fronts when closing sales. Large prime contractors may legally participate in small business preference contracts as long as they closely adhere to this stipulation. Detractors say that in spite of the fifty-percent rule, the small business is still a front for a large business. In the final analysis, the practice works in favor of small businesses so the rules are not likely to change.

The most significant small business programs are the “preference programs” for special types of small businesses. These are the programs that have the greatest potential to increase the sales of a small business quickly. The major preference programs are for (i) small disadvantaged businesses, (ii) disabled-veteran small businesses, and (iii) small businesses operating in a historically underutilized business zones (HUBZones). These programs allow sole-source awards for contracts under $ 3 million. Such programs give businesses which qualify a significant edge and these programs have been used to build multi-million dollar companies. Qualification requirements for these programs are available at http://www.sba.gov.

Outsider Perception: Selling to the federal government is more difficult than selling to commercial counterparts.

Reality: It is and it isn’t. Although the process is the same in both markets, your sales pitch to federal buyers must be more thorough and effective due to the level of competition your business is facing. 

Lesson: Develop a distinguishing message to get through federal doors and establish personal relationships with buyers.

Background:
Everyone thinks their competitors are worthless and that they alone have the best product or service known to man. Federal end users have heard “we are the best” so many times that it makes them scream when they hear it. End users want to hear simple facts backed with evidence. Because they have hundreds or thousands of vendors barraging them with messages, you have to have a sales pitch which distinguishes you from the rest.  Offer “green” products. Consider having a past federal customer contact the end user to provide a reference.

Distinguish yourself through your initial message to the customer. Federal buyers are like any other buyers in that they want to talk with only those companies that sell what they need. You need a distinguishing message to get through the glass wall encountered by all sales people, commercial or federal. Your message should not be delivered via a link to a web site or a glossy brochure. Such tactics don’t work in today’s market. Both give the immediate impression that you don’t want to take the time to determine what the federal purchaser needs. The message delivered must cut to the heart of the customer’s problem. The sales pitch must be individually tailored to the federal buyer’s specific needs.  Otherwise, it will be quickly cast aside or dismissed. 

The following examples show how a message may be crafted to meet the needs of the customer. Let’s assume you are an office supply vendor and your headquarters is located near a military base.  How do you distinguish your company from the numerous other players in your market? Your message to the base’s procurement officer should stress the service you provide in conjunction with the sale of your products. Consider the following sales pitches:

1. We have a GSA Schedule contract and we will do all of the paperwork for you. We stock everything you need and can have it at your delivery points within an hour.
2. If you have problems with a particular product, it will be replaced within three hours.
3. If you need anything beyond what we sell, we will find it and include it in your order.
4. Our sales staff and management will be available 24/7 and we will give you our personal cell phone numbers to contact us.

Professional services are inherently difficult for buyers to evaluate because their value is intangible. Your message for professional services might be:

1. We are experts in the subject matter required for your solution and we have compiled a list of references for your perusal. 
2. We understand your needs and the solicitation’s requirements because we have solved similar problems. Brief descriptions of our previous solutions are attached.
3. Attached is the resume for our proposed project manager.
4. Here’s my cell phone number and I am available 24/7.
5. I will call you to set up a meeting to discuss our proposed solution.

Outsider Perception: All federal business is done within the confines of the Washington Beltway.

Reality:  False.  More than $250 billion is spent by federal installations and agencies located outside of the nation’s capitol.

Lesson: Identify the federal agencies and installations located in your region and sell aggressively to these potential customers.

Background:
Most are unaware that the federal government spends more than $250 billion on projects located outside of the Washington metropolitan area. In fact, the federal government's buying power extends across the United States and even worldwide. Some of this money may be spent at military bases or other government installations in your state. You would be shocked to discover how much federal business is conducted within 100 miles of your office. Federal officials prefer to work with small businesses located near them since doing so is sound policy from a political and practical standpoint. 

Small businesses located within the Washington metropolitan area do reasonably well because of the vast amounts of money available for contracts in the region. However, the abundance of contract opportunities is offset by the level of competition. The Washington area is home to the very largest prime contractors and small businesses are playing in their backyard.  Small businesses hoping to win federal business near the Beltway must learn to play nice with the large primes or they run the risk of being shut out of the market. 

Many small businesses emerge and prosper by staying close to home where the competition is not as intense. There are countless federal facilities located throughout the U.S. and overseas.  Such facilities include military bases, research centers, Veterans Administration and military hospitals, and regional offices of various federal agencies.  Use your local blue page telephone directory or peruse the federal agency web sites for in an effort to locate contact information.

As previously mentioned, federal facilities located outside of the Beltway prefer, for political and social reasons, to work with local companies.  Local businesses are also perceived by federal officials to be more cognizant of delivering value.  It is not uncommon for a small business owner to meet an end user from a local federal facility at a social occasion or at a networking event.  He or she can then turn the contact into a business relationship and ultimately a sale.

Take out a local map and draw a circle around your office’s location.  Contact the federal installations located within the circle.  Use the following links to help you find local federal sales opportunities:

General all agency searches: USA.gov (the official federal web portal) http://www.usa.gov  

For federal offices in your area:

• Federal Phone Directories: http://www.usa.gov/Contact/Directories.shtm
• Peruse the blue pages in local telephone directories

Locate a military base: http://answers.usa.gov/cgi-bin/gsa_ict.cfg/php/enduser/std_adp.php?p_faqid=5837

Federal Funded Research and Development Centers: http://www.nsf.gov/statistics/nsf06316/ 

Veterans Administration Hospitals: http://www1.va.gov/directory/

Federal Funding Accountability and Transparency Act (FFATA) Database: http://www.ffata.org/ffata/

Outsider Perception: Getting a corporate federal sales initiative started is an administrative and logistical nightmare. 

Reality: The process isn’t as bad as you may have heard.

Lesson: Don’t let start-up costs and red tape deter your company from entering the federal market. 

Background:
We are frequently asked, "What procedures should be followed by small businesses eager to participate in the federal market?" The answer to this question is that a small business should implement an aggressive federal sales program and simultaneously work toward obtaining a GSA Schedule contract. The latter should be of highest priority. A Schedule contract is the only practical way a small business can obtain an approved price list.

What do you do while you are waiting to submit your GSA offer or are waiting for a submitted offer to be evaluated? The offer evaluation process can take three to nine months so you have plenty of time to do other things.  We suggest that your company undertake the following steps:

First and foremost, your company should put a federal sales program in place.  Instruct your sales staff to concentrate their efforts on selling directly to federal end users. Do this on Day 1.

Provided your business qualifies, submit your 8(a) application to the SBA. Acquiring the 8(a) small disadvantaged business certification is essential for qualified businesses. The aforementioned application should be filed within thirty days of instituting your federal sales program.

Contact prime contractors with the goal of working with them as a subcontractor. 

Use credit card transactions (those under $ 3,000) or purchase-order transactions (under $100,000) to get your foot in the door.

Even if your organization fits within the parameters of one of the small business preference programs, approach selling to the government as if you didn’t have such a status.  Sell aggressively and effectively. Then use your preference edge to help close the deal. Get started today. Start making sales calls as soon as possible.

Outsider Perception: Red tape is the biggest barrier to entering the federal market.

Reality: The red tape is not as bad as it seems from the outside.

Lesson: Don’t let the red tape deter you from cracking the federal market.

Background:
Encountering mountains of red tape is an inevitable consequence of doing business with the federal government.  You will be required to register with various federal web sites (such as www.ccr.gov) and will be asked to provide company certifications in government databases. Keep in mind that in completing these tasks, you aren’t making any actual progress towards making a sale. Government buyers don’t use databases to find vendors. Instead, the vendors find the buyers.

As much as they would love to ignore it, federal contractors are forced to comply with the government’s red-tape requirements in order to do business with the government. A newly-hired college graduate or someone in your accounting organization should be able to wade through the red tape. The task may appear daunting at first but, with patience and tenacity, the person assigned the task will find out that it is not rocket science. Complying with the government’s requirements becomes second nature after the first time through the process.

Your designated person should tackle the following tasks first:

Obtain a DUNS number
http://www.dnb.com/US/duns_update/

Register at the Central Contractor Registration (CCR) web site
http://www.ccr.gov/

Register at the ORCA web site
https://orca.bpn.gov/

Sign up for e-mails from the Federal Business Opportunities site
http://www.fedbizopps.gov/

Do companies need to enlist the services of an attorney when they do business in the federal market? Lawyers have a role to play in the federal market just as they do in the commercial market. The trick is to realize when you need one and when you don't. Don't assume you need one for every little thing you don’t understand.

Are special accounting systems required when doing business with the federal government? Yes, you will most likely need one at some point in time but not at the time of market entry. A somewhat generalized accounting package, such as QuickBooks, will do to start. Your business will need to invest in a more specialized accounting system as your involvement in the federal market grows and your revenue increases.

Outsider Perception: Although exciting, winning your first federal contract is not really a big deal.

Reality: Winning your first federal contract is critical because it gives your company insider status.

Lesson: Use your coveted insider status to leverage additional sales. 

Background:
You won one! Your company is now an insider and insiders use their position to leverage more sales. They work on-site with their federal customers on a daily basis and can legally look under every stone for more dollars. Use your insider position to nurture your contract into something much, much bigger.

Federal contractors working on-site at a federal facility are in an ideal position to generate more business. Their billable staff sits with the customer every day and, in most cases, gains invaluable intelligence about that customer. On-site personnel also have the opportunity to learn everything there is to know about the customer, the customer’s problems, possible fixes, the agency’s budget, the agency’s procurement plans and the like. It’s all perfectly legal because it is all public information. In this instance, the insider just has much easier access to it.

Perhaps most importantly, a contractor’s on-site staff establishes strong relationships with federal customers. Establishing such relationships is critical to success in the federal market and the on-site contractor gets paid to do it. If you were the customer, to whom would you turn if you needed help? You would turn to the people with whom you are working every day, the ones you know and trust.

Outsider Perception: Writing a federal proposal is like writing a commercial proposal.

Reality: Federal proposals are a breed unto themselves.

Lesson: Learn to write federal proposals using a business process that integrates proposal writing and sales. 

Background:
Learning to prepare outstanding, first-rate proposals is a task that is difficult at best and often impossible.  Many contractors fail to ever master the assignment. Corporate management must be fully committed to the task and must also devote substantial time and resources to developing and keeping a good writing team. In order to start the process, we recommend doing the following:

1. Sell the opportunity first and then write a proposal. Don’t write proposals for projects that you haven’t sold.
2. In order to put your best foot forward, present customer-centric proposals based on solutions you have proposed to the federal end user.
3. Make sales and proposal writing an integrated and structured business process. Start the process early and have the proposal started when the actual Request for Proposal (RFP) is published.
4. Propose what the customer wants first and then sell them what they need.

Outsider Perception: The federal market is tough to crack.

Reality: The perception is true.

Lesson: Although the federal market is difficult to tackle, companies that are successful in doing so quickly realize that it’s an extremely lucrative one and that their actual sales costs – once they are  entrenched – are actually less than in the commercial sector.

Background:
This newsletter concludes the 22 part series entitled “Cracking the Federal Market: The Small Business Guide to Federal Sales.” The federal market is not really more difficult to enter than any other new market your business has targeted. Don’t let the fear of the unknown hold you back. Approach the task of tackling this new market in the same way you would if it were a commercial market. Market entry requires tenacity and patience.  The federal market offers rewards commensurate with the effort your staff puts into delving into this new endeavor. For highly -focused companies, the rewards can be exceptionally rich and lucrative.

Keep in mind that federal buyers will never get rid of companies which perform at the highest levels because trusted performers make the buyers’ professional lives easier and risk free. These buyers will go out of their way to make sure that your company remains their business partner. The partnership truly begins when your company wins its first contract and, once this occurs, your company has total control over its destiny in the market. It is entirely possible for one-person firms which work in the federal market to grow to $100 million businesses in just a few years.

Small business preference programs can dramatically impact upon your company’s growth.  Those which cannot take advantage of preference programs take heart -- companies without the benefit of preferences have also experienced explosive growth.

The critical steps to success in the federal market outlined in this series are:

1. Sell to federal customers as you would in the commercial market.
2. Learn the rules for closing federal sales.
3. Get a GSA Schedule contract and sell with a pre-approved price list.
4. Target federal customers in your region first and become an “insider” like the large federal prime contractors.
5. Use the inherent advantages of being an insider to help your business succeed in the federal market.
6. Certify your company as one of the preferred small businesses if it qualifies.

Archives of the newsletters in series can be found at www.fedmarket.com.  Feel free to send a copy to your friends and business associates. 

GSA Proposal Preparation eLab
Fedmarket.com assists companies in completing their GSA Schedule offer during the course of a three-day computer workshop.  We provide you with a detailed Request for Information (RFI) at the time you register for the workshop. The RFI outlines the required corporate data and pricing that must be gathered and prepared in advance of the eLab. Attendees will, with the assistance of our GSA consulting staff, complete their GSA offer prior to the end of the workshop. In fact, many complete the offer and leave with a completed proposal in fewer than three days. If you are a procrastinator, the GSA eLab is the solution for you. The GSA Proposal Preparation eLab is offered monthly at the Federal Sales Academy in Bethesda, Maryland and quarterly in Las Vegas, Nevada. Call a Fedmarket representative at 888-661-4094 x 8 to learn more about this 3-day workshop.

• Which federal buyers have purchased your products or services.
• What they purchased.
• When they purchased it.
• How much they paid.
• Which agency the buyers work for.
• How to contact the buyers.

• First and last name
• Address
• Phone and fax
• Email
• Office and agency information
• Recent contract awards

Written by Cory Johnson and John Meyer of The Company Corporation (http://www.incorporate.com)

Starting a business can be one of the most rewarding and satisfying undertakings a person can pursue. For some it involves chasing and achieving a personal dream, and for others, it provides an opportunity for freedom and flexibility from a corporate job. Launching a new business venture comes with a lot of hard work and many challenges. Countless tasks impose themselves upon entrepreneurs trying to get their businesses off of the ground. 

With so much to accomplish, business owners may not be aware that incorporating can be an important step to ensuring the success of a business. Whether it’s a sole proprietorship or a large-scale operation, the advantages to forming a corporate entity are numerous. Advantageous tax benefits, credibility with customers, and the protection of personal assets are just a few of the many reasons business owners choose to incorporate or form a Limited Liability Company. In fact, an ongoing business that has yet to incorporate would benefit the most. With an established and growing clientele, there may come a greater chance of getting sued, and a corporate entity would help shield its owner’s personal assets. One the responsibility of the owner is to realize just how important it is to have a lasting and proven business structure.

Here are the most critical items to consider when selecting your business structure:

1. Protection of personal assets - Sole proprietors and partners have unlimited personal liability for business debt or lawsuits against their company. Creditors can attach homes, cars, savings or other personal assets. Incorporating or forming an LLC helps separate your personal identity from your business identity. Corporate shareholders or LLC members have only the money they put into the company at risk.
2. Pass-Through Taxation - For sole proprietors and partners, company profits/losses    pass directly through to their personal tax returns. For corporations, profits are taxed, distributed to shareholders as dividends, and taxed again on the personal level. This “double taxation” can be avoided while still enjoying the benefits of personal asset protection by forming an LLC or by electing an S Corporation. S Corporations and LLCs can be taxed just like partnerships.
3. Uninterrupted business -Sole proprietorships and partnerships may automatically end or become legally entangled when an owner dies or retires. Corporations and LLCs are enduring legal business structures. They continue regardless of individual officers, managers, or shareholders. Corporation ownership may be transferred, without substantially disrupting operations, through sale of stock.
4. Access to capital - Sole proprietorships and partnerships may find investors hard to attract because of personal liability. Investors are more likely to purchase shares in a corporation where they can separate personal and business assets.
5. Credibility -Adding “Inc.” or “LLC” to your company name helps a business seem larger and more established.

How does one go about incorporating or forming an LLC? A common misconception regarding the incorporation process is that only a lawyer can guide entrepreneurs through the process. Lawyers can be a trusted and knowledgeable source for incorporation, but legal fees can quickly mount. Numerous entrepreneurs have chosen to forego a lawyer and go the route of using a service company, such as The Company Corporation, or CorpAmerica. Service companies can provide valuable timesavings for business owners learning about the business formation process. The service is usually much more affordable than going to a lawyer, extremely quick, and more convenient. Service companies provide the opportunity to incorporate or form an LLC over the phone or on the Internet.  In most cases the process can be completed in less than ten minutes. Service companies have helped thousands of small business owners navigate the incorporation process and answer questions such as, “Which entity type is right for me?” and “What states are the most advantageous for forming an LLC?” Service companies provide information to business owners allowing them the opportunity to make the decision on what type of business structure and in what state they should form a business.

Most business owners choose to incorporate or form an LLC in the state in which they plan to conduct business. Typically, filing in your home state is the least complicated, and less expensive as it helps avoid paying franchise taxes and filing annual reports in multiple states. For many entrepreneurs, they find it necessary to expand their businesses into many additional states. Doing business in multiple states requires that companies “qualify or register to do business” in each state. A corporate agent can be very helpful in making small business owners aware of any additional filings that may be required by law.

No matter which business structure you choose, it is important to carefully examine the advantages and benefits of incorporating or forming an LLC. Why leave your personal assets exposed and advantageous tax benefits on the table? Service companies are ready and waiting to assist you in taking your business to the next level.

The Company Corporation is a service company and does not offer legal or financial advice.

By Geoff Williams

Every day, the men and women behind the wallets at SJF Ventures set out to prove that money isn’t the root of all evil. Like any good venture capitalist firm, SJF wants to become wildly wealthy, and fast, but their mission statement truly is a statement. The Durham, North Carolina, company invests in businesses across America that have $1 million or more in sales, and that have made their homes in unlikely, underserved locations, like formerly seedy neighborhoods in the inner city, or seed-strewn farmland in rural areas. According to managing director Rick Larson, SJF wants to help businesses with the potential to create quality jobs (higher than minimum wage, with benefits and opportunities for advancement), and whenever possible, they also like to find enterprises that are environmentally friendly.

In other words, if you’re an entrepreneur with dreams of making the world a better place, and are looking for equity capital of $500,000 to $5 million, then introductions are in order. Yes, these are the good guys.

Larson has a good example at the ready: he’s on his way to a board meeting at Ryla Teleservices Inc., a call center in Kennesaw, Georgia. “When we made the investment in Ryla, in 2002, a lot of people said, ‘What are you doing?’” recalls Larson. “All the call centers are in the Philippines or Bangladore.”

But it turned out to be money well-spent. Ryla is thriving, bringing in are ported $14 million in revenue in2006, and what’s more, the company is helping their community. They have200full-time employees receiving a full benefits package, 70 percent of which is paid for by the company. Ryla offers stock options to all of its employees, including the people who are on the phone. Not bad, considering this is a rapidly diminishing industry in America and known for offering lousy pay and few, if any, benefits.

But again, Ryla is profitable, stresses Larson, explaining, “Some entrepreneurs, when they make a pitch to us, lead with their environmental side, their redeeming side, and they forget that for their investors to be successful, people have to buy their product. So we’re most interested in strong business models. And that’s what’s going to make us—or any investor—interested in a company, more than where it’s located or how righteous that they can be.” But Larson adds that if a business model is formidable, then the righteous stuff that likely drove the entrepreneur to create the business will fall into place.

He offers another success story for SJF Ventures. Brightside Academy is a nearly care and education provider mostly based in Pittsburgh and Philadelphia. “They’re located in parts of the city where quality daycare isn’t available,” says Larson. “We like them because they’re a strong job creator, and there’s a real need in those neighbor-hoods for childcare that isn’t being met.” But Larson adds that while the Academy has “had their share of challenges over time,” the company is making money and growing, with 40 schools now open.

But for all the good that SJF is helping to create, the odds of linking up with them are slim. Of the approximately 1,200 to 1,500 businesses that send pitches to the investors annually, SJF invests in three or four companies. But Larson stresses, “Venture capital is only one form of capital, a very expensive form, and entrepreneurs need to realize that there are lots of other ways to capitalize on business. The key thing is not to get discouraged.”

And, according to Larson, many entrepreneurs doing their thing in the inner city are hard-wired to be persistent, optimistic, and ultimately, successful at finding a way to operate their businesses, no matter how cash strapped.  “Inner-city management teams tend to have a set of issues that they have to deal with everyday,” he says, “and that often makes them very good problem-solvers.”  

Three years ago I was approached by a startup in Metrowest that had just purchased and renovated a building to develop private office suites. Their goal was to attract business people looking to move out of their home office, expand their business or set up a satellite office. They were interested in developing and launching a marketing program to drive clients to their door. I was impressed with their concept and presented the idea of first conducting a needs-based analysis of the market to clearly define who their potential clients were and how they could best fulfill those needs. I also recommended a competitive assessment to determine how they should position their “suites” and create a powerful value proposition that would resonate with these new clients. The goal was to do the research before they opened their doors to ensure their message was on target and they were spending their limited dollars on marketing activities that would have the greatest impact in the shortest amount of time.

However, they were anxious to launch, believed they understood their clients’ needs and simply wanted to get out there and promote themselves. They thanked me for my proposal and let me know that they would contact me when they were ready for a more research-oriented approach to developing a marketing strategy.

This was not the first time a company has believed they were ready to open their doors before assessing the needs of the market. But just because you build it…doesn’t mean they’re going to be beating down your doors to get in. Market research is not a ‘sexy’ nor interesting project that small businesses want to hear about…most prefer to discuss website launches, designing brochures and creating promotional pieces. Ironically, on a tight budget those are the items that cost the most and are the most risky because if they’re not properly targeted, they cause the fastest drain to scarce financial resources.

Roll the clock forward to a few weeks ago and guess who called? Finding themselves at 40% capacity and never having reached the success they had anticipated, they paid a heavy price for a nicely designed (but ineffective) website and a pretty brochure (that they stopped mailing after the first attempts failed to attract clients). Without first doing their ‘homework’ to understand the value and services their prospects needed, their effort was untargeted and misdirected…and so was their money. Almost 6 out of 10 new businesses fail before their fifth year. With failure rates this high it’s critical to use limited resources (people, money and time) to target customers as precisely as possible. That doesn’t mean simply getting them in the door but making sure you’re attracting the right people so they’re not exiting as quickly as they came because you failed to offer them services worth sticking around for.

Like an airline seat that goes unoccupied….each office suite that remains vacant cost this business money. If they had held off on their web design and advertising they could have allocated their budget toward a solid assessment of the market and identified organizations and individuals who need their services, leading to a steady stream of revenue-generating clients.

What can they do now? Here are a few quick ideas (pending confirmation from research):

1. Explore All Target Markets: They need to look beyond small business owners as the only market. They’re located close to one of the largest employers in Metrowest. Therefore, there might be an opportunity to help visiting vendors who need office space when they’re in town.
2. Study Their Competition: They don’t have a sense of what their competition is offering so it’s impossible to position their value juxtaposed to what else is available or needed.
3. Network: They must identify groups where a constant flow of small business owners congregate and get the word out about their services. Networking is the least expensive drain on a marketing budget and often times the most effective way of driving attention to a business.

Have a sales or marketing challenge that you’d like some advice on? Send Beth an email at bethg@m-edge.com. Beth Goldstein is President of Marketing Edge Consulting Group (www.m-edge.com). She has over 22 years experience in sales and marketing and is the author of The Ultimate Small Business Marketing Toolkit (Mc-Graw-Hill). Beth runs Boston University’s Online Certificate in Entrepreneurship, teaches entre