The government spends billions of dollars each year on goods and services, and by tapping into this vast marketplace, small businesses can secure lucrative deals, gain steady income and heightened visibility. In this episode of The Agent of Wealth Podcast, host Marc Bautis and guest Richard C. Howard dive deep into the world of government contracts.
As a career military acquisitions officer, Howard oversaw $82B+ in DoD contracts, and has advised and trained over 400 companies as a consultant. He’s the CEO of DoD Contract – which guides, trains, and mentors small business owners and sales executives through the government sales process – and the host of DoD Contract Academy Podcast.
In this episode, you will learn:
- The benefits of selling to the US government as a small business.
- How small businesses can find opportunities to sell their products or services to the government.
- How small businesses can stand out in the government procurement process.
- How small businesses and startups can utilize the Small Business Innovation Research Program.
- And more!
Resources:
www.dodcontract.com | DoD Contract Academy (Podcast) | Usaspending.gov | Sam.gov | Small Business Innovative Research Program | Bautis Financial: 7 N Mountain Ave Montclair, New Jersey 07042 (862) 205-5000 | Schedule an Introductory Call
Disclosure: The transcript below has been lightly edited for clarity and content. It is not a direct transcription of the full conversation, which can be listened to above.
Welcome back to The Agent of Wealth. This is your host, Marc Bautis. I’m joined by a guest for today’s episode, Richard C. Howard. Richard is a leading authority on US federal government contracts. As a career military acquisitions officer, he oversaw $82B+ in DoD contracts, and has advised and trained over 400 companies as a consultant. Richard is the CEO of DoD Contract, which guides, trains, and mentors small business owners and sales executives through the government sales process.
Richard is the host of the DoD Contract Academy Podcast, and speaks extensively on the nuance of federal contracting strategy. Richard, welcome to the show.
Thanks for having me on, Marc.
I don’t think people even realize that government contracts are out there. Can you start off by explaining this market size, and some of the benefits of selling to the government as a small business?
The Benefits of Selling to The US Government as a Small Business
The US government is the single biggest purchaser of goods and services in the world. When people think about government spending, most immediately think of big defense contractors. But in reality, the government buys just about anything you could think of – from defense and weapon-related spending, to tai chi instruction, to commodities, to food. Think about it like this: Every military base is basically a small town, or city in some cases. All of the infrastructure that goes into that town or city is paid for by the government. And they have a mandate to buy from small businesses.
So whether you’re in – cybersecurity, accounting, legal, you’re selling food, you have a franchise, you have a training business – the government is most likely buying in your area. It is very rare that I find an area where the government isn’t spending money, so the spending is vast.
The government has to buy from small businesses, yet less than half of 1% of US small businesses are actually participating in the government contracting process, despite the high spending levels.
Alright, so there’s a lot of opportunity here. How does a small business find the contracts?
How Small Businesses Can Find Opportunities to Sell to The Government
Because we’re talking about the government, there is a lot of regulation that exists to ensure there’s fairness and that the public can see what the government’s doing. So everything the government spends money on – with the exception of a couple classified contracting avenues – is public knowledge.
So, as a small business owner, you should ask, “Does the government buy what I sell?” To find your answer, go to a website like usaspending.gov and begin searching public records to find out what the government spends on.
Whatever you sell, it probably falls under something called a North American Industry Classification Code, or NAICS code. When you go into usaspending.gov, type in what you sell under NAICS – for example, accounting. The website will suggest different codes that you would fall under. You can click on that, and sort it by small business spending.
You can quickly see how much the government spends on small business contracts in your industry and area of focus.
Are these contracts location specific? Does it help if a business is located near a military base, for example, or does it not matter?
It depends on what you’re selling. By the way, government contracts certainly extend past the Department of Defense and military bases. There’s lots of different federal agencies that spend money.
Okay so once a business owner discovers how much the government is spending in their niche, what’s the next step?
Once you know that the government buys what you sell – if it’s local, they buy it in your state, or if not, you can work anywhere – the next step is to register your company. You can do that at sam.gov. That’s where all registering and most of the solicitations take place.
So when you go to sam.gov, you’ll find instructions on the screen for registering. Of course, you need to have a legal business in the United States, and come ready to register with your EIN number.
All in all, the process takes a couple weeks sometimes, but at the end of it you’ll get what they call a CAGE code and UEI number – these are federal identification numbers for your business. Once you have those, you can start bidding on contracts.
By bidding, do you mean writing proposals?
Yes.
How Small Businesses Can Stand Out in the Government Procurement Process
What can a small business do to separate themselves from the others trying to do the same thing?
Good question. This is really where most companies fail in selling to the government…
Once your business is registered through sam.gov, you will begin to see what’s called a request for proposal, or RFP. At that point, a business can begin writing a proposal. But, the government is very regulated in how they buy products and services.
For instance, if I saw an RFP come out that the government is looking to buy a $3 million landscaping contract for base X, I can’t just pick up the phone and talk to someone to get my questions about the contract answered. Now, if it’s a big contract, the government will answer most questions publicly through sam.gov. In those cases, you might get some answers that can inform your proposal.
But otherwise, you won’t be able to set up a meeting with a government worker. You won’t be able to develop a relationship…
So, before the RFP comes out, there’s something called the market research phase. Let’s say you’re a software developer, and the government is putting a command and control platform together, and you have a great user interface for that. Well, it’s during the market research phase that you can engage with the government if you really want to have a shot at landing the contract later on. Meaning, before the RFP comes out, we want to know who is doing the purchase, and we want to know the details of the opportunity ahead of time.
If you want to differentiate yourself from the rest of the herd, you want to look for things like a request for information or sources sought. When those come out, they’re squarely in the market research phase. At that point, you can set up a meeting with the government.
I recommend small businesses to respond to requests for information. They’ll answer questions like:
- How long have you been in business?
- Do you have past performance?
- What do you think of the approach the government wants to take?
And, you’ll be able to suggest things. For instance, when you register your business, there are different certifications. Examples include:
- Small business certification
- Woman-owned small business certification
- Disabled Veteran-owned small business certification
If you happen to have one of those certifications, you do have a leg up, because the government needs to set aside a specific percentage of contracts to those certified businesses.
But, back to the market research phase, you can actually recommend that the government lists the contract for a specific certified group. So, you’re helping the government write the solicitation, and you can give yourself a leg-up if you suggest a certification you have.
Okay, so you’re trying to influence the decision a little bit. Have you ever seen a case where a small business had a product or service that the government isn’t spending on, but they propose it to them?
Yeah, there are a couple of ways to do that. I would say if you take away one tip on selling to the government, it’s to get meetings and build relationships with the people that actually buy what you sell. There’s a lot of ways to do that, but mainly through research.
If your business sells a product or service that the government is not actively looking for, but you want to sell to the government, the government needs two things: A requirement, and funding.
The Small Business Innovation Research Program
If it’s an innovative solution of some kind, for example a patent, you can go after something called the Small Business Innovative Research Program, or SBIR. Any government agency that spends a certain amount of money in research and development has got to contribute to this program. So, the SBIR program spends about $4 billion a year on innovative research and development contracts with small businesses.
This is a way to basically propose your product or service to the government, because they have funding in the SBIR program. If the review panel thinks that what you have is innovative, and that it would achieve a government need, you can win one of those contracts.
Phase one of SBIR is kind of low dollar. Let’s say, for example, you’re creating a VR training system. In that case, phase one might just be a feasibility study. You might propose that the government uses a VR or augmented reality training system to help maintain or fix aircrafts, for instance. Well, that might resonate with the board. That first phase one event is probably going to be somewhere around $100,000-$150,000, which is small for government contracts.
But, what you’re really doing is:
- You’re establishing past performance with the government, because now you have a contract.
- They’re now going to help you find people in the government that would potentially sponsor you.
Now you can’t totally rely on the government SBIR office, you also need to put yourself out there to find a sponsor. If you find somebody willing to sponsor, but they don’t necessarily have to have money, they just sign a memorandum of understanding for you to go to phase two.
Phase two is to develop a prototype, or set up a demonstration. There could be a lot of different things that you’re recommending, but that’s the phase two piece.
The Small Business Innovative Research Program is really great for getting your feet wet. Even if you have a developed product but you’re modifying it for government use, that would also qualify for the program.
Going back to finding these opportunities, my father actually had a government contract through a larger corporation. He created a pellet that went into 50 caliber ammunition. He wouldn’t get the government contract himself, but General Dynamics or Olin would go through him to create this component of their contracts with the government. Are there opportunities like that out there?
Yes. That’s a really good point. There is a variety of ways the government can buy things from a small or large business owner. For example:
- Contracts.
- Subcontracting.
- Sole source contracts.
As a business owner, you need to understand how the government is buying what you’re selling. That’s something that you can do pretty easily with the research tools the government offers.
Let’s say you own a company that is licensed to do HVAC. Over time, you’ve built a relationship with the government office that purchases contracts in construction. From that relationship, you learn that next year, Hanscom Air Force Base is going to be building an office building, and you have interest in installing the HVAC system. But, you aren’t able to take the full construction contract.
What I recommend you do is look through a website like usaspending.gov to see which construction companies have done that type of work with the government – illustrating past performance – and reach out to them about this upcoming opportunity. The fact that you’re bringing them this opportunity sweetened the pot for them to work with you, involving you in the project.
If you reach out to three companies like that, you’ll get at least one or two bites to form an agreement and go after a large contract together. That’s very helpful for a small business, because the big company can handle the proposal writing, and so on.
Artificial intelligence is all the rage right now. Do you see AI being used to uncover some of these opportunities, or to help small businesses in this process?
It’s interesting that you bring that up. Two of my recent episodes on the DoD Contract Academy Podcast were about AI in the government space.
One of them is called Govly, which uses artificial intelligence and machine learning to enable government contractors, OEMs, and distributors to accurately plan for government purchases years in advance
The other is called Rogue, which is an AI tool specifically designed to help businesses write proposals for government contracts. It kind of works like ChatGPT.
Business Financing and Government Contracts
What happens if a business needs financing to fulfill an order from the government?
First, it depends on the contract. If it’s a SBIR contract, where the business is developing something for the first time, then you can win the contract before you have to start development. But those are research and development contracts.
So let’s say you win a small services contract that involves employing 20 people. The small business will have to pay those individual employees before the government pays the small business. That’s because there’s about a 90 day turnaround time on invoicing to the government.
Now, there are certain financing houses set up specifically for government contractors. One thing to know is once you win that government contract, it’s one of the most secure contracts you’re going to have. So a lot of banks know they can count on the government paying the business.
That’s also one of the reasons companies go after government contracts – because it increases the value of your company.
Are Government Contracts Recession-Proof?
In addition to AI, the other thing that we’re constantly hearing about is this looming recession. At a high level, how is government spending compared to other industries?
Government spending is more stable. I always recommend that business owners – small or large – have one stream of income from commercial sales and another stream of income from government sector sales. The government is spending year over year, whether there’s a recession or not.
But I would say that the government experiences difficulties in different ways, and typically at different times.
Usually, if you have a three-year government contract, for example, you’ll receive that funding month over month. Now, there are times when the government shuts down, or when there is sequestration. The government can terminate a contract for convenience. But if they do, there are regulations to protect the companies that held the government contract.
That’s good. Well, we’re just about out of time. Richard, thank you for joining me today. You did a great job explaining how businesses can leverage government contracts as well as how to navigate the government procurement process. What’s the best way for our listeners to contact you or learn more about your advisory coaching services?
Your listeners can go to dodcontract.com to schedule a consultation. On the website, we also have courses available. And of course your listeners can check out my podcast, DoD Contract Academy, on whatever platform they like to listen on.
Great, we’ll link to those resources in the show notes. Thanks again, Richard. And thank you to everyone who tuned into today’s episode. Don’t forget to follow The Agent of Wealth on the platform you listen from and leave us a review on the show.
Sara Blakely was once a door-to-door fax machine salesperson. Now, she’s the founder of Spanx – a billion-dollar company that sells undergarments, leggings, and swimwear – despite having no fashion, retail, or business leadership experience. In this episode of The Agent of Wealth Podcast, the Bautis Financial team discusses the ninth book assignment in their monthly Book Club,The Spanx Story: What’s Underneath the Incredible Success of Sara Blakely’s Billion Dollar Empire by Charlie and Stephanie Wetzel.
In this episode, you will learn:
- The Spanx origin story.
- How Spanx became a billion-dollar business.
- Examples of how Sara Blakely embraced failure to find success.
- How Spanx founder Sara Blakely pays it forward.
- And more!
Resources:
The Spanx Story: What’s Underneath the Incredible Success of Sara Blakely’s Billion Dollar Empire | Listen to Previous Episodes of the Bautis Financial Book Club | Schedule an Introductory Call | Bautis Financial: 7 N Mountain Ave Montclair, New Jersey 07042 (862) 205-5000
Welcome back to The Agent of Wealth Podcast, this is your host Marc Bautis. On today’s show, I’m joined by the Bautis Financial Team – John, Kayla and Kyra – for another episode of our Bautis Financial Book Club.
This is the ninth episode of the Book Club series, and this time around, John selected the book The Spanx Story: What’s Underneath the Incredible Success of Sara Blakely’s Billion Dollar Empire by Charlie and Stephanie Wetzel. John, what drew you to this book?
John:
Well, to start, I honestly had no idea what a Spanx was. But I’m a huge Shark Tank fan – I’ve seen almost every episode – and Sara Blakely is one of the guest judges on the show. I was watching an episode and actually recognized her name from Jesse Itzler’s book Living With a Seal, so I began learning a little bit more about her.
I found the story of Spanx to be really compelling, and it reminded me a lot of this idea of the American Dream.
To speak about the company’s origin, I’ll hand it over to Kyra.
Kyra:
Sure! This origin story is exactly how the book began, so it’s a great place for us to start our discussion too.
The Spanx Origin Story
Sara Blakely was 27 years old, working as a salesperson at a company that sold fax machines door to door. Because she was performing well, she was promoted into the training department which required her to move to the company’s regional office in Georgia.
Blakely was invited to a corporate event soon after making the move, and wanted to make a great impression. When planning her outfit for the event, she was drawn to a pair of white pants that still had the tag on them. She liked them – that’s why she bought them – but they hadn’t worked in the past because Blakely couldn’t find an undergarment to compliment them.
She decided to take the pants to a department store to find a solution. There, she was introduced to shapewear, which would have worked in theory… but it was way too uncomfortable.
Soon, she realized that a control-top pantyhose would be the perfect solution. But because the pants were cropped, she would have to cut off the legs. So she did it. She went to the event. And the Spanx was born.
The authors talk about how it wasn’t necessarily an original thought. They were sure people had done it before, but Blakely took a common problem… obstacle… annoyance… (whatever you want to call it) in her daily life, found a solution, and created a breakthrough product.
John:
Exactly. I found it interesting that the authors – Charlie and Stephanie Wetzel – called out that it wasn’t necessarily an original idea… there were so many versions of undergarments on the market, but none of them fulfilled all of Sara’s needs.
We also read that at one point, Sara was watching The Oprah Show and noticed Oprah’s pantyhose visible at the foot area – where her pants exposed them. This happened after Blakely already thought up the Spanx, and seeing that other women were struggling with the same issue brought her a sense of verification. Oprah plays into this story quite a bit, which we will get into later.
But it was just amazing to read how this simple idea sparked a billion-dollar business. It’s pretty amazing.
With that said, there’s a lot more that went into her success than just the idea. Kayla, can you share a bit about what you learned from the book regarding Blakely’s initial investment and business development?
How Spanx Became a Billion-Dollar Business
Kayla:
From a business and financial perspective, Spanx was pretty much self-funded by Sara Blakely.
It started with her investing her own savings – about $5,000 – into the company. In the early days, she also used her credit cards to cover the expenses. Like Kyra said, she worked for a company that sold fax machines, so she was also able to use funds from that for early product development.
In the beginning, she was super frugal. She struggled with finding manufacturers because the order sizes were too small, so when it came to packaging and shipping, she created the boxes herself and would personally deliver them to local stores.
Then, as the business continued to grow, she invested the profits back into the business. She had a little bit of help from family and friends, but she was still struggling with gaining traction with other investors. Still, she continued to reinvest the profits and watched it grow.
Then, in the early 2000s, she started adding more employees and the product line started to expand. By 2008, a private equity firm invested $300 million into the company.
Over the years, Spanx continued to invest in themselves, expand and improve the distribution network.
To sum it up, the growth was self-funded. Sara reinvested the profits back into the business rather than taking outside investments or going public. They also outsourced their manufacturing to keep expenses low, so most of the success could be attributed straight back to Blakely.
John:
Yeah. There clearly was an incredible amount of discipline involved. I mean, she was shipping items out of her house and doing almost everything on her own.
One of the reasons I like Shark Tank so much is because you get to hear about the mistakes some of the most successful people have made… and a lot of those mistakes are related to costs and investments. So, for her to keep costs low and continue to reinvest, it’s very impressive.
I mean, even after Oprah had Sara on the show to promote Spanx, she was still shipping stuff out of her house.
By the time the $300 million was invested, the business was already huge. So to start Spanx with just $5,000… it’s wild.
I really believe she handled the success of the businesses really well. If – all of a sudden – you become a billionaire, on the cover of Forbes, and so on… it can be hard to remain focused. After all, fortune can fall into the hands of the wrong people. But she did a lot of good with it. Kyra, I know you have some thoughts on that.
How Spanx Founder Sara Blakely Pays it Forward
Kyra:
Absolutely. Sara often said the most important purpose of Spanx was always as a platform for giving back. Early on, she set aside a portion of the company’s earnings to give away. But as the company grew, so did the opportunities to make a difference.
Sara was a contestant on Sir Richard Branson’s 2004 reality show “The Rebel Billionaire,” and though she made it to the finale, she was the runner up. But after the winner received his prize money, Richard Branson ended up handing her a check for $750,000 made out to “The Sara Blakely Foundation.” At the time, the foundation didn’t exist. But Branson knew how interested Blakely was in creating a nonprofit organization, so he decided to give the first donation to Sara, which helped her establish it.
The foundation was launched in 2006 with the goal to “Empower Women to Make the World a Better Place.” At the foundation’s launch event, $600,000 was raised to be donated to a college program in South Africa, which helped provide scholarships to 278 young women who would have otherwise been unable to go to college.
Another example is in 2013, Blakely was invited to sign The Giving Pledge, joining her friend Richard Branson (as well as Bill and Melinda Gates and Warren Buffett) in committing to dedicate half of her wealth to philanthropy.
With a net worth still estimated at over a billion dollars, she and her foundation have poured hundreds of millions of dollars into the lives of millions of women.
The book ends with a quote I really enjoyed on this topic. Sara said about money, “I think it’s fun to make, fun to spend and fun to give away.”
John:
I think that’s the last line in the book, right?
Kyra:
Yes, it was a great way to close.
John:
It’s also a very good point.
In the middle of the book, they talk a lot about the culture of the business, and the authors talk about how Sara’s view of failure has molded that culture.
They discuss the contrast between Blakely and the former CEO, Laurie Ann Goldman, on the pursuit of success. It was interesting to me, to see that contrast.
I’m going to hand it over to Marc to give his thoughts on her view of failure and success.
How Sara Blakely Embraced Failure to Find Success
Marc:
I think when you look at someone as successful as Sara – the youngest, self-made female billionaire – you want to deconstruct how she got to where she is. Because she obviously wasn’t an overnight success.
One of the things that really stood out to me was how she embraced failure from an early age.
She was actually forced to embrace it by her dad, a trial attorney. Every night, at the dinner table, he would ask Sara and her siblings, “What did you fail at this week?” It might have been a sports tryout (not making the team), a unit in math, etc.
Whatever they said, he never expressed disappointment in it. Actually, quite the opposite. He was pleased with failure – they would celebrate with a big high five. And the more things that they tried and didn’t succeed at, the prouder he was of them.
Sara and her siblings learned to seek out new challenges they could fail at. Every day, they attempted to be more – do more – than the day before. With that kind of approach, you will eventually be successful.
Obviously, there were a lot of setbacks when Sara formed Spanx, but there were a ton of examples in the book that happened before…
Growing up, Sara wanted to be an attorney like her father. So she took the LSATs, but failed. Embracing failure, she did what you would think: she signed up for an LSAT prep class and studied harder. But when she took the test again, she failed… again.
Next, she thought she wanted to be the Goofy character at Disney. So she traveled to Disney and inquired about the position, only to find out that she had to have three months of experience working in the park. She also had to be a certain height, so she eventually wasn’t able to be Goofy.
It was time for her to move on, and she eventually started working for a copier company. That’s what led to the party that Kyra was talking about and the idea for Spanx.
So many people don’t take risks. They don’t seek out challenges because they’re afraid of failure, and that’s where she’s different.
There’s a lot of famous stories about failure. One, Thomas Edison. The story is that he failed 10,000 times before he was able to perfect the electric light bulb. The way he framed it was, “No, I didn’t fail 10,000 times. I found 10,000 times that didn’t work, and if I didn’t find those 10,000 times out, I would’ve never gotten the success that I got.”
Another famous example is Michael Jordan, the greatest basketball player of all time. Surprisingly, he didn’t make the varsity basketball team as a sophomore in high school. Now, you have two options:
- You can feel sorry for yourself and move on to something else.
- You can practice, improve and try again.
So he took his training to the next level. It’s said that when he was training or practicing and didn’t want to, he would visualize being cut from the team. That served as his motivation to carry on.
Failure is something that she embraced. Now, it’s something that she’s doing with her own kids – that same exercise her father did with her and her siblings. That’s the biggest takeaway I got from the book.
John:
100% agree. As a parent, you want your kids to try a variety of things, and they don’t always work out. So you have to embrace failure through all phases of life.
I think that brings us to the end here. I’ll hand it over to Marc to close the episode out.
Marc:
Thanks, John. That’s all we have for today’s episode. If you’re interested in reading The Spanx Story, the book is available on Amazon. And if you liked this episode and would like to listen to any of our past Book Club episodes, we will link to them in the resources section of the show notes.
Thank you to everyone who tuned into today’s episode. Don’t forget to follow The Agent of Wealth on the platform you listen from and leave us a review of the show.
3 Ways to Raise Your Social Security Benefit