Government contracting can be a lucrative business, as a result, it can also be highly competitive. In fact, last year’s Deltek Clarity Government Contracting Industry Report showed that 64% of small businesses surveyed expected their company’s revenue from government contracts to increase this year. To grow, your firm must consistently deliver high-quality services while simultaneously looking for ways to increase efficiency and profitability. We work with GovCon leaders every day who are focused on these same priorities… and we’ve learned something. With that in mind, here are six tips to help your government contracting firm become more profitable.

Six Tips to Help Your Government Contracting Firm Become More Profitable

  1. Consistently Benchmark Your Firm and Monitor Metrics
    Monitoring performance metrics is essential for identifying areas of improvement and increasing profitability in government contracting. By tracking metrics such as revenue, profit margins, and employee productivity, you can identify opportunities for improvement and make data-driven decisions to improve performance.

  2. Focus on Satisfying Your Most Profitable Customers
    Acquiring a new customer can cost five times more than retaining an existing one. Your top customers provide consistent revenue through the repetitive purchase of products or services. Focusing on the satisfaction of these customers can help businesses increase their sales activity further, improving profitability. An upsell or add-on opportunity for an existing client is typically much easier than developing a new prospect. In fact, studies have shown that the success rate of selling to an existing customer is 60-70%, while the success rate of selling to a new customer is 5-20%.

    Focusing on the satisfaction of existing customers will also make them more likely to be a reference. A strong base of referral customers is a must for any organization when it comes to landing new prospects. Therefore, it should come at no surprise that companies with high levels of customer satisfaction are often the most profitable.

  3. Develop a Strong Proposal Strategy
    Winning government contracts requires a strong proposal strategy. This means understanding the requirements of each contract, developing a compelling proposal that meets those requirements, and presenting it in a way that stands out from the competition. A few keys to developing a strong proposal strategy include:

    • Identify the key stakeholders early
    • Conduct thorough research
    • Hire experienced proposal professionals
    • Establish clear objectives and metrics for the proposal
    • Develop a clear and compelling narrative
    • Use proposal management software and document management systems to streamline the process

  4. Get Laser Focused on Your Core Competencies and Promote Them
    One of the most effective ways to improve profitability in government contracting is to focus on your core competencies. This means identifying the areas in which your firm excels and concentrating your efforts and resources on those areas. You may want to consider specializing in a specific industry or service. Government agencies often have specific needs, and contractors that can demonstrate expertise in a particular area are more likely to be successful. Make sure to highlight your expertise in your marketing materials. Client case studies are a great way to show your expertise and highlight happy client(s) within the same agency. By becoming laser-focused, you can improve efficiency, reduce costs, and deliver better results to your clients.

    Government contracting is a huge market, but the word of success travels fast. Firms with a strong reputation are likely to receive referrals and repeat business. A strong brand w/ a unique differentiator can allow an organization to demand higher prices for its products or services. However, developing a strong value proposition and a narrative of differentiation alone is not enough. You need to spend time and money telling that story. If that narrative is conveyed clearly and consistently it will help you win more business.

  5. Foster a Culture of Innovation
    Fostering a culture of innovation can help your government contracting firm stay ahead of the competition and increase profitability. By encouraging employees to think creatively and develop new solutions, you can identify new opportunities for growth and success in the industry.

    Leaders of government contracting firms (and other small businesses) understand that employees are their firm’s most valuable asset. Fostering a positive culture of innovation that offers employees the ability to contribute new solutions will help you in hiring and retaining top talent, an essential component for profitability. By hiring the best people and providing them with the training and support they need to succeed, you can deliver better results to your clients, reduce turnover, and build a strong reputation in the industry.

  6. Manage Risks Effectively
    Risk management is a critical aspect of government contracting, and managing risks effectively can help you avoid costly mistakes and protect your profitability. This means identifying potential risks, developing contingency plans, and taking steps to mitigate risks before they become problems. When it comes to bidding, there are five main types of government contracts and there are pros and cons associated with each one. Make sure you have a team who is versed with each type and can help you determine if a contract is one you wish to pursue.

    The five types of government contracts are:
    • Cost Plus
    • Fixed Price
    • Time and Material
    • Labor Hour
    • Indefinite-Delivery, Indefinite-Quantity

And Speaking of Profitability

By following these tips, you can position your firm for success and achieve long-term profitability in this dynamic and rewarding industry. At Blu Omega, we have an extensive history of supporting federal & commercial customers grow and become more profitable. Our scope of services includes post-award surge support, proposal support, and key personnel staffing. For more information, contact Blu Omega here.



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