While federal and state governments may be the biggest contract opportunities for small businesses, local city, county and town governments also provide excellent selling possibilites. Municipal agencies — such as parking bureaus, water and sewer commissions, or even boards of education — regularly do business with small, local companies, and it may pay to investigate whether pursuing something similar could be profitable for your business.
It's important to understand that doing business with a government is vastly different than typical business–to–business selling. Sales cycles can be extremely slow, and prospective contractors often face a good deal of red tape. Local governments rarely have the ability or desire to move quickly. Many contracts, particularly larger ones, require a long bidding process and the approval of politically appointed boards which don't always find it easy to reach a consensus. It's not unheard of for the contracting process to drag on for years.
Local governments also tend to focus on the short term. Rarely are they able to think past the next election. There's little incentive for them to try anything new. This means that if you're selling "benefits," you can't look at long–term goals, but need to focus on short–term needs. You also need to show how your product or service is a safe choice, since these agencies rarely, if ever, take risks when it comes to procurement.
Use the following tips to help assist you in reaching this potentially lucrative market.
Learn how each agency does business
Spend time up–front researching the contracting methods used by each municipality you're targeting. Each town or city does things differently; their political personalities vary, as do their contracting methods. Contact the people in charge of purchasing at the municipal agency you think would be interested in using your products or services. Do they, in fact, buy products or services like yours? What procedures do they use? What information do they need to see before considering a purchase? How are buying decisions made? Who is responsible for developing the appropriate RFPs? What requirements does your company need to meet? What politics are involved in purchases?
If you can't get this information from the agency, try speaking with non–competing businesses that are selling to them, and ask them the same types of questions. Network with local businesses through your chamber of commerce. Look for the names of contractors when winning bids are posted.
Another excellent source of background information is the local newspaper. Go through back issues of the daily or weekly paper and search for coverage of events like commissioner meetings. Look for information about political issues, recent appointments, or budget changes that will give you perspective on how decisions are made. Does the board regularly table motions or does it act quickly? Is there any behind–the–scenes maneuvering you need to know about? Does it favor local contractors or does it look statewide or nationwide to fill contracts?
Be very sensitive to price
Municipal contracts are almost always awarded to the low bidder, so agencies can show that they are not wasting the taxpayers' money. For a small business that has positioned itself to sell on value, not on price, this can be extremely frustrating. Remember that governments base their buying decisions on short–term expenditures, not long–term savings. You'll need to focus your sales pitch on what they have to spend, not on what they'll save.
Cost out any contract bid carefully. Can you get the contract and still make money? Don't low–ball the price just to get in the door; unlike some business–to–business contracts, you'll find it nearly impossible to renegotiate a higher rate. Don't get yourself locked into a money–losing contract.
Look for influence at all levels of government
Don't limit your sales efforts to the contracting agency. Sell across the government spectrum to find people who can champion your business. In a political arena, there are many others who can help you get your products or services in front of the right agency. Is there anyone else who can lobby to help you get the contract? Are there city council members, commissioners, or other elected officials who can represent your case?
You don't have to have been a major contributor a politician's campaign to do this. Many politicians naturally want to support local businesses, and are interested in the success of their constituents, especially around election time. You can also make contact through community groups and charities you might be active in.
Make RFPs work for you
At almost every level, government contracts are awarded through formal bidding using requests for proposals, or RFPs. These RFPs are used to ensure that the contract goes to the lowest possible bidder who can meet the agency's specific, stated needs. Even if you offer a unique product or service, there still may need to be an RFP. The point of this process is simple; it avoids appearances of favoritism to a particular supplier, and allows the government to show that tax dollars are being spent efficiently.
Shrewd small business owners can turn this process to their favor, however, speak regularly with the office responsible for developing the RFP and become a resource to them. If you offer some kind of unique solution, work with the agency to help draft the RFP. Make sure the published specs include any proprietary features your product or service offers. If you're able to offer a package of services (both computer systems and training, for example), ask to have the RFP structured that way. The bottom line: the RFP should be worded in a way that makes your company the ideal bidder.
Build on successes
Cities and municipalities are hesitant to try new things, even ones that will save them time or money. The reason is simple — old ways are safer than new, and local governments may prefer to play it safe. If you're able to persuade one or two cities to go with your product or service, more will be open to it. So focus your efforts on the one or two municipalities that are most likely to buy your product or service. When you're able to demonstrate that your product or service has been successful elsewhere, other agencies will be more open to considering it.
The previous content is provided by OPEN: The Small Business NetworkSM from American Express.
