Most GovCon company Founders are amazed to learn that hidden within this market is the Holy Grail of wealth accumulation, passive income. After a substantial effort to win and transition a contract, you are rewarded with an extended revenue stream, requiring minimal oversight. And transitioning a contract isn’t nearly as hard as you might believe. Here’s why.
Most bid opportunities are simply a continuation of ongoing contracts that are being “re-competed” at the end of the contract period. During the previous contract period, the government and incumbent contract holders have “weeded out” bad contract performers. The folks that remain are almost always good. And guess what happens when you win the contract and their soon-to-be-former employer loses it? They come running to you to keep their jobs. With the experienced, incumbent workforce on your team, work performance during contract transition on your new, complex win is no longer an issue.
Even better, the program manager is typically funded by the contract to be the onsite manager for the entire contract, working hand-in-glove with government leadership. Smart corporate executives in this industry fully empower their program managers to meet both contractual and financial goals of their awarded contracts. The corporate office usually only gets involved when there are opportunities or issues. Otherwise, the program manager runs the show, ensuring that revenue and passive income keep rolling in!
Most government contracts are three to five years in length. However, that’s not the full story. Once you’ve won a contract, bidding on its contract renewal or recompete is tremendously easier since you have 100% knowledge of your customer’s hot buttons. This simple fact is why incumbent contractors have a 70% follow-on award rate. A five-year contract really has an “expected value” duration of 8.5 years, requiring a significantly reduced effort to win the re-compete. That’s nearly a decade of passive income for writing a winning proposal. It’s even longer, if the contract is recompeted a second, third or fourth time.
In addition to largely passive income streams, business owners are creating equity in their businesses. Every time your company wins a contract, gains a new customer, achieves a new credential, or simply stays alive for another year, it accumulates value. Investors and other companies in the Federal Government contracting industry are constantly seeking new investments and ways to make current investments more profitable. This frequently entails mergers and acquisitions. In other words, you may have an opportunity to have a very significant “liquidity event” by selling your business.