GovCon Industry Advantages: Low Cost Barrier to Entry

For many, the single most important advantage of launching a new business in the Federal Government contracting industry is its very low cost of market entry. In layman’s terms, this means how much money you must spend to make a run at starting a successful business in a specific market.

Although there are some markets that have low costs of entry, they may not fulfil your dreams or purchase that beach house. For example, a teenager can spend $500 for a lawnmower, trimmer, and blower to enter the lawn mowing market in their neighborhood. Their $500 investment enables them to compete for $20-$40 mowing jobs.

Now think about this…The same financial investment for a teenager hoping to earn gas money when invested in the Federal Government market can have you competing for millions of dollars in government contracts! How can this be? Here’s why. In almost all Federal Government contracts, minimal financial commitment is required until after you’re awarded the contract. This means you don’t have to hire your contractor employees until after you win the contract and are guaranteed revenue to pay them!

Depending upon your specific service or product that you intend to sell to the Federal Government, there may be some variance in costs associated with launching a GovCon company. Using Randy Wimmer, the Government Contracting Academy founder, as an example, he paid $100 in licensing fees to register his first as a Limited Liability Company.

He bought a $50 website template and populated it with his corporate information and paid $15/month in webhosting services. Webhosting came with a free email account. He bought $50 worth of business cards and upgraded his personal printer to something with a little higher print quality. He paid around $250 for it. His cost to bid on his first prime contract that was worth $15 Million was $20 in binders and paper. His real cost to submit this proposal was many, many late nights of work.

This is what Randy didn’t have to buy or do. He didn’t have to pay ludicrously expensive franchise fees. He didn’t have to buy or lease an office or furniture. Instead, he sat at his kitchen table or camped out at Starbucks and used his existing laptop. He didn’t have to hire staff. Most importantly, he didn’t have to quit his “real job,” so he had the same amount of income that he always had. Instead of writing proposals during the day, he wrote them after work when his kids went to bed.

Because of the shoestring budget required to launch a GovCon startup, Randy did not have to apply and be approved for large business loans. He did not have to convince doubting investors that his business plan would lead to hefty return on investment for their clients. He did not have to dilute his ownership share for startup funding.

His upfront costs to start a Federal Government contracting company that ultimately led to an 8-figure acquisition was essentially that of a teenager hoping to make a few bucks mowing lawns in his neighborhood. It does not always take money to make money. However, Randy encourages aspiring GovCon entrepreneurs to make a tiny investment of $25K to attain corporate credentials to tremendously accelerate their success!