Each year the federal government aims to award 23% of its contracts and purchases to small businesses. That’s a big chunk of change—U.S. government agencies are the world’s largest buyer of goods and services, spending about $425 billion annually, according to the SBA. They buy anything from office furniture and automobiles to consulting services and temporary staffing.
In order to sell to these federal agencies, it’s best to get your small business listed as a “preferred vendor” on the General Services Administration schedule. Here’s what you should know before going through that application process.
The requirements. The GSA generally wants its vendors to have been in business for at least two years when applying, says Mark Amtower, a consultant in Highland, Md., who helps GSA vendors market their products or services. The GSA also makes sure your company is “financially sound” by issuing a credit report, and often will look at your balance sheet and profit and loss statement. So make sure your financials and credit are in good standing.
Make sure you’re wanted. The GSA only approves businesses in certain sectors—those that can conduct business with the government. In other words, it won’t approve a business whose products or services aren’t useful to any federal agency. (Here’s a list of the sectors.) And before applying to become a vendor, search the GSA’s recent sales reports to see which type of businesses are making the most money.
Know the terms. If your business is approved as a preferred vendor, it will be required to offer favorable pricing and terms to the government. (Which is the purpose of the GSA schedule.) These prices and terms must be good for five years. “If you’re retailing a product, then you should have guaranteed pricing [with your manufacturers and wholesalers] for that period,” Amtower says. Pricing is an important determinant for the GSA when choosing its vendors, so your business will likely be required to share information about your pricing and discounting practices during the application process.
It’s not free. All businesses on the GSA schedule pay the government a “contract access fee” equal to .75% of their sales made to the government each quarter. “If your accounting system is not set up to handle that, you’re in for a rude awakening,” says Amtower. Plus, if your business becomes a preferred vendor it can be paid a surprise visit by a GSA auditor at any time. “They don’t have to tell you they’re coming.”
It’s not a ticket to increased sales. Amtower says getting on the GSA schedule isn’t the most difficult part—it’s marketing your products and services once your business is on the list. “There are 12,000 businesses that have a GSA contract, and 3,000 of them didn’t make a penny from their contract last year,” says Amtower. “They assume business will automatically occur, though business only occurs when you develop relationships with buyers—just like any other industry.” So having a GSA contract is advantageous, for sure, but it does not guarantee sales for your business.