Danger: No Traction.If your business is struggling, pursuit of government contracts can hurt more than it helps. You can expect to spend serious money -- and easily a couple of years of effort -- to find a return on what you'll invest to develop opportunities and prepare proposals. And when you DO win, guess when you get paid? After you do the work. Winners budget to stay in business long enough not only to win, but also to perform.
Your current line of credit is often not enough to finance pursuit of several major opportunities, and win a couple, AND stay alive until after you get your first payment. Even healthy companies that are blessed with a line of credit today are shocked to find that their bankers do not simply extend that line and its terms, even to finance a signed government contract. Margins are usually not huge in government contracting. Asset-based financing is your cheapest money. While I see offerings every week for alternative financing (aka "last-minute money"), it's always more expensive, and will evaporate your profits in a hurry.
The Fix? Get Some Financing.
Have you hugged your banker lately? I'm really not joking. If you've decided to pursue government contracts, and revised your marketing budgets to support that pursuit, review your access to working capital and financing. Then visit your banker to let her know your plans -- not least because you want to check your assumptions about financing options and how your bank can support you.
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