B e c o m i n g a G o v e r n m e n t P r i m e C o n t r a c t o r

May 25, 2016

F A M O U S Q U O T E S A B O U T B U S I N E S S

• “A failure to plan is a plan to fail” by Anonymous• “If you keep on doing what you are already doing, what

you are going to get is what you already have” by Anonymous

• “Act as if someone, somewhere is inventing a product or service that will put you out of business” by Dr. Gary S. Goodman, TRW executive

• “Only the paranoid survive” by Andrew Grove, former Intel CEO and Chairman

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W H Y Y O U A R E I N B U S I N E S S

• Lifestyle: Keep and maintain for the long-term• Grow and Sell: Why build processes and

systems?

These are very different approaches to business and call for unique strategies

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A G E N D A

• Progression from Subcontractor to Prime Contractor• Attributes of a Subcontractor• Attributes of a Prime Contractor• Finders, Minders, and Grinders• How to Grow a Small Business into a Big Business• The 5 Mistakes Standing Between You and Your First Million• 5 Big Business Growth Strategies Small Businesses Can Use• Your Business Plan• References/Resources

P r o g r e s s i o n f r o m S u b c o n t r a c t o r t o P r i m e C o n t r a c t o r

P R O G R E S S I O N F R O M S U B C O N T R A C T O R T O E X P E R I E N C E D P R I M E C O N T R A C T O R

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DIFFERENCE BETWEEN SUBCONTRACTOR AND PRIME CONTRACTOR

EVENT/PROCESS/TASK SUB NOVICEPRIME

EXPERIENCEDPRIME

Work inside customer ● ● ●

Identify hot buttons/needs ●

Work with customer on requirements definition ●

Review draft/shape RFP ●

Initiate draft proposal ● ●

Respond to formal RFP ● ●

Respond to prime data call (rates and resumes) ●

Formal Make-or-Buy analysis ●

Develop RFP to subs with SOW ●

Technical writing ● ●

Bubble chart (capabilities matrix) ●

Compliance matrix ●

Proposal outline – responsibility matrix ●

Color reviews ●

P R O G R E S S I O N F R O M S U B C O N T R A C T O R T O E X P E R I E N C E D P R I M E C O N T R A C T O R

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As a Government prime contractor, sooner or later you will need compliant business systems per the Defense Federal Acquisition

Regulation Supplement (DFARS)

DFARS BUSINESS SYSTEMS

SYSTEM DFARS SUB NOVICEPRIME

EXPERIENCEDPRIME

Accounting 252.242-7006 ● ● ●Earned Value Management (EVM) 252.234-7002 ●Estimating 252.215-7002 ● ●Material Management and Accounting System (MMAS) 252.242-7004 ●Property Management 252.245-7003 ● ●Purchasing 252.244-7001 ● ●

A t t r i b u t e s o f a S u b c o n t r a c t o r

AT T R I B U T E S O F A S U B C O N T R A C T O R

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• To get started as a Government contractor, the entrepreneur sells his/her skills to someone he/she knows

• Next, they move to the staff augmentation phase (body shop)

• The next level is providing technical solutions• Unfortunately, most new companies don’t have customer

insight and are not very value-add in nature• Signs teaming agreements with work share and other

restrictions (exclusivity, non-compete, etc.)

AT T R I B U T E S O F A S U B C O N T R A C T O R

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• Subcontractor focuses on a much narrower scope of work• Does not need to understand the full scope of the project –

typically a ‘niche’ resource• Subcontractor must typically comply with the ‘spirit’ of the

regulation – a prime contractor must comply with the ‘letter of the law’

• Project management responsibilities are significantly less than those of the prime contractor

• Subcontractors ‘look through’ the prime contractor with an eye toward satisfying the ultimate Government customer – multi-layered focus

AT T R I B U T E S O F A S U B C O N T R A C T O R

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• So what marketing strategy should you use?o An inch deep and a mile wideo An inch wide and a mile deep

• The answer is both! Start off looking for low-hanging fruit – anything that provides you with a realistic opportunity of getting work.

• Then once you get a person on the inside of the customer, grow a mile deep. Get known and get to know the customer’s wants, needs, style, and philosophy.

S T R A T E G I C D E C I S I O N S

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• As a subcontractor or prime contractor, strategic decisions will need to be made about:o What you want to beo Where you want to go

• A niche market is usually your best bet. Other, more ‘developed’ and crowded markets provide challenges.

STRENGTHS/WEAKNESSES/OPPORTUNITIES/THREATS (SWOT) EVALUATIONFIRE AND AMBULANCE SERVICES

ATTRIBUTEMARKET

OPPORTUNITY THREAT

CAPABILITY

STRENGTH

Your unit has strong capabilities and the environment is ripe for you to

provide a needed service

You are strong, but there are competitors such as private

ambulance services that make it harder to penetrate this market

WEAKNESSYour unit is weak, but your

capabilities could be enhanced to provide a needed service

You are weak and there are competitors or inhibitors to your

success

W H E R E I S T H E M A R K E T F O R W H AT Y O U O F F E R ?

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MARKET GROWTH EVALUATIONFIRE AND AMBULANCE SERVICES

ATTRIBUTE PRODUCTS AND SERVICESEXISTING NEW

CUSTOMER

S

EXISTINGOrganic growth comes from doing

more of the same stuff with the existing client base

You may find the incidents of fires are down, so you introduce

ambulance services or fire safety training to existing clients

NEW

New growth is easy to do when you have a great product and/or

service that you offer to new clients (such as a growing county

with new office buildings)

As a maturing county, you find your clients are white collar professionals in 20-story high rise office buildings,

so you introduce exit and safety services for these new structures

A t t r i b u t e s o f a P r i m e C o n t r a c t o r

AT T R I B U T E S O F A P R I M E C O N T R A C T O R

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• Prime contractors that pursue and win major service contracts with the Government often form teams with smaller subcontractors. They do this to:o Broaden their technical offerings and capabilitieso Take advantage of subcontractor domain knowledgeo Develop an extensive pool of qualified staff and Subject Matter

Experts (SMEs)

• Assembling a winning team, however, requires experience and skill. Prime contractors typically look for subcontractors that meet certain defined criteria.

From: Federal Government Contracting: 7 Characteristics of a Successful Subcontractor by Jon Stout

AT T R I B U T E S O F A P R I M E C O N T R A C T O R

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Eight prime contractor characteristics are critical in developing a winning team:

1. Unique or Exceptional Skills Desired by the CustomerEach customer requirement is unique. To develop a winning proposal, the team must identify and include team members with the skills the customer needs.

2. Possess Extensive Customer Domain KnowledgeKnowledge of the customer, its mission, and personnel are mandatory prerequisites to winning. It cannot be over-emphasized that intimate understanding of the customer organization and operations offers tremendous advantages.

AT T R I B U T E S O F A P R I M E C O N T R A C T O R

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3. Extensive Proposal Preparation Skills and the Ability to Clearly Write and Persuade the Customer• Concise and persuasive proposal writing is required because customer

evaluators receive a large number of proposals and summary checklists are often used to score winning proposals. Since proposals often have a number of authors that write in different styles and voices, strong editing skills can be especially valuable.

• The customer, through the proposal process, demands clear and concise solutions. A well-written proposal that meets the customer’s needs is a winning document.

4. Support the Proposal Process and Meet All Data CallsWriting Cost, Past Performance, Technical, and Management volumes is an important part of the proposal process. The process is complex and requires the collection and evaluation of large amounts of data, usually developed using information provided by all teammates. The best subcontracting teammates respond to data calls timely with accurate information.

AT T R I B U T E S O F A P R I M E C O N T R A C T O R

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5. Develop Aggressive Pricing• Large Government projects are usually awarded competitively and all

competitors must develop aggressive pricing• Fringe, overhead, and G&A forward pricing must be carefully and

accurately developed and the customer usually reserves the right to review prices and cost buildup. The best contractors understand Government pricing models and requirements and eliminate excess costs from their proposals.

• Some contractors offer separate benefits packages based upon market demands that allow aggressive pricing and a more competitive cost proposal. This strategy has resulted in a number of team wins.

6. Use Customer Knowledge to Shape and Win Task OrdersFor many large Indefinite Delivery, Indefinite Quantity (IDIQ) contracts, task orders are awarded competitively. The most effective way to win task orders is to interface with the customer, understand its needs, and influence the specification of the requirements in a way that teammates can best respond to and win.

AT T R I B U T E S O F A P R I M E C O N T R A C T O R

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7. Be an Aggressive (Smart) Recruiter• For services contracts, contractors must be able to recruit and hire the

best qualified resources quickly and cost-effectively• Successful recruiting requires an investment in recruiting technology and

personnel that enable the creation and maintenance of a pipeline of available, skilled candidates with clearances required by the customer

• Large Government contracts are awarded competitively and developing winning proposals can be very costly. The best winning proposals are team efforts and the best subcontractors meet or exceed the criteria described above.

• This is particularly true when the proposal is a response to a major multi-year effort. Subcontractors that always respond before data call due dates generally gain a larger percentage of work share. Subcontractors with a reputation for performance and responsiveness on data calls are often invited to join new project teams.

AT T R I B U T E S O F A P R I M E C O N T R A C T O R

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8. Manage Subcontractor Risk• Pick vetted, quality subcontractors that will address proposal

responsibilities and, upon award, the proposed work scope• Ensure that selected subcontractors are qualified to work for the

Government (per FAR 9.104, Standards):o Adequate financial resourceso Able to comply with delivery or performance scheduleo Satisfactory performance recordo Satisfactory record of integrity and business ethicso Necessary organization, experience, accounting and operational skills, and

technical skillso Necessary production, construction, and technical equipment and facilitieso Otherwise qualified and eligible to received an award under applicable laws and

regulations

F i n d e r s , M i n d e r s , a n d G r i n d e r s

F I N D E R S , M I N D E R S , A N D G R I N D E R S

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• Finder: The true entrepreneur that knows the product and/or service and can deliver sales (typically the business owner)

• Minder: The Accountant, Contracts, HR staff. They keep track of the business, but don’t typically generate revenue.

• Grinder: The worker bee, in the trenches delivering the product and/or service

• Finders are the people that started the business and have had to do it all at one point or another.

• Minders and Grinders are the people that perform the work formerly done by the Finder.

• Each is very good at what they do, but the owner can, or believes he/she can, do it all better than the folks replacing him/her

• As the business grows, it becomes more complex

From: B2B CFO

F I N D E R S , M I N D E R S , A N D G R I N D E R S

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• So when things go awry, the Finder gets involved. Over time, this takes up more and more of the Finder’s time.

• As a result, less time is spent Finding• Few can do Finding• This is the most critical part of the business• Without Finding, there is no business• Therefore, the first rule of success is to keep Finders out

of the day-to-day efforts (functional specialties) and let them do the Finding

H o w t o G r o w a S m a l l B u s i n e s s i n t o a B i g B u s i n e s s

H O W T O G R O W A S M A L L B U S I N E S S I N T O A B I G B U S I N E S S

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• A failure to grow can more often than not be attributed to owners working IN their business and not ON their business

• Typically, the entrepreneur does everything and as the business grows, he/she works:o harder and hardero longer hourso nights and weekends as the perceived solution

• Quality suffers and sales decline or your business stays small because of limited capacity

From: How to Grow a Small Business into a Big Business By Greg Fisher

H O W T O G R O W A S M A L L B U S I N E S S I N T O A B I G B U S I N E S S

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ROADMAP• Strategizing• Structuring• Skills Development• Systematizing• Transition

S T R A T E G I Z I N G

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It is easy to get caught up in the day-to-day affairs of the business. Instead STEP BACK:

• Ask yourself if you are headed in the right direction (periodically/quarterly; not just at the start of your business)

• As you grow, you are in a better position to make strategic decisions because you:o Know the industry bettero Have greater insight into the marketso Understand your competitorso Understand the business model alternatives

S T R A T E G I Z I N G

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In the Strategizing phase you should address (SWOT):

• VALUEoWhat value are you creating and for whom?o How will you create value in the future?

• MARKETSo Are we operating in the right markets?oWhich markets will we focus on growing in the future?

• COMPETITIVE ADVANTAGEo Are we winning in our markets?oWhat can we do to improve our competitive advantage?

S T R A T E G I Z I N G

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In the Strategizing phase, you should address:

• ACTIVITIESoWhat are the core activities of our business?oWhat do we choose to do and choose not to do?

• GOALSoWhat are our goals for the next 3-5 years?oWhat steps are needed to achieve our goals?o Do we have a BHAG (Big Hairy Audacious Goal)?

S T R U C T U R I N G

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• Structure is the right people in the right positions to do what is required to make the strategy happen

• As you grow, structure becomes increasingly important• For a small business, it is you and a few others. You can

easily define your responsibilities and what you will outsource.

• For a large business, each person needs to understand:oWhat their duties areo How they will be held accountable

S T R U C T U R I N G

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• As the company grows, you can lose sight of everyone’s duties, resulting in:o Duplication of worko Lack of accountabilityo Work overload

• Working ON the business, therefore, requires leadership to:o Establish the business structure including lines of responsibilityo Establish position descriptions and how employees can grow

within the organizationo Establish repeatable policies and procedures for business

functions

S T R U C T U R I N G

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In the Structuring phase, you should spend time addressing:

• SKILLSo What skills do we require in the organization to deliver on the

strategy? o Do we currently have the right skills to deliver on the strategy? o Where can we find the missing skills?

• ROLESo How do we put people in roles that leverage their skills and

enable us to deliver on our strategy? o Describe each person’s roles and the responsibility that goes

with that role?

S T R U C T U R I N G

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In the Structuring phase, you should spend time addressing:

•  ACCOUNTABILITYo How will people be held accountable for delivering on the

requirements of their roles? o What will we measure? o Who will do the measuring? o How often will we measure performance?

S K I L L S D E V E L O P M E N T

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• For people to operate effectively within a system, they often need to be trained

• It is, therefore, essential to see skills development and training as a critical element of working on your business

• You should oversee the training and take an active interest in the skills requirements and development of all the people in your business

S K I L L S D E V E L O P M E N T

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In the Skills Development phase, you should spend time addressing:

• PERFORMANCE REQUIREMENTSo At what level do I need the various people in my organization to

perform for the business to be successful?• PERFORMANCE GAPSo What are the gaps in their performance between what is required

and what is currently happening?

S K I L L S D E V E L O P M E N T

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In the Skills Development phase, you should spend time addressing:

• TRAINING PRIORITIESo In what order should I address the skill gaps for maximum

success and survival of my business?• TRAINING METHODSo Which gaps are best addressed through formal training?o Which are best addressed through on-the-job coaching and

mentoring? o Who will do all of the required training?

S Y S T E M AT I Z I N G

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• To build a business with a real platform for growth, it is critical to identify the key activities relating to that business and to build systems that allow those key activities to be replicated effectively and often

• When most businesses start out, entrepreneurs perform most of the critical activities in the business themselves

• The only way entrepreneurs can facilitate real business growth is to translate what they do into a set of REPEATABLE processes that others can execute

S Y S T E M AT I Z I N G

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Most businesses require systems and processes that relate to:

• Marketing (estimating)• Selling (estimating)• Product or service delivery (quality/internal controls)• Financial management and reporting (accounting and

timekeeping; EVMS)• Buying (purchasing and subcontracting)• Product development (quality/internal controls)

S Y S T E M AT I Z I N G

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In the Systematizing phase, you should spend time addressing:

• KEY PROCESSESo What are the key processes that:

Create value for our customers? Allow our business to run effectively and efficiently?

• PROCEDURESo Do we have established, documented procedures to deliver on our key

processes easily and often? o For which of our key processes do we still need to establish and

document procedures?• AUTOMATION AND OUTSOURCINGo What could we automate to reduce the dependence on people? o Are there procedures within our processes that could be more effectively

executed by external organizations?

T R A N S I T I O N

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• Making the transition from spending all your time working in your business to consistently dedicating time to working on your business is not easyo It takes discipline and dedication to get this right, but such

discipline and dedication should yield handsome returns in the long-term

o Smaller business owners should aim to spend 20% of their time (the equivalent of 1 day a week) working on the business

o Larger business owners or managers within larger enterprises can aim to spend as much as 80% of their time working on the business

• The higher your growth aspirations, the more time you should spend working on your business

T R A N S I T I O N

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• The effects of moving from working entirely in your business to regularly dedicating time to working on your business will be amazingo You will realize a year down the line that you have a happier, more

empowered, more focused workforceo You will discover that customers you personally had nothing to do

with are raving about your company’s serviceo You will obtain better work/life balance, and see the business

grow in a sustainable and profitable way! • BONUS: Doing these things can greatly increase the value of

your business when you are ready to sell

5 M i s t a k e s S t a n d i n g B e t w e e n Yo u a n d Yo u r F i r s t M i l l i o n

T H E 5 M I S T A K E S S T A N D I N G B E T W E E N Y O U A N D Y O U R F I R S T M I L L I O N

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1. Most focus on perfection, not experimentsDon’t be paralyzed by perfection; rather, be driven by

experimenting/testing2. Few thoroughly think things throughKnow what you want; have a vision/goal, then reverse engineer it into

smaller actionable steps3. Most never learn intelligent delegationGetting things done through others multiplies your ability to get things

done. Remember Finders, Minders, and Grinders.

From: The 5 Mistakes Standing Between You and Your First Million By Peter Voogd

T H E 5 M I S T A K E S S T A N D I N G B E T W E E N Y O U A N D Y O U R F I R S T M I L L I O N

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4. Most are making the wrong tradesTrading time for money works in the early stages of a business, but

without scaling and leverage, you will have a low multiplier5. Most are ego-focused instead of customer-centric

People care about what your business can do for them. Most entrepreneurs try to sell their experience and expertise. They believe that people want to pay them for what they know, but people don’t. They want to buy a solution or outcome to their problems and desires. They want results. They want you to solve their problem and reduce their pain. They don’t care about you.

5 B i g B u s i n e s s G r o w t h S t r a t e g i e s S m a l l B u s i n e s s e s C a n U s e

5 B I G B U S I N E S S G R O W T H S T R A T E G I E S S M A L L B U S I N E S S E S C A N U S E

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1. MARKET SEGMENTATION: Segmenting your market comes down to making choices. Who will you serve? Who will you avoid? Which segment can you focus on to improve profitability? Cleared vs. Uncleared? Federal vs. State and Local or commercial? Intelligence vs. Civilian agencies vs. DoD?

2. LEVERAGING PARTNERSHIPS: Find ways to get things done through relationships that leverage your company’s strengths and weaknesses

3. USE TO-DO CHECKLISTS: Give yourself a guide to success and a reminder to do the essentials every day

4. ACQUISITIONS: Don’t dismiss acquisitions just because you’re small (2 small businesses can be a big leverage and not cost a lot)

5. BECOME A LEADER IN THE INDUSTRY: Find a need and satisfy it. You will be noticed.

From: 5 Big-Business Growth Strategies Small Business Can Use by James Clear

Yo u r B u s i n e s s P l a n

Y O U R B U S I N E S S P L A N

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• Identify or define your mission/vision statement• Identify goals and objectives of the company and departments• Identify existing policies, procedures, and practices• Meet with staff and discuss corporate goals• Have staff identify present state functions, roles and

responsibilities, and problems• Collaboratively identify potential future state (short- and long-

term) functions, roles, and responsibilities (costs and benefits)• Diagram process flows (inputs, process, outputs)• Prepare a calendar of events and required lead times• Identify desired metrics (present and future state, compliance

with Cost Accounting Standards and Cost Principles, etc.)

Y O U R B U S I N E S S P L A N

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Review existing plan or develop a strategic plan• Existing customers o Services usedo Potential expansion of existing serviceso Use of new services

• New customers• New products• Identify new markets and contract vehicles• Schedule, size, and win probability = estimated sales and

revenues (i.e., customer short- and long-term plans)• Identify competitors, suppliers, potential teammates• Perform Strengths/Weaknesses/Opportunities/Threats (SWOT)

analysis

Y O U R B U S I N E S S P L A N

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• Identify infrastructure: staff, systems, and processes required to meet the strategic plan and associated goals (i.e., CAS compliance, cost estimating, contracting, accounting, service delivery, etc.)

• Prioritize (based on cost/benefit analysis) implementation requirements

• Prepare an enhancements schedule• Build capital, revenue, and expense budget forecasts

Y O U R B U S I N E S S P L A N

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Host daily/weekly/monthly meetings• Recently completed actions• Current actionso On scheduleo Problematico Alternatives/actions to address

• Soon to come dueo On scheduleo Potential issues/impactso Alternatives/actions to address

• 30/60/90 day schedule• Metrics measurements review

Y O U R B U S I N E S S P L A N

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Change PlanCorporate Vision and Goals

Evolution of Controlfrom Central

to Functional Departments

Goals and Objectivesfor Functional Departments

Job Descriptionsfor Department Staff

Process Listsfor Job Description

Process Diagramsfor Job Description

Organization Chart Schedule of Eventsfor Job Description

Strategic Planfor Vision/Goals

Metricsfor Job Description

Markets and CustomersIn Strategic Plan

Old/New CustomersOld/New Services

in Strategy

Potential Revenue Streamby Probable Customer,

Market, Contract

Budget forServices, Staff, and Cost

Measure vs. Goals

Budget for Staff and Cost of Infrastructure

Requirements

Fringe, OH, and G&A andBid Rates Developed

R e f e r e n c e s / R e s o u r c e s

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R E F E R E N C E S / R E S O U R C E S

• Captureplanning.com: How to Become a Government Contractor

• FDIC.gov: Becoming a Government Contractor

• Inc. Magazine: How to Become a Government Contractor

• SBA: Finding Government Customers

• SBTDC PTAC: Selling to the Federal Government

• SWOT Analysis: SWOT Analysis

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Q U E S T I O N S / C O M M E N T S

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Gary E. FitchPresident, White Owl Division of Kingfisher Systems, Inc.VP Business Operations, Kingfisher Systems, Inc.3110 Fairview Park Drive, Suite 1250Falls Church, VA 22042(301) 404-1852gary.fitch@kingfishersys.com

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Roy ConleySenior ManagerCohnReznick LLP(703) 847-4435roy.conley@cohnreznick.com

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