How to balance your growth strategy
- By Bob Lohfeld
- Dec 13, 2013
When I review new-business growth strategies for companies, one of the things I like to see is a balanced approach that consists of three main strategies—winning new business, growing your current business base, and if the company is large enough, acquiring other companies.
As a first cut, I weight each of these strategies equally, so if the company uses all three, then each strategy is accountable for delivering a third of the company’s revenue growth. In this case, winning new business would be accountable for delivering a third of the company’s growth.
There are important tactics within each of these strategies that need to be present for them to execute well. In this article, I’ll discuss some of the tactics that you should look for and how to build your own new-business growth strategy.
Winning new business
The government uses multiple procurement approaches to award contracts, and every government contractor should have a new-business acquisition strategy that aligns with each of these approaches. If you are planning your company’s business growth strategy, make sure that your approach includes these four tactics at a minimum:
If you are in the IT or professional services business, you will want to make sure your company has a GSA IT Schedule 70 contract, a Mission Oriented Business Integrated Services (MOBIS) contract, and a Professional Engineering Services (PES) contract. The government pushed $38 billion through all of the GSA schedule contracts in fiscal year 2011 and about the same amount in 2012. Of that spending, $23 billion (over 60 percent of all dollars awarded through GSA schedule buys) went through these three schedules with the IT Schedule 70 garnering $15 billion (40 percent of the total GSA schedule spending).
These three GSA schedules are essential vehicles for closing small and mid-sized new business deals with most government agencies.
Agencies also use these GSA vehicles as the basis for entering into blanket purchase agreements (BPAs), which can put your company in a preferential position to provide products and services to a government agency. Some state and local government organizations also buy off GSA schedules.
To be a leader in the new business game, make sure GSA schedules are part of your growth strategy. If your firm is not a GSA schedule contract holder, then you may find yourself sitting on the sidelines, unable to compete and watching other companies take your business away.
Multiple Award Contracts
The government often awards contracts to multiple companies for a broad range of services and products and then competes work under these contracts at the task order level.
When these contracts are available to multiple agencies, they are called government wide acquisition contracts (GWACs), and when they are open to just the issuing agency, they are called specific-agency multiple award contracts (MACs).
Additionally, there is another category of contracts called indefinite delivery/indefinite quantity (IDIQ) contracts that may be awarded to a single company or multiple companies.
In all, there are about 600 GWACs, MACs, and IDIQ contracts.
Some of the more popular GWACs are GSA’s Alliant contract; the National Institutes of Health’s (NIH) Chief Information Officers Solutions and Partners (CIO-SP3); the Defense Information Systems Agency (DISA) Encore II contract; the Office of Personnel Management’s (OPM) Training and Management Assistance (TMA) contract; the Army’s Information Technology Enterprise Solutions Services (ITES-2S), and many others.
Some multiple award contracts are awarded to just a few companies and others, like the Navy’s SeaPort-e contract, has been awarded to 2,400 companies.
As you build out your growth strategy for each government agency, your market research team should determine which multiple award vehicles are most popular as indicated by the dollar value of task orders flowing through each vehicle by agency.
This will give you a clear focus on which multiple award contracts need to be in your portfolio to accelerate your revenue growth with each agency. It is best to have multiple vehicles that can service your target agencies since the popularity of individual vehicles tends to ebb and flow.
Agencies set aside procurements for small business and can limit competition for these contracts to firms that meet the small business size standards set by the Small Business Administration. They can further restrict competitions to firms that are 8(a) certified, Service Disabled Veteran Owned Small Businesses (SDVOSB), or businesses resident in Historically Underutilized Business (HUB) Zones.
If your firm qualifies for these set-aside procurements, then using these preferential programs will be a main thrust for your business growth strategy.
If you are not eligible to participate in these set-aside procurements as a prime contractor, then you need to have a strategy in place to partner with other firms that can. Again, have your market research team identify those small businesses that have a presence at the agencies you are targeting, and develop relationships with these firms so you are still in the game if a particular agency decides to take the set-aside route for their next procurement.
These procurements are available to any bidder and are pretty easy to identify on the procurement horizon. Since these are generally the larger-value procurements, they will attract a lot of attention, and competition will be keen. Serious bidders will identify and work these opportunities well in advance with effective capture campaigns and will write highly competitive proposals.
To be successful with the full-and-open growth strategy, you must have the skills and experience to compete in the major league of federal procurements. If you don’t have these resources in-house, you will need to augment your staff with professionals who specialize in capture and proposal development for these kinds of procurements.
Grow your current business base
Every member of your company’s technical and operational management team should know and understand they have an important role in growing your company’s business.
These individuals have a privileged role in business development because they interact with your customers and probably know more about what your customers need that anyone else in your firm. They have the high ground in the campaign for new business.
They can find out information that outsiders can’t get, and they can see firsthand what problems your customers have and what services your firm might offer to your customer base. What is missing in most companies is a plan to mobilize these resources.
To grow your current business base, these individuals must be part of your growth campaign. Some fundamental actions include:
- Ensuring these people understand that growing your company’s business is part of their role in the company.
- Providing appropriate training or coaching in business development, capture management, and proposal writing.
- Using a management mechanism to collect and act on the information they provide.
- Implementing a mechanism to recognize and reward individuals for successful accomplishment.
If you mobilize your operations team, they can accelerate your revenue growth and lead the firm in acquiring new business.
Buying other companies
Acquisitions are generally done to strengthen your company’s presence in a market that you are already in or to give your company an operational base in a market that your firm wants to enter for strategic reasons.
If you are planning on making acquisitions part of your growth strategy, then decide what you want to buy (more revenue in your current markets or a strategic position in new markets) and how much you are willing to spend—then get professional assistance in this highly specialized area.
Balancing the strategies
All three growth strategies work well for government contractors.
If you decide you are not ready for acquisitions, then focus your growth strategy in equal amounts on winning new business and growing your current business base.
Some good market research will go a long way in helping you decide which government agencies to target and what services and products to push.
To be effective, you should have a balanced growth strategy so get going and put this approach to work for your firm.
Bob Lohfeld is the chief executive officer of the Lohfeld Consulting Group. E-mail is email@example.com.