Why 80% of GSA Schedule Holders Fail

I recently sent out an update from a Driving GSA Sales webinar session and I received a response from a gentleman that makes sense to share with everyone.  Here was my update and the ensuing response…

Hey Everyone,

Normally I don’t send out recaps for our Driving GSA Sales Series but since we maxed out the webinar yesterday, I wanted to make sure that everyone had access to the presentation and link to the video (see below). With FY2013 closing out, federal spending is red hot with opportunities really breaking loose at a record pace- but not for everyone…

Did you know that 80% of GSA schedule holders are in the process of failing right now? Yesterday we took a look at how to change that by getting in front of the right people and getting your message across with procurement briefings. Again, sorry if you were not able to log on, please make sure you are registered Driving GSA Sales 2013 and get there EARLY next month as we will be in the throws of the final spending madness. Also, if you have any topics that you would like to cover in 2014, please let me know so we can keep the series fresh…

Thanks!
-Dave

Dave,

I am curious, where do you get your information from ? Your statement, “ 80% of GSA Schedule Holders are in the process of failing” ….

That seems like an extremely high amount – how are they failing? Why are they failing?

-Patrick

Great questions that we could probably discuss for hours on end but I will try and take a quick stab at it.  Regarding the 80%, when I first started working in the federal space, I had a meeting with super guy, Joe Jeu (now the head of DeCA) who at the time headed up one of the key areas in GSA FAS. I had a hunch that what most companies lacked was dedicating real sales people to get in front of buyers so we got together for coffee and I showed him a graphic of a 24 month timeline where 6 months was spent on getting the schedule and had a full blown marketing/BD strategy for the entire 24 months.  He immediately pointed at the GSA award date (6 months in) and said “ this is where 80% fail”.

4 out of 5 GSA Schedule Holders Fail to Make $25000 in 2 Years

While I was immediately gratified by the resounding validation of my assessment, I was just like you thinking that seemed amazingly high.  He went on to explain that while GSA gives companies 2 years to make $25k, about 50% get $0 and 30% don’t make the minimum $25k. I have been tracking GSA sales for years now and he is spot on with the number of contracts terminated annually.  Guess what, it gets worse- most companies spend $50k-$75k to fail.

Why are They Failing?

My primary answers are:

1)      Federal business development is not fast easy or cheap.

2)      Having a GSA schedule does not make money fall from the sky- it is the easiest way to start but doesn’t guarantee a dime.

3)      The federal market is not friendly to newcomers.  In fact, it is geared in just about every way to keep you out.  Incumbents and current federal contractors  have a significant advantage over new businesses because they know how the federal government process works.  Even experienced federal contractors have problems growing outside of their current circle of influence because they often have to go back to square one when penetrating a new agency.

4)      They don’t understand the market.

5)      They don’t know who is buying what they sell.

6)      They don’t have a strategy to reach the people who buy what they sell.

7)      They don’t apply the resources necessary to be successful.

8)      They don’t know how to measure success before the money starts to come in (which can take years).

9)      They pick the wrong horse to ride.  Not everyone is capable of building business in the federal government.  There are a ton of people who look good on a resume but are paper thin when it comes to delivering and it can take a year or more to figure that out.

10)   They don’t get serious until it is way too late.

11)   They don’t have the intestinal fortitude to stay the course.

Because:

1)      Without a clear way to understand how the federal market applies to them, business owners really don’t know if they should be in the federal space at all, much less if a GSA schedule is even being used for what they sell.  Flying blind in a complex market creates many cascading problems that lead to failure. Since most companies don’t know who is buying, how they buy and who they buy from, it is almost impossible to effectively market, follow-up and stay in front of the right people.

2)      Federal BD is a farming model with a very slow growing crop and that is just the way it is. With very few exceptions, It takes 2-3 years to develop lasting traction in the federal space.  A key problem is that this fact directly conflicts with entrepreneurs as they look at 30,60,90, 6 months and a year.  As a result, successful entrepreneurs apply arbitrary timelines to measure progress and – guess what – they don’t even come close to meeting the goals.

3)      The feds follow a different calendar (usually FY Oct. 1 – Sept. 30).  All planning and Business Development work needs to revolve around the next two Septembers, not an arbitrary number of days or even years. It has to be comprehensive too.  For instance, Q1 & Q2 are not good for sales but critical for relationship development and tracking opportunities coming later in the year.  Q3 is positioning for what is coming and making sure that you are aware of the opportunities coming in Q4.  Now, buyers and program folks are scrambling for Q4 and it is literally 6 months too late to start marketing for the windfall.

4)      Most companies do not know that there are two different buyers with two different needs. The program side needs to know who you are, your capabilities, and key differentiators. CO’s need to know how they can buy from you and know you can fulfill the contractual obligations.  Both important, but again, two very different buying motives.

5)      Most companies are not willing to invest the kind of dollars in people who understand the world and can grow federal business. I don’t care what anyone says, successful federal contractors spend around $150k per year to develop the market and that is a steep investment to start to get traction within 2-3 years.  Sure, there are always anomalies but it typically, it takes that long.  Some folks will say you can do it yourself which is true as long as you manage your expectations and market your GSA schedule effectively.  If you give yourself a few years to learn the ropes, earn your stripes and keep pressing, you will eventually succeed.  Interestingly, less than 20% of the attendees for yesterday’s event were willing to spend more than $100k per year for BD.  A sure sign of commitment level and a direct correlation to the probability of their success. To make matters even worse, the resources they do apply are usually spent on a rep who is under performing in sales and doesn’t know the market. That won’t work no matter what market you try and penetrate but throw in the complexities of federal and long, painfully slow sales cycle, and you have a recipe for certain failure.

6)      Most companies don’t pre-market their GSA schedule to build some kind of brand awareness.  When they don’t, it is difficult to make the $25k by year two (which is not a lot of money as you know).  Some folks even get extensions and can’t make it by year three because they waited until they get a letter from GSA in the middle of year two.

Love the questions but that is all I have time for at the moment.  I am going to use this dialog in my next “Friends of the Firm Update”. Let me know if you would like to discuss further and by all means please register for the next session, it will be a barn burner with year-end spending in full swing!

Find Dave

David Lowe

CEO at isiFederal
Dave works with companies by incorporating best-in-class business practices like targeting your best customer (customer segmentation intelligence), “Top-Down” sales training and sales management. He builds his practice on the principle of doing the right thing for others--all the time.

Personal “bests” include booking $11.8 Million in new private and government business in 18 months (from cold calls) and managing sales representatives to close ratios of 85% (in cell phone sales).
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in Developing Your Federal Strategy, Federal Contracting, Getting (and Keeping) GSA Schedules, Reaching Your Buyers by David Lowe 1 Comment
About the author: David Lowe

Dave works with companies by incorporating best-in-class business practices like targeting your best customer (customer segmentation intelligence), “Top-Down” sales training and sales management. He builds his practice on the principle of doing the right thing for others--all the time. Personal “bests” include booking $11.8 Million in new private and government business in 18 months (from cold calls) and managing sales representatives to close ratios of 85% (in cell phone sales).

One comment

  1. Gill

    Thank you for posting this information. This is an important topic, and I know for a fact that most GSA Contractors do not put the focus they should on this topic until they get an order from the GSA and realize that they are going to take a loss if they fulfill it.

     

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