A Piece of the Government Pie
The U.S. government spends about $425 billion each year on goods and services. Within that sum, nearly a quarter of that budget is set aside exclusively to contract small businesses. Still, breaking into the world of government contracting can be a challenging and confusing experience for a small business owner. It often takes a bit of strategy—and grit—to make Uncle Sam one of your clients. One such story is Craig Technologies, an engineering and technical services company based in Melbourne, Florida, which contracts with the Army, Navy, NASA, and the Air Force. Carol Craig, the comapany's founder, started the business out of her home as a part-time contractor. A decade later, it is a $20 million firm with about 250 employees. Scaling a business depended on government contracts is no simple task, especially when global firms (think Accenture or Boeing) have long-standing, secure relationships with their government clients. Inc.com's Eric Markowitz spoke with Craig about her military career, maxing out eight credit cards to start her business, and scoring her first government contract.
What's your background? Did you always know you wanted to work with the government?
I have an ADD background. (Laughs) I've done things in IT and engineering but after school I joined the Navy, where I designed cockpit systems for the Department of Defense. I was doing a lot of work with pilots and aviators so I figured, if they could do it, I could do it. I got accepted to be a flight officer on P-3 Orions and went ahead and did that for a couple of years. I let the Navy do surgery on my knee and they ended up screwing it up so I got out as a service-disabled veteran.
You're certified as a woman-and-veteran owned business. Does this give you a leg up on your competitors?
The federal government says that 23 percent of all government dollars must be set aside of small businesses, and a part of that goes to minority-owned businesses (including women-owned, veteran & service-disabled veteran owned, Native American-owned, Alaskan-owned, and Native Hawaiian-owned corporations). There's still competition in there—it's not as easy as it sounds, but it definitely gives you an advantage over the large government contractors who have been in there for years. It gives you a chance to compete against them.
What was the process of getting certified like?
What I didn't realize was how long it would take. From 2002 to 2005 I focused on the civilian side, just trying to get everything in place for the government side. There were definitely some sleepless nights. There were lines of credits that turned into working capital loans. I think I had eight credit cards, all maxed out. That kind of stuff.
When did it turn around?
In 2005, I finally got my first government contract. For me, a job with six people was significant. Today we have over 250 people. I've tried to be really controlled with my company's expansion because when companies expand too quickly, they don't have the right infrastructure in place. I'm definitely a planner; I'm always thinking ahead.
What are some of the challenges of being a government contractor?
Government contracting can become very frustrating because you can just become a number. A lot of contractors with call them "butts in chairs" (but I won't allow our employees to refer to people like that). It's also common to get short-term projects, like six months or so. I stay away from those—we're looking for contracts that span five to 10 years.
What advice would you give to a business that's just starting out?
Well, I actually took losses in the beginning. Overall, government contracting in the service industry is not very lucrative. You're lucky if you can get four to five percent bottom-line profit at the end of the day. You have to be creative if you're going to get anything higher than that. A lot of that is just because the government really looks at your costs and expenditures and considers a lot of it unallowable. That all comes out of profit. One thing I did initially was that I came in with lower prices and accepted jobs at a loss, so for a couple of years I had some pretty significant losses. But, like I said, it was a long-term strategy, and I knew that it was important to learn the field, get past performance reviews, and as the company grew, I knew I would see the profits improve.
What about branching out to new services? Is that a good way to expand in contracting?
Definitely. I used diversification to my advantage. I didn't really know exactly what I was doing, but because I was comfortable with technology, I felt as a small business, I could have contracts all over different agencies. That meant I could have people all over the United States, and a core capability that was diverse. It wasn't a shotgun effect—I wasn't going to be mowing lawns or doing anything too high end, but there's a whole big world in between, and diversification was a good thing, not a negative.
Is there a good size for a company to be to be able to contract?
My goal is a little less than 500 people, because you're still considered a small business under certain qualifications. Also, 500 is a manageable number for me personally. I don't have the experience to be a CEO of a big company just yet.
But expanding from a staff of one to 250 employees requires some serious business skills, right?
I don't have a business degree, and that might help. (Laughs). I guess I just don't know what I don't know.