If you are a successful, growing Government subcontractor, and you are thinking about becoming a Government prime contractor, you have a lot to consider. You need to understand the regulations, responsibilities, and the increasingly competitive Government contracting marketplace before making the leap from subcontractor to prime contractor. While there are numerous opportunities for you if you do become a prime contractor, there are also potentially costly mistakes that can be damaging to any uninformed new prime contractor.
This article is intended to provide valuable insider knowledge for subcontractors pursuing prime contractor status. We address a number of questions and issues such as how to determine if your company is ready for prime contractor status; which steps to take to become a prime contractor; and what are the industry best practices for structuring your company and making strategic decisions necessary to ensure success.
Numerous motivations drive small business owners into business and to succeed. An innovative product or capability, a desire to ‘try something different’, an unexpected change in employment status – all of these can be motivating factors for a potential business entrepreneur. But once you’ve established your company, you need to ask yourself: Am I in it for the long haul to maintain a lifestyle? Or, do I want to grow-and-sell the business?
A lifestyle owner views his/her business as a means to maintain and, hopefully, improve their current way of life. Accordingly, a lifestyle owner will need to invest in establishing their company’s business systems early on to help ensure viability. Conversely, a grow-and-sell owner views his/her businesses as a profit-making asset to be managed with an eye toward maximizing the short-term value. The key motivation is the ultimate sale of the company. The grow-and-sell owner should not be investing in internal business systems for the long haul.
A business plan is a formal statement of business goals, reasons they are attainable, and plans for reaching those goals. This living document generally projects 3-5 years ahead and outlines what your company intends to do to achieve its desired level of growth and success. Spend significant quality time developing a formal business plan. The time spent upfront on the business plan will pay dividends later by helping you and your team stay focused on your strategic business goals.
While there is no hard and fast business plan format, it should address certain key aspects of your company and strategy, including:
- Vision and Mission: What will your business look like in three years? Five years? What is your company’s mission? Its purpose?
- Success: How do you define success? How will you measure it?
- Strategy: What are you selling and who are you selling it to? What is your unique value proposition?
- Finances: How much capital will you need to grow? How will your expenses change in three years? Five years? How will you meet those expenses (income)?
- Plan of Action: Who will you hire and when? Who will you market to and when?
The CohnReznick Government Contracting Industry Practice provides a wide variety of services that help Government contractors comply with Federal regulations. We also provide a range of audit, tax, and business advisory services. We help numerous prime contractors, and others, employ best practices in many different areas of Government contracting as they seek to establish mutually beneficial relationships with the agencies they serve.
If you need more information, please contact Kristen Soles, Partner (firstname.lastname@example.org or 703.847.4411).
For over 40 years, CohnReznick has provided comprehensive services to assist government contractors with a full life cycle approach to winning and managing contracts. We ensure your financial and procurement processes are compliant, efficient and effective - so you can focus on what matters most, profitable growth.
InsightGOVERNMENT CONTRACTING: DCAA issues guidance on coronavirus-related legislationJeff Shapiro, Caitlin LewisRead considerations for incurred cost audits and forward pricing audits potentially impacted by the CARES Act, the FFCRA, and more.
InsightHome office expenses: Tax and FAR implications for government contractorsJeff Shapiro, Dana Fried, Chase ClarkLearn what costs related to helping government contracting employees work from home may be allowable, deductible, and non-taxable amid COVID-19.
Press ReleaseChristine Williamson named Business Partner of the Year in MCCC's annual awardsCohnReznick LLP, one of the leading advisory, assurance, and tax firms in the United States, announced that Christine Williamson, CPA, PMP, and a lead partner in the firm’s Government Contracting practice, has been named Business Partner of the Year by the Montgomery County Chamber of Commerce (MCCC) in its first-ever virtual 2020 Business Awards program.
InsightCybersecurity Maturity Model Certification (CMMC): A road map to complianceYou know you need Cybersecurity Maturity Model Certification (CMMC) to qualify for Defense Department contracts, but where to begin? Use our tool to get started.
InsightGOVERNMENT CONTRACTING: Effects of multistate teleworking arrangements on state taxationLance E. Rothenberg, John IannottiGovernment contractors with employees working in different states due to COVID-19 may face implications for nexus, apportionment, and withholding. Read more.