Regardless of inflation or the current economic situation, there will always be reliable customers for your products and services. It's a government agency. Various levels of government, from federal to state to county to local government, spend nearly a third of the funds they accept. His CEO at Glass, Paola Santana, heads a company that helps small and medium-sized businesses get a piece of this business, but primarily through “micro” means. Purchases are less than $10,000 and do not require a procurement contract. I talked to her about how to do this kind of business with the government. This conversation has been edited for continuity, brevity, and clarity.
Excerpts from this interview will be published in Sunday's Forbes CEO Newsletter.
Why should companies sell their products to the government?
Santana: Governments are the world's largest buyers, and the U.S. federal government is the world's single largest buyer. Governments typically spend about 20% to 30% of their domestic GDP on purchases. According to this, the global procurement market is estimated to be between $13 trillion and $16 trillion.
In the United States, there is a system called SBA. According to SBA statistics, there are approximately 33 million small businesses in the United States, making up approximately 99% of the economic structure.
The conventional wisdom is that small businesses will never win awards. [government] contract. When you put these two pieces of information together, what we're literally saying is that the world's largest buyers, who actually buy goods with taxes collected from individuals and businesses, are not directly returning that money to the foundation. That's it. our country's economy.
Paola Santana, founder and CEO of Glass;
glass
This is equivalent to 30% of GDP. [businesses that] It will energize our economy in a very seamless way. And you ask the question. Why aren't we buying more from small businesses? Then we go deeper and see that at the federal, state, and local level, each of these tiers has a mandate to: [put] 20% to 30% of the funds raised will be divided into groups, [including] Small and medium-sized enterprises. Some of these agencies are meeting or exceeding their goals by purchasing from the same small and medium-sized businesses. In the words of some government procurement leaders, “we've turned some small businesses into big companies.”
What we quickly realized is that governments are not only offering stronger competition, more diverse product offerings, and higher quality products and services that offer more comfort and a better experience, but also warranties and insurance, as well as vendors that can provide That means you need to understand all these additional features. We need to bring these vendors into the light. Give them visibility. Digitize them. Understand what you have in real time, what you are selling in real time, and the price in real time. Next, you need to aggregate them.
When we come to small businesses, they're like, “Look, I just want more revenue.” I just want to do business. I took this program to win a contract. I did this webinar. I have also achieved government certification, but no agency has a government contract. ” What we tell small businesses is that only one in a million contracts is with the government. But you can still have a chance to win with small purchases that don't even have to be competitive. The government will come to your rescue. [is better]. For many of the small businesses we talk to, a $10,000 purchase can keep their business running and the lights on for several weeks.
What are some of the challenges for small businesses wanting to work with the government?
They need to understand where to go to sell their products and services. For example, if you sell fire extinguishers in New York City, you first need to understand who you want to sell fire extinguishers to. Let's go to the city's homepage. And under the city's website there is a system for procurement. It will take several weeks to complete the paperwork for registration. You'll probably also need to get certified to sell to New York City. If you want to sell to other New York City departments that don't rely on New York City's centralized procurement, such as the New York Port Authority or the New York State Housing Authority, you'll need to visit their respective websites and register. respective procurement systems. This is at the city level. If you want to sell to the New York State Department of General Services, you must also register at the state level.
When will you have time? [You would have] Having a dedicated government sales department that can not only identify all of these government agencies, but also submit information in the way they want to receive the information. At any given time, in the United States he has 90,000 government agencies making purchases. So how do you know which ones require the least effort or which ones can be set up most effectively?
There's no central platform to see who's buying, when and where unless you subscribe to everything.
How does working with a company like yours make this process easier?
Visit one location and make sure that one location is updated and has the best price available. Any government official who wants to buy from you can find you. They will find you, not because they know you. They will find you because they came to the search bar. This is a central location that brings together all the vendors who don't necessarily need to be government vendors, but who have all the requirements to be a government vendor at the small, micro-purchase level.
Many of these small government purchases are more routine. No contracts in place, how often do you switch vendors?
I think government agencies recognize that local businesses have a lot to offer. I also think that governments, as custodians of money, want to distribute this money to the economic structure of the businesses they support and want to thrive. . Remember, every business that stays in business is money that the government doesn't need to cover, the price of jobs that the government needs to capture. Government purchases are usually tax-free, but if the lights are on because of government purchases, they can be sold to people who pay taxes. And the more taxes we collect, the more taxes we pay to the government, and the more money the government has to spend. There are incentives to keep these businesses afloat. What we are helping governments understand is that keeping a government afloat through subsidies and subsidies is not the same as keeping a government afloat through business.
after that [a smaller business] If you get 10 or 200 small payments on credit card transactions, that can potentially lead to a big deal. Through transactional education, you can gain information from actually doing business with government. I think that's very powerful. It connects the dots between people who care about their city and feel its impact. I respect the government. They keep me and my employees in business. It can change the agency we think we have and help us run our cities and countries better. Because we know we are part of a business that is empowering. [them].
Is the government specifically looking for local small businesses to work with?
Our urban customers are looking for serious and specific vendors. Businesses have a business license from the city, so they have a list. And they're like, “I do business on less than 1% of the city's business license list.” How can we do more business with them?’ Imagine if the entire logistics, reduced CO2 emissions and faster delivery times could be achieved by something local. That is, local demand and local supply.
At the federal level, there are specific obligations. There's the Buy American Act, which requires the federal government to give priority. [items manufactured in the U.S., or made from materials sourced here].There's an entire business owned by veterans. [category]. There are also small and medium-sized enterprises run by women. At the federal, state, and local levels, 95% of government agencies at these three levels are required to spend 20% to 30% from these entities, and here's how to manage and track this . manually. About two months ago, the New York City Comptroller's Office released a report finding that minority and women-owned businesses are underutilized by New York City officials. Our idea is, let's provide a bigger pool. And of course, having more players at the table increases diversity.
The government has no obligation to buy the cheapest. In the United States, we have a mandate to buy the most valuable things with taxpayer dollars. Get the right activity from the right groups and track it all in one place. This is one of our value propositions. One simple screen can direct you to big box stores that offer better prices and ship from your neighboring state. And you'll find a small business that has exactly what you want, in the quantity you want, can deliver in the same amount of time, and for $1 more. Same-day delivery, free delivery, and a woman-owned business. Then there's a company run by a veteran who keeps items that are $1 cheaper because they want to get rid of that item from their warehouse, but they're already doing business with you. Which of these options do you want? If your goal is a woman-owned business, you'll probably choose the second one. If you are optimizing your budget, you should expand it on your initial budget. If, like many government agencies during the pandemic, you don't have time to wait for a shipment, [it could be like laboratories that needed hand sanitizer to open quickly:] It was a little expensive since it was a local vendor, but we were able to open that lab on time.
Once you start getting business from the government through these purchases, is there a chance it will stay stable?
Based on the data we observe from the governments we do business with, they are slower to make decisions, but they are deeper and less confusing. So when they buy products from you, after they check you, make sure that you are a responsible partner, that you have done what you promised to do once and for all, we data shows that the government continues to use you. Unless you are, you will have to look for another vendor as there is a limit to how much money you can spend on one vendor. Because the government knows that it gives all the vendors it chooses exclusive power for a while. This is also good for the government. They must be rotated and distributed according to law.
If you can get past the initial friction of where and how to start selling to the government, it can be a very reliable, solid and sustainable source of income. If you go in, you will go in.
