--- title: The Government services firm business model description: Discussion of the government service company business model and keys to success image: https://lh6.googleusercontent.com/bOjXUr2EH1xEnU6xanKQl7IwFyDdHlKq70IQQfeteWSIaZXMPkUIP2QJNwQOksvenzfv4TdIMe_S8CDv_AxI3mDMD---JZs0CKO3KicBT_dQic5j-Eeg7BkDrj13iCInvrTlHLA --- [![](https://www.fedscout.com/hubfs/Website%20Sep.%202020/logo.svg)](https://www.fedscout.com/) ![](https://www.fedscout.com/hubfs/menu-24px.svg) - [Features](https://www.fedscout.com/features) - [Pricing](https://www.fedscout.com/pricing) - [Resources](https://www.fedscout.com/resources) - [GovCon Glossary](https://academy.fedscout.com/courses/glossary/) - [Podcast](https://www.fedscout.com/undiluted) - [Academy](https://academy.fedscout.com/) - [Blog](https://www.fedscout.com/blog) - [Login](https://app.fedscout.com/auth/sign-in) - [Sign Up](https://app.fedscout.com/auth/sign-up) - [Book a Demo](https://meetings.hubspot.com/geoff96) # Blog Welcome to the FedScout blog. Our articles provide analysis, thoughts, and perspectives on the federal market and how to be successful in it. **Find** and **Track** Your RFPs ### Search Blog This is a search field with an auto-suggest feature attached. - There are no suggestions because the search field is empty. ### Recent Posts [![New call-to-action](https://no-cache.hubspot.com/cta/default/7500325/747b4521-46a0-4957-950a-924a96dc1440.png)](https://cta-redirect.hubspot.com/cta/redirect/7500325/747b4521-46a0-4957-950a-924a96dc1440) [![New call-to-action](https://no-cache.hubspot.com/cta/default/7500325/5b249851-488d-4abb-83ca-12a8e97327fe.png)](https://cta-redirect.hubspot.com/cta/redirect/7500325/5b249851-488d-4abb-83ca-12a8e97327fe) ![](https://lh6.googleusercontent.com/bOjXUr2EH1xEnU6xanKQl7IwFyDdHlKq70IQQfeteWSIaZXMPkUIP2QJNwQOksvenzfv4TdIMe_S8CDv_AxI3mDMD---JZs0CKO3KicBT_dQic5j-Eeg7BkDrj13iCInvrTlHLA) Nov 26, 2020 - [Tweet](https://twitter.com/share) ## The Government services firm business model **Time to read:** 5 min **What’s in it for you:** Understand how government services firms work and their basic business dynamics. **Is it worth reading:** If you haven’t worked for a government services firm then yes. **Content** - The government services firm business model - Key services firms activities   **The government services firm business model:** The government is massive, has highly varied needs, and spends $250-300B a year on everything from  janitorial to strategy services.  But regardless of the actual service all government services firms share the same basic business model: 1. Win a government contract for $X  2. Pay people to deliver the services for less than $X 3. Keep the difference ![](https://lh6.googleusercontent.com/bOjXUr2EH1xEnU6xanKQl7IwFyDdHlKq70IQQfeteWSIaZXMPkUIP2QJNwQOksvenzfv4TdIMe_S8CDv_AxI3mDMD---JZs0CKO3KicBT_dQic5j-Eeg7BkDrj13iCInvrTlHLA) **Key services firms activities:** So let’s take a look at a services company’s major activities and how those affect profitability:    **Submitting your proposal (Point A):** This is what it sounds like.  The government publishes needs and services firms propose solutions and prices to deliver those solutions. - **How this impacts business success:** Most small businesses will submit proposals to do work before they’ve hired the people to do it.  And this creates a major challenge because:   [![New call-to-action](https://no-cache.hubspot.com/cta/default/7500325/e3f28376-9cc6-4f27-a8bd-c0f5963a8361.png)](https://cta-redirect.hubspot.com/cta/redirect/7500325/e3f28376-9cc6-4f27-a8bd-c0f5963a8361)   **Find, vetting, and hiring the people to do the work (Point B):** Once you win the work you hire the people to do it (for very small businesses the owners may be the people to do the work) - **If you’re too slow:** You typically only get a month or two from the time you are awarded a contract to the time you have to start performing on it. If you can’t find all the people the contract asks for on day one your customer is A: not going to be happy B: won’t pay you for the people that weren’t there - **If you’re too fast:** If you bring people on before the contract officially starts anything you pay them is pure cost to you, the government won't pay you back - **If you get the wrong people:** The government tends to be very specific about the credentials and qualifications of the people you staff on their contacts so you need to be sure that the people you hire qualify administratively and that they can actually do the work the government expects. - **Additional information:**   **Having the financial depth to cover the gap between starting work, and getting paid (Point C):** The government has gotten much better about their payment speed (especially for small business) but you should have at least three months of employee salary in the bank to make sure you can pay your staff while you are waiting to get paid. If you don’t have that much in savings there are a variety of services that can help you.  See HERE.   **PROFIT! (Point D):** This is pretty self explanatory but your ability to correctly set a bid price when you submit your proposal (Point A) will determine whether this is a large, small, or negative number.   **Offramping people (Point E):** This is the converse of point B and has a huge impact on profitability: - If people are on payroll after the contract ends that is pure cost - If you have another contract starting soon after this one ends you may be better off paying the team to write proposals/do non-billable work so that you can roll them onto the next contract   **Marketing and relationship building:** One of the most important things a services company does is marketing themselves.  For more see HERE     --- **Other GovCon & SBIR guides, classes and analysis** | [![Resource collage.001](https://www.fedscout.com/hs-fs/hubfs/Resource%20collage.001.jpeg?width=400&name=Resource%20collage.001.jpeg)](https://www.fedscout.com/resources) | Our resources section has everything you need to: - Understand the SBIR program - Explore the Government Contracting market - Get help registering your company - Master key GovCon topics | | --- | --- | [![FedScout Button.003](https://www.fedscout.com/hs-fs/hubfs/FedScout%20Button.003.png?width=200&name=FedScout%20Button.003.png)](https://www.fedscout.com/resources) Topics: [Government Contracting](https://www.fedscout.com/blog/tag/government-contracting) ![FedScout logo](https://www.fedscout.com/hubfs/Website%20Sep.%202020/logo.svg) Don’t miss out on the newest GovCon resources. 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