Business with the Government, Advantages and Disadvantages

Business with the Government, Advantages and Disadvantages

Most entrepreneurs in small and medium businesses they think twice before doing business with the government due to the enormous amount of paperwork, setbacks and bureaucracy that it can involve.

However, while penetrating this tortuous market can be difficult, it doesn’t have to be a nightmare. On the contrary, achieving it can also represent enormous benefits and opportunities that can become very profitable businesses.

“In 2009, the government of Mexico made purchases worth more than 17.6 billion pesos through 15,000 SMEs.”

Here are some advantages and disadvantages that can result from doing business with the government:

Governments buy all kinds of products and services

They regularly invest huge amounts in all kinds of products, infrastructure and services provided by SMEs such as: office furniture, tools, telecommunications systems, airplanes, technology programs, construction and repair services, uniforms, computers, food, cleaning services, equipment, paper, accounting services and rental services, weapons, among others.

Governments grant millions of dollars annually
The Government of the United States, for example, is the main consumer of products and services in the world. Every 20 seconds the government awards an average of $ 400,000 dollars in contracts and in Latin America and Spain the numbers are not very different.

States announce their requirements publicly
Governments regularly turn out to be a very particular customer who describes in detail what they need, who to talk to to supply it, when they need it, how much they are thinking of paying for services or products and when they will make the purchase.

Most state agencies have websites where they publish the bases of their bids and procurement requirements, which are publicly accessible and allow you to identify the business opportunities with them.

The rules regarding purchases are regulated
Whatever the state agency with which you intend to negotiate, most of them follow the same purchasing regulations, hence the qualification requirements, purchases, selection processes, forms and terms of payment and other steps are detailed in those regulations and you won’t have to learn everything all over again each time with every business you do, as it happens in other markets.

Bids are won by meeting the requirements
Unlike the negotiations with commercial clients, the government works based on price requirements, quality standards and delivery mechanisms that, if met, allow any SME to apply and participate on equal terms. The downside, however, is that competition is often aggressive and unfair.

There are control and supervision organizations
Because the main and biggest problem for governments, especially in Latin America, is corruption and influence peddling, new control mechanisms are implemented every day to ensure that the processes are as clean and compliant with state purchasing regulations. .

Likewise, it is common that there are also more state and non-state supervisory organizations that support these control mechanisms. Of course, this does not guarantee that there will be 100% fair participation, but it does guarantee that more entrepreneurs will be able to participate and take advantage of the enormous opportunities that present themselves to sell to the state.

Payment mechanisms and terms
Governments tend to pay very well but not always on time. Arrears are common and this means that the company has to wait and process its payments many times with extreme patience. So if you’re seriously thinking sell to the government you should consider this factor in your costs and your sales plan to the government.

So if you are seriously thinking about venturing into this world of government business, then the first step is to start documenting yourself about the operation of the system in your country. In the second part of this post we will give some tips and specific steps to start do business with the state.

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