By Dr. Calvin Kent
With A national debt of more than $14 trillion exceeding the nation’s GNP, there is only one certainty in today’s political debate: the growth of federal spending will either slow down or possibly stop. Government contracting with private business is likely to experience this trend. There seems to be no definitive answer as to how many government contracts are received by West Virginia businesses or the value of those contracts, but one seemingly low estimate puts the amount at nearly half a billion dollars. The major federal contracting agencies conducting business in West Virginia are the Department of Energy, Department of Agriculture, National Science Foundation and the Department of Defense.
For the past two decades, the philosophy has been for federal government services to be contracted to private providers. Extensive services are provided by the General Services Administration and the Small Business Administration to assist businesses in knowing about and applying for these contracts. The range of contracting stretches from janitorial work to building sophisticated defense hardware.
It would be useless speculation to forecast what the future of federal contracting will be, what programs are most likely to be downsized, what programs will be untouched and what regions of the nation will be most affected. Based on this level of uncertainty, how should businesses who depend on federal contracts respond?
There is an answer: invigorate the entrepreneurial spirit. Entrepreneurs are those who see what others overlook and act on their insight. The entrepreneur is always looking for an opportunity or a new niche that needs to be filled. Equally important is the willingness to take risks and respond to that insight. Given today’s economic uncertainty, the greatest business risk is not to take one.
Those firms with the largest percentage of their business coming from federal contracts will most likely be the first to suffer. The solution is to diversify. It is slightly comforting to know that tough times are most likely to kindle the entrepreneurial spirit as businesses look for innovative ways to supply old markets or develop new ones. There is truth in the old saying that necessity is the mother of invention.
Diversification begins by finding new markets for what is already being produced. Who else may buy it? Can small modifications in a product change its usefulness to a new group of customers? Can the firm’s machinery and workers be adapted to the production of different products for which there is a demand? What resources are available to assist in retooling or re-engineering to respond to the market?
The second step is marketing. Firms faced with the loss of government contracts will have to introduce or reintroduce themselves to the market. While advertising plays a role, another beneficial form of marketing is networking. Work the contacts the firm already has and use every opportunity to find new ones. Remember the most successful marketing is not selling the products or services you already have, but asking the potential customer what they need and responding to it.
Third, this is an excellent time to upgrade skills, knowledge and attributes. The successful entrepreneur recognizes that this is a knowledge economy and today’s knowledge quickly becomes obsolete. Three types of knowledge need to be constantly updated. What are the new technologies that are becoming available? What are the skills needed to respond to technological advance? What must be done to upgrade the work force? In addition, one must keep informed of what is going on in both the domestic and international economies. With quickly rising incomes in countries like China and India, a business’s needs may well be overseas.
Recognize the potential for research and development. In fiscal year 2010, 208 West Virginia businesses received $57 million in research and development (R&D) contracts. Last year, the top five contractors were ProLogic, Alliant Techsystems, Vista Research, Brigadier Construction Services and Security Assistance. If you have an idea and are searching for a way to move forward, imitate their success.
In addition, West Virginia’s colleges and universities received $171 million in federal R&D. Much of the university-based research is designed to create the firms of the future. The National Science Foundation concluded that 73 percent of the new patents filed by businesses in 2010 were based on university research. Both Marshall University and West Virginia University have technology transfer offices whose function is to move innovation from the lab to the marketplace. To do this, they are always looking for private partners.
Don’t be reluctant to look for help. There is plenty out there, ranging from courses on finance and accounting to seminars on marketing and how to get into the international arena. The best part is that most of the best help is free. Almost all West Virginia higher education institutions have entrepreneurship programs designed to help start and grow ventures. Search them out, for their success depends on your success.
The West Virginia Small Business Development Center has a comprehensive program for supporting new business ventures through their Three Step Jump Start program. If you need a technology partner, look to one of the Robert C. Byrd Institute for Advanced Flexible Manufacturing centers conveniently spread across the state. Both the U.S. General Services Administration and the Small Business Administration have hands-on programs that are valuable.
The one thing that must be avoided at all cost is fear. Reluctance is the enemy of advancement. A business’s future does not have to be failure. It’s up to the leader to recognize that even in these tough times, success is probable if the entrepreneurial spirit is present.
