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One of the most striking differences between small businesses and larger organizations such as governments and corporations is the way purchasing decisions are made and put into action. In small companies, the decision makers are often the owners with a personal stake in the outcome. Purchases are made by the end-user. Internal lead times are short, and the procedural requirements simple. Governments and large corporations, on the other hand, are far more likely to operate according to bureaucratic procedures, compartmentalized functions, and pre-set budget constraints. Large purchases may require approvals by more than one department or supervisor. These differences can be perplexing and frustrating to small businesses when they attempt to sell to governments and corporations. As a small business decision-maker, you might wonder who in the organization you need to convince. How many more hurdles do you have to jump over? Is it even worth the effort? Before answering that last question, try to answer this one: What do the following products and services have in common?
Answer: The largest U.S. customer for each of these products and services is the U.S. Government. In fact, the federal government is the largest buyer in the world of thousands of different products and services, spending more than $300 billion* annually with private-sector businesses. Some of these are big-ticket purchases, such as aircraft carriers, supercomputers, and office buildings. But the government buys almost every other type of product and service, providing opportunities to all kinds of companies - large and small - including yours. So, is it worth the effort? Absolutely. And not only because of the potential sales volume. Government purchases generate crucial revenue during economic downturns when sales to businesses and consumers are lackluster. Remember, however, not to become too dependent on government contracts. As with other customers, the government's buying patterns change over time. State governments also represent excellent opportunities for small businesses, with total annual budgets exceeding $1 trillion, much of which is spent on goods and services from the private sector. The market for goods and services represented by large corporations is difficult to quantify, but easily dwarfs purchases made by all levels of government. * The total budget of the U.S. Government was over $2.3 trillion in 2005, but over half of the total budget goes towards expenditures for Social Security, Medicare, interest, and other nondiscretionary obligations. Next: Basic Definitions |
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