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Small Business Owners Increase Spending on Federal Contracts

Small Business Owners Increase Spending on Federal Contracts

A new survey has found that small businesses are spending significantly more on federal contracts than in years past, without much more success. The American Express survey found that small businesses spent an average of $128,628 in 2012 on seeking out federal contracts, up 49 percent from $86,124 in 2010. At the same time, those same small business owners are making fewer bids on federal contracts as competition becomes fiercer.

In 2008, the government spent $540.9 billion on contracts – in 2012, that number dropped to $517 billion. As the government spends less in contracting each year, small business owners have found many of their expensive efforts went for naught and wondering whether it’s worth it to make several bids on the same contracts.

Some industries spent more than others – construction companies spent an average of $172,058 on bidding in 2012, while information services companies spent an average $169,948. Even as small business owners spend hundreds of thousands on research, development and writing the proposal, the pace of bidding and revenue from contracts is down.

This decline in bidding is likely due to a drop in revenue percentage from contracts over the past several years. In 2009, companies attributed 38 percent of revenues to government contracts. By 2012, that number had dropped to 19 percent, making it difficult to justify spending hundreds of thousands on repeat bids only to be edged out by the competition.

Small business owners said their bids were successful 55 percent of the time. While this number is up from 41 percent in 2009, it is still low enough to make seeking out a government contract a difficult financial task.

If a small business owner is having trouble financially, they can come to National Funding for assistance. National Funding can help small business owners with getting a small business loan, or can offer information on getting a merchant cash advance for business operations.


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