The GAUGE – Growth
Profitability! Growth! Profitability!! Growth!!! – The New Mantra for Project Based Businesses!!
Profitability is the main goal and most widely tracked metric of most businesses. It is the way organizations make money as well as measure success. Depending on the size of your firm it can be the sole source of capital for investments. So, profit is important as a current measure. However, to remain profitable and have long term success organizations must be thinking about how they are going to GROW their project based business.
So how are government contractors looking to grow today? Contractors will continue to divest, merge, and restructure to stay competitive. While organic growth is possible, the fastest path to growth and profitability may be through an M&A or restructuring. M&A enables growth, especially if integration costs are well-managed. Internal restructuring is also an effective technique to reduce overhead. The GAUGE tip below provides some basic questions you will want to ask yourself about growing your business.
Entity type is another consideration. Almost 60% of the respondents polled were structured S Corps. This has been a popular structure due to positive tax treatment. 23% were C Corps, followed by LLCs. This is very consistent with the industry mix. There is heightened focus on the use of joint ventures because they allow companies to share technology and investment. What is the best structure for you?
The last consideration we will discuss in this blog is the contract vehicle. Examining contract vehicles can also help companies grow and win. Smaller companies are using LPTA bid strategies to grow their revenue streams. Large prime contractors reported that they are looking for higher margin work and will forego bidding on lower margin, high risk work. You need to decide what is right for your business.
Just a quick reminder of the benefits of external benchmarking:
- Gives a perspective of the overall industry
- Provides an understanding of what others are doing to be successful
- Produces ideas for improvement
- Makes you more competitive
- Helps you win more business and grow your organization
Check out The GAUGE Report for additional information that will help you grow your GovCon.