To ensure effective business development, it is crucial to have a comprehensive understanding of your budget to execute your contract wins successfully. We frequently engage in conversations with business owners to assess their current executed contracts compared to their pipeline. Together, we chart a path that enables them to visualize their cash flow requirements and anticipate how it will evolve throughout the year as they achieve foreseeable wins.
Discuss Capital in Advance
We strongly advise scheduling dedicated time for discussions with your executives as part of your business development plan. These discussions should focus on their current access to capital and their ability to promptly secure additional funding in the event of a conservative schedule of contract awards.
The financial past performance is important for two main reasons:
- It provides your bank or lender with accurate reporting, enabling them to assess risk and confirm your ability to secure, maintain, and increase funding as per your workflow requirements.
- It demonstrates to your Prime or Agency your financial capability to support potential growth within contract awards. While showcasing your work performance is valuable, highlighting your financial capacity is crucial for pursuing growth opportunities.
Revenue growth is stifled more by your access to flexible and affordable capital than by your ability to win the work. We consult with business owners every day who are confident in an inevitable win, or even more so, have already won, and do not have any lending options in place and are hoping for a miracle.
More Contracts Don’t Mean More Capital
In reality, winning contracts does not necessarily lead to improved access to capital. Particularly within a traditional lending environment, it can actually pose a greater risk. The uncertainties in government contracts do not align with a risk-averse lending process. Now more than ever, government contracts are viewed as risky due to financial regulations aimed at protecting the bank and the funds earmarked for client lending. The risk of losing task orders or contracts altogether significantly hinders your ability to secure future underwriting.
The increasing cost of capital is aimed at mitigating risk, leading to higher interest rates to uphold institutional stability. While these regulations affect all clients, they pose a greater challenge for smaller businesses, which have already endured tougher requirements compared to larger, financially established companies.
It’s imperative that you have consulted with multiple lending options and establish where your needs can be met before you execute your business development plans. As executives negotiate the source of working capital, business development teams can better plan their pursuit of awards based on the company’s overall financial performance.
Establishing robust accounting and cash flow assessment processes within your company will enhance your ability to forecast feasible endeavors and minimize time spent pursuing unattainable opportunities.
If you need guidance on creating a successful business plan, we’re here to provide resources that will help you approach your RFPs this year with confidence.