It comes as no surprise that increasing revenue will generate more profits. That is unless it costs you more than your revenue gains to get that increased profitability.  For Government contractors, there are many turns you can take on the revenue path to profitability.  The key to this principle of increasing revenue to gain more profits is that you need to do so at a higher ratio than your costs.

Revenue

Include All Costs
Too often in their attempt to grow the business, Government contractors will sell or bid on projects which cost them too much to maintain.  They do this by underbidding direct costs, reducing indirect rates, or not bidding indirect rates at all in their proposed price. When this happens, the risk is great that you increase your volume but you may be losing too much with each hour you deliver.  Be sure if you are increasing revenue, that you do so with the cost factor in mind.  Deliver the best you can at the same price that you had in the past when you have made decent profits or potentially with reduced costs. Increased revenue comes with the attendant responsibility of making sure your costs are in line with that increased activity.

What to Avoid
Do not be swayed into bidding low price technically acceptable (LPTA) bids to just win without an eye towards the profit line.  You cannot make up losers by increasing volume.  That is a potential for disaster. You do not want to risk being terminated because you cannot perform the work at a decent margin. That is not good for the Government and your reputation as well.

Government Contractors Focus on Long Game
In the short term, you need to generate the maximum feasible from each contract. Sometimes that means the front-end contract is at a lower margin than you may be satisfied with for the long term.  If that’s acceptable to you in the short term and you expect to realize additional work and services later, then go ahead.

Focus on your customer’s experience and deliver good work.  Superior performance will go a long way to bringing more work, revenue, and ac, company profits.  It is always less expensive to keep loyalty than to go out and secure a new relationship.  Plan for the future by delivering well now and creating an additional growth strategy with what works for you.

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Marsha Lindquist