We have previously discussed that a business may have to invest $25,000 to $75,000 (in terms of sales costs) to obtain a GSA Schedule. When discussing the matter with our GSA Schedules seminar attendees, many are surprised to l earn that the investment is so great. A frequent comment is "Why would a company invest such a substantial amount of money to obtain a vehicle that has no guarantee of producing income?" We will explain hereafter the reasons why such an investment is a sound one.

Compared to the investment necessary to enter the federal market, an expenditure of as little as $25,000 is an attractive alternative. Keep in mind that it may take your business more than a year to make inroads into the federal market. During that time, your company has to pay the salaries of its salespersons and management - some of which may easily range from $100,000 to $200,000. Furthermore, the cost of writing proposals in response to public Requests for Proposals (RFP’s) can become excessive. On the other hand, if your company had a GSA Schedule contract, it would not have to write expensive proposals in order to win government business. A GSA Schedule contract also reduces contract administration costs significantly - particularly if a "cost based" contract is the alternative to a GSA schedule order.

Many companies new to the federal sales market do not realize the sales costs involved with the business development process. By way of example, let’s look at a small, IT services company that has no experience in the federal market. The company elects not to obtain a GSA Schedule contract and decides instead to enter the market by bidding on public, information technology RFP’s. The company, which has lost on its first several bids, quickly learns that pre-selling the company’s services before the RFP is issued is essential in order to have any chance at success. The company also calculates that it has spent $10,000 - $25,000 per proposal it has submitted.

After its initial failures, the company spends months pre-selling several sales opportunities. Midway through the pre-sales process, the federal customers all ask if the company has a GSA Schedule contract. The federal buyers explain that a Schedule contract avoids the lengthy and expensive public bidding process. The answer to the inquiry is "no." Without a Schedule contract, the company has to respond to each public bid with an expensive proposal. If it had held a GSA Schedule contract, the company could have avoided most of the proposal writing costs (which can easily exceed $100,000 before the company wins its first proposal). The company, during the pre-selling process, could have sold the federal buyer on procuring the company’s services through its GSA Schedule contract.

It is worth noting that those companies selling products don’t realize as great a reduction in proposal writing costs since bids prepared in response to Requests for Quotes (RFQ’s) are less costly. Nonetheless, the reduction in savings is more than offset by the reduction in competition in using GSA’s pre-approved prices. In summary, the investment in obtaining a GSA Schedule contract can be recouped quickly since you have the potential to avoid proposal writing costs. Admittedly, obtaining a GSA Schedule contract is not cheap. However, businesses entering the federal market have to view market entry costs from a long-term perspective.