Government Contracting Services Firm

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Executive Summary

Potomac Federal IT is a small IT services firm positioned to win federal, state and local government contracts, using NAICS code 541512 (computer systems design services). The owner has twelve years of hands-on government contracting experience and writes proposals himself. The plan starts with subcontract work and small set-aside awards and grows toward prime contracts. Year 1 revenue is projected at about $150,000, growing to about $1.1 million by Year 3. Startup costs are about $89,000.

Company Description

Potomac Federal IT is an LLC based in northern Virginia and owned by Robert Russell, who has twelve years of experience delivering and managing IT contracts for government customers. The firm registers in the federal System for Award Management (SAM), holds a unique entity ID and, where eligible, pursues small business set-asides. Services: help desk and infrastructure support, systems administration, application modernization and cybersecurity support delivered under task orders and subcontracts.

How we make money. The plan has these income lines: subcontract and task order revenue at about $1.00 each, about 150,000 in Year 1. Pricing is set so each line covers its direct cost and a share of overhead.

Unit economics. In Year 1 direct costs are about $63,000, a gross margin of about 58% of sales. Pay and overhead take most of what is left, so the plan first shows a profit in Year 2. Prices and volumes are set from the assumptions in the appendix and should be replaced with your own quotes.

Problem & Opportunity

Government agencies need qualified small IT firms, but many small firms struggle with registrations, proposal writing and compliance. Large prime contractors need small-business subcontractors with clean past performance. Agencies want vendors who deliver on time, follow security rules and keep clean paperwork.

Products & Services

A firm built to compete for small, well-defined awards. Robert writes proposals using a library of tailored past performance narratives, a capability statement and a pricing model that covers labor and overhead. The company starts by subcontracting to primes, builds past performance and then bids as a prime on smaller vehicles.

Market Analysis

Federal, state and local agencies spend heavily on IT services each year, and a portion is set aside for small businesses. The firm targets work in its region through agency small business offices, prime contractors and state portals. Contract awards take months, so the plan assumes slow early revenue.

Who we serve first. Government agencies buying IT services, small business offices and prime contractors that need small-business subcontractors.

Competitive Landscape

Large primes and established small contractors compete for the same work. Potomac Federal IT competes on a small, responsive team, strong past performance and a focus on agencies that value small-business partners. We do not bid on work outside our capability or bid prices we cannot deliver at.

Our strengths and weak points. Strengths: Owner with twelve years of government contracting experience; Proposal library and a focus on small, well-defined awards. Weak points we plan for: Awards take months, so early revenue depends on one or two subcontracts; A small team limits how many bids can run at once.

Marketing & Sales Strategy

Register in SAM, build a capability statement and a past performance file, introduce the firm to small business officers and prime contractors, track opportunities on public portals and attend agency industry days. The first goal is one subcontract award by month 5 and one prime award by month 15.

The first 90 days. Days 1 to 30: finish registrations, set up job cost accounting and write the capability statement. Days 31 to 60: introduce the firm to small business officers and 10 prime contractors. Days 61 to 90: submit the first proposals and set a weekly bid review.

Operations Plan

Each opportunity moves through a bid or no-bid decision, a proposal plan, pricing and a compliance review. Delivery staff follow written procedures for security, timekeeping and invoicing. The firm keeps contract records, maintains required insurance and follows cybersecurity practices expected by agency customers. An accounting system that tracks job cost and indirect rates supports pricing and audits.

Key resources and partners. Resources: Registrations, a capability statement, past performance narratives, delivery engineers and a job cost accounting system. Partners: Prime contractors, small business offices, a contracts attorney, a government contracts accountant and teaming partners.

What we measure. Opportunities bid, win rate, awards signed, billable utilization of staff, on-time invoices and cash in the bank.

Risks and how we plan for them:
- Awards take months and revenue starts late. The plan funds the early months and relies on subcontracts before prime awards.
- A protest or delay can postpone a contract. We bid on several opportunities and do not depend on one award.
- Compliance mistakes can cost a contract. We use a contracts attorney and accountant and confirm every registration and set-aside rule with the agency.
- Cash tied up in slow payments. Government agencies pay on set terms, so the plan funds the gap with a working capital loan.
- Staffing for a new award. We use a bench of vetted contractors until the award supports a full-time hire.

Compliance. Federal work requires accurate timekeeping, proper cost accounting and registrations that stay current. We use a contracts attorney and an accountant familiar with government contract rules, and we confirm all registrations, certifications and set-aside eligibility with the agencies before bidding. Security. Staff follow written security practices and complete any required training and background checks.

How a bid works. We read the solicitation, check that we meet every requirement, price labor at rates that cover overhead and a fair profit and have a second person review the proposal against the instructions before it is submitted. After an award, we hold a kickoff with the customer, set a reporting schedule and invoice on the dates the contract requires. Past performance. Every contract ends with a short written record of what we delivered, the customer's contact and any measured results, so each win strengthens the next proposal. Teaming. We keep a short list of partner firms with complementary skills and agree in writing on who does what before submitting a joint bid. Cash. Because agencies pay on set terms, we invoice the day work is accepted and track every invoice until it is paid.

Management & Organization

Robert Russell, Owner and Capture Lead, runs business development and proposals. A delivery engineer is hired when the first award starts, and a second engineer and a project manager follow as contracts grow. A government contracts accountant and a contracts attorney provide outside help.

Hiring plan. Robert runs capture and proposals. A delivery engineer starts when the first award begins, and a project manager is added in Year 3. Vetted contractors cover surges.

Outside help. We rely on an outside bookkeeper for monthly reconciliation and tax filings, an attorney for contracts and licensing questions and an insurance agent who reviews our coverage every year. We meet with these advisors at least twice a year and keep notes of what they recommend.

Milestones Narrative

Year 1: complete registrations, build the capability statement and past performance file, win the first subcontract by month 5, revenue about $150,000. Year 2: win the first prime task order and hire a second engineer, revenue about $600,000. Year 3: add a project manager and bid on larger set-aside vehicles, revenue about $1,095,000.

What the plan's numbers say. Year 1: sales about $150,000, loss about $77,500; Year 2: sales about $600,000, profit about $69,100; Year 3: sales about $1.1 million, profit about $213,100; Year 4: sales about $1.5 million, profit about $321,900; Year 5: sales about $1.9 million, profit about $423,400. The lowest year-end cash is about $47,700.

How we will keep score. Every month we compare real sales to the plan, check the cash in the bank, review the direct cost of each job or product, and look at what customers say. If sales are behind plan for two months in a row, we slow spending and delay hiring until the numbers catch up.

Funding Request

How much we need and how we will use it. Total needed: $253,000. This number comes from the Funding Need Calculator in this plan. It adds up:
- Startup costs of $89,000, listed item by item in the Startup Costs section (the largest are Working capital reserve $60,000; Laptops, secure workstation and test lab $9,500; Insurance first payment $5,500).
- A cash cushion of about $164,000. That is the deepest cash dip in the early months plus about three months of bills, so slow weeks do not put the business at risk. Lenders call this "working capital."
- Together that comes to about $253,000 (rounded up to the nearest $500), which is the total we are planning for.
Where the money comes from:
- Owner money: $60,000.
- SBA 7(a) loan: $193,000.
Kind of funding we are looking for: SBA 7(a) loan: $193,000 at 12.75% interest over 10 years, about $2,853 a month. A loan is money we pay back with interest, and the monthly payments are already included in our cash flow.
How we will pay it back. We expect sales of about $150,000 in Year 1, growing to about $1.9 million by Year 5. We expect a loss of about $77,500 in Year 1, a profit of about $69,100 in Year 2, a profit of about $213,100 in Year 3, a profit of about $321,900 in Year 4 and a profit of about $423,400 in Year 5. Year 1 is lower than a full year because government awards take months and the first contract starts mid-year. The lowest year-end cash balance is about $47,700 (Year 2), so with this funding the business has money in the bank every year of the plan.
What we are offering the lender: the equipment we buy as collateral and a personal guarantee from the owner.
A smaller first step, if needed. If we cannot raise the full amount right away, we can start as a subcontractor with one small team, focus on one agency and delay hiring until the first award starts. Duplicate this plan and lower the loan to match.
What if sales are slower? We also tested a cautious case where sales come in 20 percent lower every year. In that case the plan shows a loss of about $97,000 in Year 1, a profit of about $111,800 in Year 3 and the lowest year-end cash is below zero, by about $2,000. Cash would run short in that case, so we would cut costs early, delay hiring and talk to the lender before it happens.
All numbers in this plan are estimates. We will update them as real results come in.

Appendix Notes

Documents to attach before you send this plan:

- LLC operating agreement.
- SAM registration and unique entity ID.
- Capability statement.
- Past performance narratives and references.
- Insurance certificates.
- Cost accounting system documentation.
- Teaming agreement template.
- Company security practices.
If you don't have any of this yet, no worries - let's continue.

The assumptions behind our numbers (change them in the Financials section to match your own):
- Subcontract and Task Order Revenue: about 150,000 units in Year 1 at about $1.00 each, costing about $0.42 each to deliver.
- Pay: owner / capture lead $90,000 a year (the same number all five years); delivery engineer $92,000 a year (people in Years 1 to 5: 0, 1, 1, 2, 3); project manager $100,000 a year (people in Years 1 to 5: 0, 0, 1, 1, 1).
- Other yearly costs in Year 1: proposal costs, registrations and travel about $18,000, professional liability and cyber insurance about $6,000, software, security tools and phones about $8,000, government contracts accounting and legal about $12,000, marketing and memberships about $4,000.
- Tax rate: 21%.
- Every dollar amount is an estimate. Replace them with your own quotes and research.

Plain words used in this plan:
- SAM: the federal System for Award Management, where contractors register to do business.
- NAICS code: a number that classifies an industry; 541512 covers computer systems design.
- Set-aside: a contract reserved for small businesses.
- Prime and subcontractor: the prime holds the contract and a subcontractor does part of the work.
- Past performance: a record of earlier contracts used to judge a new bid.

Startup Costs