Earline Lagueruela - CEO, FederalContracts.com

Welcome to another CEO Wisdom podcast. We have Earlene Laguerrella with us today. She's CEO at federalcontracts.com, a former federal prime contractor. She's helping a tech and communication company grow government revenue of all things. I have lots of questions on the topic. I haven't sold to government myself. So Earlene, welcome to the podcast. us a bit more about yourself.

Hi, Charles. Thanks again for having me. It's good to see you again. I'm excited to be part of your podcast and want to share with people that government is a, is a place to think about when you are looking at diversifying your business. I started out many years ago. I had an advertising agency and a web development firm. We're based in Texas and we had several major downturns in the economy. The second time that it happened, I'm going like, whoa, we need a client that will be here next year and will pay their bills. That's how I discovered federal contracting. My first contract was a $3 million contract with the Air Force Center for Environmental Excellence doing public affairs in 12 states in the north-central part of the US. We had to hire staff. There. And that was exciting, um, from San Antonio to be coming out and, and having offices in other places. And this was before the internet was all there. Email existed, but the internet was, was very, um, new. And so we had a virtual office in these, in, in these, in these offices, and the work was done in San Antonio. And we were able to get all the work done via special VPNs that were available at that time. So that was kind of exciting. And I turned that into an experience where I decided that I liked that client, I was going to get another one, and I got the Army Corps of Engineers for another $3 million. And that time it was in the It was in Omaha and different places like Idaho and Denver and all kinds of other places. Along the way, I sold my agency and started consulting and helping firms find how to sell to the federal government. In fact, I now have extended it with federalcontracts.com to where we can actually help a company assess whether, you know, should they be selling to any kind of government, like a local government, or maybe it's your local university, or maybe it's your state. And there's a lot of opportunities out there for people who are in any kind of business. And we like to specialize in IT and professional services, but I've helped people in many other areas also get their feet wet.

And why should founders sell to government? Seems like it's very high-ticket type of contracts. And also, once you're in, you're in, and you're hard to remove. It's like a moat. Why should founders sell to the government? And why should they not?

So one of the reasons that I did is one is cash flow. For example, when I got my 3-year contract, you don't have to worry about cash flow that all those people that you're hiring for that job, you've got them paid for the next 3 years because your contract is going to be going on. And so you have stability and then you can build your business to go after other larger clients because you have an established base of income. You also make new contacts, you find out and you do new work and you find out different skills that You didn't know that with the same amount of people that you could do it. In fact, I discovered environmental community relations, which at that time I had no idea. I was a regular advertising web development firm. We didn't know anything specific about that, but we learned it. Then we found out that there was millions of dollars of other contractors out there who could hire us as a specialist in our area. And so for other businesses out there, the question is, you've got your revenue already with what you can get in the regular market. Why not explore to see if maybe government is for you? And I'm not saying that it's for everybody, but it really can make a difference.

And what are the perils? What are the less nice parts of selling to government? If you ask a guy like me, it's like they take forever to make a decision. They would drive me nuts. Like, uh, working with them would drive me nuts, right? Like the bureaucracy, it's super slow. It's low accountability people working the government most of the time. So I work with like founders, right? So yeah.

So I, I would suggest, um, that, that you have somebody in your company that can be your point person for your agency that, um, can check off the list, go down the line, make sure things are running smoothly, and that you're using your creativity, for example, for the parts where you're brilliant. But for everyday contacts of you being the person in charge of your own government thing, you might want to consider having somebody in your business be the lead person. Because they, they have the patience and they can check off the marks and send the reports and figure out where they're at in the project and, and all those details, which in a regular business, well, we don't worry about those things. We, you know, we— you just sign a contract, you go for it, and boom, you're there. Uh, with the government, it's not the same. However, it's, it's, um, it, it— they do pay their bills. And they stick to what they hired you to do. And, and it can be very profitable because you're basically paying for your overhead with a government contract.

Right. Why do companies like Palantir make it their full bread and butter to sell to governments? Is that because of the reason I just mentioned with like the moat? of like, uh, impossible to, to get out? Uh, it takes a while to get in, but it's impossible to, to get out. Is it also because of reputation, right? Once you sell to government, you're almost like whitelisted in all Fortune 500. Like, what's the— what's the Palantir play here?

So, um, it depends on your business that, you know, you can be a, a bomb manufacturing, you can be, you know, providing security to a location. You could be doing IT. You could be doing— I have a friend of mine who has a contract to provide nurses and doctors as part of like to hospitals for the VA. And basically she's basically like an HR firm. And that's not her real business. She's got another business completely, but she saw this contract and she said, I can do that. I can hire those people. find them, and I can make money off of them because they make money every hour that they work. So it kind of— it, it, it, um, what I would say is get somebody creative like me to look at your business and say, where in government do I fit in? You know, if I do fit in, um, because there's all kinds of opportunities. Some are better than others. And so you, you really, um, You really want to see if there's something. Now, for a company that has only done commercial, it's a rude awakening because you have to have a lot of things documented. And so you'll probably have more paperwork than you ever cared for. But once you get used to running the business and providing the reports and you have a standard report that you send out, and you know that on the 15th you've got to send X, Y, and Z, you get it all prepped up and ready to go.

And companies like Palantir, like they made it their full business model. Do you think there will be more of these businesses that will fully be made only to serve governments? Is that a scalable business model in itself?

I doubt that a lot of companies are going to be just federal business. only. There's too much good stuff that you're doing, and you can sell it commercially. So I, I don't think it's, it's going to be a pattern that will be there. It's more usual to have a company that's a commercial enterprise that has government contracts. It's less— it's unusual just to be a federal contractor.

Got it. And walk me through like the full process of selling to the government. Um, is it like request for proposal? Is there a way also I can put some of my agents onto this so that I don't have to do it manually?

Yes. In fact, there's a lot of AI now involved in helping you get your, your government work. Um, the first thing is there's something called SAM, SAM.gov. And if you want to sell to the government, you need to get registered there. And it's a little tricky, but it's free and you can do it. Some people hire experts like myself to get it done correctly the first time because it's quite intense. It's about an hour, hour and a half to fill out all the paperwork. And you'll be asked to do things like, what's your NAICS code? Well, hey, in the business world, we don't have NAICS codes, but that's a National North American Industrial Classification code. If you're going to sell to them, you need to know what your codes are. That's a 6-digit code that says what you sell. That's one of the first steps. Once you're registered with SAM, you can start bidding. SAM.gov has a request for proposals every day. You can use an agent to find the jobs for you and the contracts. by those 6-digit codes. So let's say that you're in accounting. You put your accounting 6-digit code, and any contract that is out for bids, that they're open for new contracts, they'll publish it in SAM. So for the most part, most work is published in SAM.gov. So you Most of us use a service that already crunches all those numbers and gives us a readout every day of what things are available in the areas that we're interested in selling to the government. And so that, that can be done very inexpensively. And, and then that way you don't have to be searching through, you know, thousands of, of, of things that that might or might not be good. Then there's the RFP. The RFP, I'd say to people to check out the terms and conditions and what's the criteria, because sometimes they'll have a friend who's maybe the only company that can fill in a specific thing, like must have X experience. There was, there was a famous one for a billion-dollar contract with one of the major contracting units, and you must have done something nationally for the government during COVID to, to be able to get that award. Well, how many companies had a contract at that time? I'd say just one. So you need to look at the fine print. and see if there's something there that smells like somebody's been prepped for that area. And sometimes you'll see it that you must have done X, Y, and Z, and you're going like, no, you don't need X, Y, and Z to do this. But obviously they're trying to favor the criteria that way.

Right.

And then with the RFPs, you can use people that write RFPs for you. They can write your proposals. Or you can have somebody in your staff write them. It depends if you're selling just like, for example, when we were selling just advertising, it was really simple. You put down, you know, how many billboards you were doing, how many radio stations, how many TV stations, how many, um, gross rating points you were going to have, how many people you were gonna see, and how much money you were going to charge them.

Boom.

Very simple. When you get into something more complex like Public relations. Who are you going to reach? How are you going to reach them? What are the what are the what are the parameters of the job? What's the impact, and what are your deliverables? The deliverable could be a report. It could be a study. It could be research. It could be a website. Deliverable is something tangible that like a report that you can deliver to the government, and. So that's part of the process. And then in an RFP, hopefully you're only going for stuff that you really can win. If you don't have 80% confidence that you've met everything that they said you must have this, this, this, don't do it. I had a client who went ahead, it required the having What do you call it? Certified financials. Well, they didn't have theirs certified. They had regular financials. And they said, well, maybe we don't need to have them certified for the RFP. But their request for proposal wasn't even reviewed because they weren't included in the package. So those are the kinds of things that I guess you'd call them snags, you know, things that You're thinking, well, in a regular business, they may not need to see them because if we're the best, they'll ask us and we'll be able to provide it for you. But that request for proposal can be something else. It can be tricky. But as somebody who's won so many of them, I can tell you there is a way to do it right and there's a way to win business. I'm testimony that you can sell millions of dollars to the federal government in many different areas because I sold in advertising and marketing and PR, web development, all kinds, even consulting. So there's lots of ways to sell them.

Got it. And is there like Zoom calls or sales process in which you need to get on a call and sell them on something? Must be like humans, human emotions also at the end of the day. It's not only like spreadsheets and grids and scores. Uh, do you, at some point, do you hop on a call with the committee and you have to pitch something?

No, if you are, if for the most part, you, you send it all in, in, in an email and occasionally they'll revert back to the way things used to be, which was, was to you, you sent it in a package. by FedEx or something. But some— we had a recent RFP where the top 5 people were selected to make a presentation, oral presentation. And so that's when you do the human presentation and you explain your ideas and everything else. So, yeah.

That's crazy.

Yeah.

Yeah. One part of my brain is like, I like the numbers and the impartiality of it. But another, I mean, if I would invest as a venture capitalist in a business purely from a spreadsheet, right? Like that would never make sense. I would actually need to hear the pitch and see the founders, right? Like it's, it's their presence is a lot.

Yes, exactly. And that business, especially when you're doing venture capital, um, you're, you're betting on the, on the person, the human being and their essence. And their, their, um, their ability to solve problems and find solutions to things that somebody else hasn't even considered.

So why is government different? Why are they not even meeting people that are going to sell to them is my question.

The reason is that there's so many billions every year that, um, that they don't have time to visit with everybody. So they've decided, you know, RFP They have their documentation. They're going to look at your— did you respond? What's your case studies? What is your background? What were your solutions that you proposed? Are those solutions things that they think can really help? The more you can solve a problem for the government, the more clients you're going to get. A good reason, part of my success was going to agencies. They didn't even have a request for proposal out. I went out to them and I said, hey, you know, we're doing X, Y, and Z for this agency. And we found that they're getting benefit from it. How would you like for us to explore that for you? And they're going, well, tell us more, you know? And then you explain that. And before you know it, You know, we, we generated our own contracts where none existed just by being, um, innovative and, uh, and, and, uh, and creative.

Right. But isn't that fundamentally broken? Like, when, you know, Elon went back to— went to politics and tried to slash a bunch of things, right? And he messed up a whole bunch of things, but Wasn't he right in the fact that like these systems are broken from the, on the government level? Because you say they don't have time. I mean, okay, well deploy agents to AI interview these people, record the videos, see their presence at least, right?

Yeah.

And yeah, if they don't have time, well, what does that mean? Should we lower salary, have more people? Like, Aren't there, like, fundamentally broken systems? And if, if I would be a US citizen, that would be my money that would be invested in this. I wouldn't be too satisfied with, like, who's being hired in that decision process of things. I don't think it's the most efficient provider, or am I wrong here?

Well, I think in some cases it may not be the most efficient. Because the government likes no surprises and they're risk-averse. So they want to make sure that the company has done something similar in scope for somebody else. And so that you have proof of performance, not necessarily with another government agency. But if they're going to— let's say you have a million-dollar contract that you're going for. Well, if all your work is in the thousands, you know, you've done $5,000 here, $10,000 there, maybe $100,000 here, and you're bidding for something that's a million, the chances of you getting them, even if you're great, are less than somebody who is just as good as you, but they've done million-dollar work. And so that's, that's one of the, the, uh, the considerations when you're, when you're doing this, is to try and go after And build it, build your capacity to get more business by going after clients, by going after contracts that you can show that you can win. And then have 3 or 4 that you've done really well that you can say, okay, you can call Joe Smith at, you know, at Lackland Air Force Base and he'll tell you how good we did for them, you know.

And In your case, your agency, I believe you fully scaled on government contracts and you had an exit, right? Like, what was that, 20 years ago?

Yeah, in 2010.

How much business do you know that have almost fully fueled on government contracts and had had an exit? Seems like a very good acquisition, right? Because the cash flow is like stable and you're buying contracts. Also, how does that impact the new owners? They need to disclose that they're the new owners if you're serving the government? How does that work?

No, because it was a corporation, and a corporation is an entity. So it's, it's, it was still the same corporation with, with the same years of experience and everything else. If you're a sole proprietorship, that's different, but if you're a corporation, the corporation is a person. This is an entry.

Private equity groups are looking for that a lot nowadays, right? Like just stable government contracts, like risk-averse type of acquisitions.

Yes, and people who are positioned to win them can use the capital that comes from— because sometimes you'll get a contract, but you're paying salaries in advance of you being able to bill it. The government only pays you after you show that you've paid your bill. So let's say that I hired all these people, which I did, in the north-central part of the US. So I'm billing the government 30 days after I've already paid all my employees, and I'm not going to get paid until another 30 days. So I have a 60-day spread of payroll that I'm taking care of. So that's where venture capital can really be Very helpful. There's some other people that, that will do factoring where they'll give you a percentage, they'll charge you, and you, you know, between 5% and 15% of, of your, of your invoice and advance you the money so that they can keep having that. But I found it was easier to have a line of credit at the bank and several lines of credit at banks. if we needed to hold off. And sometimes, you know, they'd make a mistake and not find the bill and blah, blah, blah, and things would get delayed. And for a small business, it can be really painful. But for— if I'm in venture capital and I'm looking at a business and somebody already shows me that they can do government work and they have past performance, And it looks like they know what they're doing and they have a plan, basically which agencies, which projects. And you can build your pipeline, which is what I did. You know, look ahead, see what's coming up in the future, start meeting with the agencies ahead of time, letting them know who you are and how you can help them. And pave the way to find out, You know, what really makes them tick. Because in certain ways, if you're able to get that information of what are they, you know, what's their need, how can you fill it, and you can come up with a solution for them that's cost-effective, they'll want to hire you. For sure.

This is very intriguing. Where can people find out more about you, Eileen?

At federalcontracts.com, they can set up an appointment, and right there, there, you know, you can request a meeting with me, and I'll be happy to walk them through it and analyze, you know, if do they have a chance, and if they do, with which agencies, you know, because they might be perfect for federal, but then which federal, you know, DOD or DOW. Or maybe they— well, EPA is not giving a whole lot of stuff, but for example, the Department of Homeland Security, that was one of my big clients when I was, uh, in my agency days. Um, right, that was exciting. So I'm, I'm happy to help people, um, who would like to know more. Uh, and yeah, just go to my website and pick a slot and, um, I can talk to you on Zoom.