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How Much Can a Small Business Make Selling to the Government?

One of the most common questions I get as a government contracting instructor is: How much money can my small business make selling to the government? There’s a lot of misinformation out there claiming it’s easy money, but let’s break down the real numbers so you can see exactly what’s possible for your business.

Average Earnings for Small Businesses in Government Contracting

The U.S. government has a mandate to allocate a portion of its contracting dollars to small businesses. Historically, the target has been 23%, but in Fiscal Year 2024 (FY24), that number increased to 28%, totaling $183 billion in small business contracts.

To determine how much small businesses are making on average, we not only need the total amount spent but also the number of small businesses that received contracts. While the FY24 numbers are not yet officially released (expected in Spring 2025), we can make some reasonable predictions based on trends from previous years.

Small Business Contracting Trends:

• FY23:

  • Total spending: $178 billion

  • Number of small businesses: 61,219

  • Average earnings per business: $2.8 million

• FY24 (Predicted):

  • Total spending: $183 billion (increase from FY23)

  • Estimated businesses: 59,947 (2.2% decline from FY23)

  • Average earnings per business: $3.05 million

• FY25 (Projected):

  • Total spending: $189.4 billion (assuming a 3.5% increase)

  • Estimated businesses: 58,632 (continuing 2.2% decline)

  • Projected average per small business: $3.2 million

This data indicates that while the number of small businesses securing government contracts is decreasing, the average earnings per business are increasing. The government is spending more money on fewer small businesses, which means greater opportunities for those who secure contracts.

How to Determine Your Earning Potential in Government Contracting

If you're wondering how much your specific business can make, the best way to find out is by looking at data related to your industry. Here’s an example using pest control services:

• Total obligated dollars in government pest control contracts: $215 million

• Average contract value: $197,000

• Number of contracts: 1,900+

This means that if you're in the pest control business, you could be earning contracts averaging nearly $200,000 each. While this is lower than the overall small business average, it still presents a significant revenue stream.

Revenue Streams in Government Contracting

For businesses considering government contracts, there are three primary revenue streams:

1. B2C (Business to Consumer): Selling directly to individuals (e.g., pest control for homes).

2. B2B (Business to Business): Selling to other companies (e.g., commercial pest control).

3. B2G (Business to Government): Selling to the federal government, which often has higher contract values.

Should You Start a Business Just to Sell to the Government?

If you don’t already own a business, I don’t recommend starting one solely for government contracting. Government procurement is competitive, complex, and requires an established track record. Instead, it’s best to start a business in a field you are experienced in, and then pursue government contracts as an additional revenue stream.

Final Thoughts

• The average small business earned $2.8 million in FY23 from government contracts.

• In FY24, this is projected to rise above $3 million.

• For FY25, predictions place the average at $3.2 million per small business.

• While fewer businesses are securing contracts, those that do are earning more.

If you’re interested in selling to the government, start by researching contract opportunities in your industry. Use SBA.gov and USAspending.gov to explore government spending data related to your business.

Would you like more guidance on how to break into government contracting? Visit GovClose now!