Selling products and services to prisons can be a very lucrative business. As large facilities that handle an ever-growing inmate population, prisons require a great number of products and services to operate. Many of these products are provided by private sector supply companies, who benefit from selling products to the Federal Bureau of Prisons, different state departments of corrections agencies, and private prison operators.
However, breaking into the prison supply market can be daunting for many small business owners. Although federal bidding opportunities are centralized, most state departments of corrections have their own procurement and bidding processes. These processes can easily overwhelm small business owners.
Additionally, you can encounter financial obstacles. Since most purchases will be large, your financial resources may not be sufficient to handle the transaction, leaving you shut out of valuable bidding opportunities. And lastly, most invoices are paid in 30 to 60 days, creating potential cash flow problems for smaller companies.
However, if you are prepared and handle the process methodically, these challenges can be overcome and can lead to increased revenues for your company.
Jails buy many products
Prisons have to buy all the products and services needed to maintain the facilities, pay employees, and support the prison population. For example, they have to feed their inmates. This means they have to buy conventional food items, such as milk, bread, meat, vegetables, and other products on a regular basis. They also need to buy special items like kosher food to satisfy specific dietary requirements. Likewise, they need to clean and maintain their facilities, so they need to buy cleaning supplies and other equipment. As you can imagine, the list of products that they need to procure is large and represents a substantial opportunity for small business owners.
Finding and making the sale
Although finding these potential sales opportunities is not difficult, it can be time consuming. Jails can be operated by the federal government, the department of corrections of an individual state, or by private companies. Each of these entities has a separate bidding and procurement process. Keeping track of all of this can be very difficult.
Instead of trying to market to every prison, you should focus on a small number of opportunities – and grow your client base as you gain experience. You might want to consider learning how to do business with the federal bureau of prisons, since they manage numerous jails. Most of their bidding opportunities are centralized and are listed in in the Federal Business Opportunities site, which makes them easy to find. Simply go to FedBizOpps website (https://www.fbo.gov/), select the “Agencies” tab, scroll down to and click the “Department of Justice” link, click the “12 Offices” link, and then click the “Bureau of Prisons” link.
As another example, procurement for the Florida Department of Corrections requires that you first register with the state of Florida purchasing system. You can search for opportunities here. You have to follow their procedures and deadlines, which may be different from how the Federal Bureau of Prisons works.
As you can see, the process can easily become overwhelming if you don’t manage it properly.
Take advantage of special opportunities
One advantage of working with the federal government and with state agencies is that they have programs designed to help small business owners. They also have programs that help veterans, disabled veterans, minorities, and other individuals that bid for opportunities. If you qualify as one of these designations, you should consider learning about the additional help and benefits that may be available to you.
Financial problems and payment terms
Small businesses often run into two challenges when they make a sale to state and federal agencies. The first challenge is simple: order size. By small business standards, these orders may be so big that you may not be able to bid for them because you don’t have the working capital to pay your suppliers.
The second problem is that many federal and state invoices pay in 30 to 60 days. Unless your suppliers give you similar terms, this could cause cash flow problems for your company. There are two financial solutions to deal with these problems.
Finance your sales and improve cash flow
If your biggest challenge is that you have a large order and need funds to pay your supplier, you should consider financing your purchase order. This solution provides you with financing to pay your supplier expenses and uses the order as its main collateral. The advantage of this program is that it enables you to take on large orders, which can help you grow your company faster.
On the other hand, if you do have the working capital to pay your suppliers but can’t afford to wait 30 to 60 days to get paid for your invoices, you should consider factoring financing. This solution provides you with immediate funding by using your invoices as collateral, thereby improving your cash flow and enabling you to offer payment terms with confidence.
To qualify for purchase order funding, your company should meet these requirements:
- Have high gross margins – 15% or more
- Work with reputable suppliers
To qualify for accounts receivable factoring, your company should meet these requirements:
- Sell to credit-worthy commercial clients (or government agencies)
- Invoices should not be encumbered by liens
- Have no major legal or tax problems
Get more information
We are a leading provider of factoring and PO financing to jail supply companies that need financing. For more information, get an online quote or call (877) 300 3258 to speak with an expert.