Government contractors
A commercial buyer asks how much of the revenue repeats. A buyer of a federal contractor reads the financial statements and then looks past them, to assets that never appear on them. Those assets set the profit and the multiple at the same time.
What a GovCon buyer is paying for
Most of what a buyer pays for in a federal contractor lives outside the income statement. I group it into five assets. Each one can be built, and each one can be documented so a buyer can verify it rather than take your word for it.
What the government has committed to buy, and what comes next. Funded backlog rather than ceiling value, the option periods still to run, and when each contract recompetes. Then the vehicles you hold. A seat on a GWAC, an IDIQ or a GSA schedule is a license to sell that a buyer cannot get any other way.
A facility clearance and a cleared workforce. A security clearance can take twelve to eighteen months to obtain, so a buyer who wins classified work after closing can bill on day one instead of waiting a year to staff it. Clearances belong to people, and a change of ownership has to be reported, so this asset needs planning before anyone signs.
Your 8(a), SDVOSB, WOSB or HUBZone status, and the certifications a buyer checks before it can bid the work, such as CMMC for defense contracts. Set-aside status belongs to your ownership and your size, so it does not automatically survive a sale. More on that below.
The proof that you can do the work. Your CPARS record, the government's own rating of your performance, written by the contracting officers who watched it. The people named on your contracts. An accounting system that holds up when a cost-type contract is audited. Strong CPARS tell a buyer the revenue is real and the recompetes are winnable.
Many firms list fifteen or twenty NAICS codes because more codes feel like more opportunity. A buyer sees a company that has not decided what it is. A firm that earns most of its revenue in one or two codes, with agencies that know its work, is harder to replace and easier to grow, and it is priced that way.
What the 5 Assets are worth
$2 million to $23 million
The best offer when the work began, and the sale four years later
When I started working with one federal contractor, the best offer on the table was $2 million. Four years later, the whole company sold for $23 million.
The work was not about making the company look more attractive. It was about building the value that was already there into a form a buyer could see, verify and pay for, one asset at a time.
The set-aside question
A company that is sold has thirty days to recertify its size. Since January 2026, if the buyer is not small, the company loses eligibility for new set-aside orders on multiple-award contracts. Single-award contracts can run on through their option periods, but that work no longer counts toward an agency's small-business goals.
For a firm built on set-aside work, the large prime that would once have paid most for your agency relationships is now the buyer for whom that revenue disappears at closing.
Firms that are still small after the deal, and platforms built to stay that way, can carry the set-aside work forward. They are a different list of buyers, and they price differently.
Selling to your own people, bringing a large firm in as a partner rather than an owner, taking a minority stake off the table, or splitting the company in two can keep set-aside work alive that a straight sale would end.
Those structures are built with your government contracts counsel. What each one is worth, and which one fits your timing, is the part I bring. The Exit Briefing covers both in more depth: The Wall Has More Than One Door and The GovCon Grow-or-Exit Decision.
SBA has also proposed a large increase in size standards (The Wall Just Moved for Some of You). Until that rule is final, plan against the standards in force today.
At the table
In an asset purchase, each federal contract has to be novated to the buyer, which commonly takes six to twelve months. A stock purchase avoids novation but still requires notice to each contracting officer.
Many contracts name the people who must perform them. If those people leave after closing, the government can require replacements it approves. A buyer will price that risk unless retention is built into the deal.
Years DCAA has not yet closed carry exposure to questioned costs and rate adjustments. A buyer's accountants typically treat that exposure as debt and take it off the price.
A buyer will rebuild your rates on its own cost structure. If yours cannot be explained and supported, the earnings a buyer believes in can be lower than the earnings on your books.
Federal payment cycles, unbilled receivables and retainage keep a contractor's receivables high by design. A buyer who sets the working capital target the commercial way will ask you to leave more cash in the business than it needs.
Final indirect rates are not agreed until at least thirteen months after a fiscal year ends, and often later. Part of the record a buyer wants runs on the government's schedule rather than yours, so those dates have to be planned rather than hoped for.
The work
The Defensible Date Review works the same way for a federal contractor as for any other company, with one difference: many of its dates come from the government. Filing deadlines, option exercises, recompetes, audit closeouts and certification renewals are published, which makes a federal contractor's dates more exact than most.
For a federal contractor, the Review and the full assessment that follows also cover:
Your government contracts counsel and your GovCon accountants each have a part in this. I work alongside them, so the legal, accounting and value questions are answered together rather than one at a time.
From The Exit Briefing
Bring your contract list and what you are thinking about. If a sale is years away, that is the right time to be having this conversation, because most of what a GovCon buyer reads takes years to build.