The American Recovery and Reinvestment Act is pumping $787 billion into the economy.
That’s $787 billion of revenue for companies lucky enough to get it.
But stimulus dollars can set you up for future disaster, warns the Wall Street Journal.
Stimulus funds won’t be around for long. Businesses that take on new employees or otherwise expand to handle a glut of government contracts will find themselves in trouble when the federal spending spree is over. Long term expansion to handle a fleeting increase in activity will lead to idle resources that businesses can no longer afford.
Small businesses that do chase after ARRA dollars may be better off taking on subcontracting work, leaving direct contact with the government to larger firms already in familiar with the process:
“It can be a challenge for an inexperienced company to do business with the government,” says David I. Sonde, a managing partner with The Winvale Group LLC, a government-contracts consultancy.
By subcontracting, business owners can boost their profits and learn about the many requirements of government work without the requirement to meet all of them. At the same time, they can provide the prime contractor with expertise and resources they may lack.
When bidding on big contracts, large businesses must submit subcontracting plans. “They need small businesses to meet their subcontracting goals,” says Diana Dibble Kurcfeld, president of Design To Delivery Inc., a government-contracting consultancy firm.
Thanks for the warning. But we’d take the money while it lasts.
NOW WATCH: Ideas videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.