A small Virginia company wins a four-year, $22 million contract with the U.S. Coast Guard.
By Derek Reveron
In 1992, Dennis Garcia founded Potomac Management Group Inc. as a part-time business run out of his home in Alexandria, Virginia. At first, the one-man information technology and logistics consulting firm survived on small purchase-order contracts from government contractors.
But last year, PMG had sales of $1.9 million – a leap that represents a doubling of revenue almost every year, but still a small player in the government contracting industry. All the while, Mr. Garcia never gave up competing for the big contracts. His efforts finally paid off earlier this year when PMG landed a five-year, $22 million deal to provide administrative, management, and technical support services to the U.S. Coast Guard's headquarters in Washington, D.C.
Even as PMG has grown, so has the critical-mass threshold for federal contractors. Now the company must make the transition to fledgling star in the world of high-tech procurement. Mr. Garcia, now age 30, expects to post revenues of more than $8 million in 2000. His work force has doubled to about 50 employees over the past year and will get even larger in coming months. PMG now has offices in Norfolk and Virginia Beach, Virginia; Denver; Albuquerque; Washington, D.C.; and Mayport, Florida. PMG's multiple offices make it easier to land the kinds of contracts that will help the company grow, says Mr. Garcia.
"The $22 million contract is a launching point to take us to the next step," says the CEO. "We are solidifying an infrastructure that will be strong enough to carry us forward to eventually land larger government contracts and commercial contracts, and to diversify."
The meteoric rise has earned PMG plenty of attention. In January, Washington Technology magazine ranked the company 17th on its list of the 50 fastest-growing companies in the Capital region. The Alexandria Chamber of Commerce named PMG the professional services firm of the year for 1999. It July, it ranked number 25 among the HISPANIC BUSINESS 100 Fastest-Growing Companies.
Yet most of the company's growth comes from that one $22 million deal. Under the agreement, PMG provides Web design and development, economic analysis, technical writing and editing, conference planning, and other services to the Coast Guard. The company also supplies staff ranging from expert economists and oceanographers to administrative assistants and graphic designers.
The contract will mean a steady revenue stream of more than $4 million per year for the next four years. Just as important, says Mr. Garcia, the deal lends PMG positive mentions in the word-of-mouth network of Washington-area agencies and contractors. "People are starting to know who we are," he explains. "As we perform well on our largest contract, people will start looking at us for other work."
To continue its growth trajectory, the company must prove it's not a one-contract company. Already it has two other multimillion-dollar contracts. Under a $4 million deal with the Navy's fleet and industrial supply center in Norfolk, Virginia, PMG will provide staff and equipment to handle cargo shipping to ports and airports. For another $3 million contract with the U.S. Geological Survey's Eastern Publications Group, the company analyzes, maintains, and updates databases. It also converts library material into digital format, and at one point it rescued from permanent loss more than $3 billion worth of scientific data, ensuring that it would be available to the scientific community on the Web.
Now Mr. Garcia wants to utilize the company's technical expertise to stake out its own profitable territory in cyberspace. The idea to move from the old business model of government contracting – a shrinking sector, which nonetheless currently accounts for all of PMG's revenue – to the new reality of the Internet. To that end, PMG will develop a bilingual Web portal featuring a range of editorial and e-commerce offerings. Mr. Garcia hopes to line up about 15 "channel partners" to provide the site's content. He acknowledges that he faces a tough fight in the increasingly crowded world of Hispanic-oriented cyberspace. The site will include business-to-business and business-to-consumer capacity, and most of the revenue will come from online advertising.
Mr. Garcia plans to make PMG more global through the launch of an e-commerce venture. "We want to move more of our business into the world economy via the Internet," he explains.
The Web will help PMG fend off the feast-or-famine cycle that debilitates many government contractors, Mr. Garcia believes. For now, the company has a full plate of work, thanks to the $22 million contract. However, it's uncertain when the next contract will surface or how much revenue it will provide. "You just don't know if you're going to get a contract tomorrow," he says, "so you had better always be working on getting the next one." In response to this uncertainty, as well as the consolidation trend consuming the federal contracting market, PMG is preparing to wean itself from government work by bidding on commercial contracts.
Besides talent and luck, Mr. Garcia owes his success to networking with other Hispanic entrepreneurs. He grew up in Arlington, Virginia, earning top grades in high school and setting a state record for the half-mile on the track team. After graduating from the University of Texas, he returned to the Washington, D.C. area to work for Research Management Corp., a large government contractor.
He founded PMG in his home in 1992. He financed the start-up with credit cards while working full-time at Research Management. Eventually, he mortgaged his home for capital and quit his job. He spent much of his time networking with people in the Washington area who ran successful contracting businesses.
A few years later, he met William Soza, president of Soza & Co. Ltd., a professional management services firm based in Fairfax, Virginia. "Will became my mentor," recalls Mr. Garcia. "He sat down with me and said, 'This how is you do it.'"
Says Mr. Soza: "Dennis came to me seeking advice and ended up doing subcontracting with us. I explained how we do things here, and we discussed ways of doing business in general. PMG did more than $1 million in subcontracting work for us."
Both CEOs offer simple advice to would-be entrepreneurs looking to break into high-tech contracting: network ferociously. They emphasize how important it is for companies based outside of the nation's capital to establish a presence there. Mr. Garcia takes full advantage of his geographical location. "I still spend most of my time networking with other businesses, trying to figure out what's coming next, and my network continues to grow," he says.
Networking with the local Hispanic community, observes Mr. Garcia, yields solid business contacts as well as goodwill and publicity for his business. He feels the need to give back to the community where he grew up, believing that such contributions help Hispanic businesses in the long run by promoting education, training, and health in the community. "I have a great passion for Hispanics," he says, "and my business enables me to do things within my community."
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