If you go into business as a contractor, is there an easy target to pick for the contracts you'll go after? Known sources of contracts? Or do you typically branch out from opportunities you know of or learned about while in the industry?
You will need to make sure your business is registered - https://www.sba.gov/content/register-government-contracting and meets the requirements for the type of contract your biding on. There are some requirements depending on the type of contract you are trying to get setup - http://www.gsa.gov/portal/category/101791 but many businesses doing government contracting are doing very well now (Northrop Grumman, Lockeed Martin, Boeing, etc.) since their early days as a small business.
If you want to build up your customer base you can go with agencies or look for businesses that want to Business 2 Business which will typically pay the highest rates.