Before jumping into a Federal Sales Strategy, performing a cost-benefit analysis of the Federal Market for your unique product can help you make the right decision for your organization and prevent a lot of wasted time and resources.
At some point, every growing business faces the choice of expanding into new sales verticals that may be unfamiliar to their existing sales and executive teams. This can be a huge headache or even a nightmare if not planned and managed correctly. Similarly, many technology companies arrive at this crossroads with the option to sell their products to the US Federal Government.
More often than not, CEOs and VPs of Sales who have never pursued a Federal Market strategy will see the Federal Government as an easy opportunity for revenue expansion. While the Federal Market can be an extremely lucrative avenue for growing an already successful commercial business, it should never be approached as an easy fix or with the same mindset as your commercial sales strategy. It is vitally important, when building a Federal vertical, that a company understands their capability to sell to this market and then creates a solid plan to achieve and sustain long-term revenue growth.
How To Perform A Cost-Benefit Analysis On Standing Up A Federal Sales Practice
Before diving into a Federal vertical, it is first important to determine whether or not your business has the capacity to sell to the Federal Government, long-term. The Federal Government faces a number of procurement rules to ensure that taxpayers’ money is spent appropriately, including:
- Certain products need to have specific certifications in order to be purchased by DoD or civilian agencies
- Agencies can only purchase products under a specific spending threshold or through an approved contracting vehicle
- Agencies must have available budget for your solution category to secure funding or the agency must be willing to seek out funds through other means
Understanding these restrictions will allow you to determine whether or not you have the current capacity to sell into the Federal Market now or if you need to invest into your capability before you can really begin to sell. Once you understand your capacity, now you can begin your cost-benefit analysis by weighing these two aspects of pursuing a Federal Vertical and ultimately determine if it is worth the investment of time and resources.
Benefits of Pursuing the Federal Market
The primary benefit of pursuing a Federal Sales Strategy is that you will be generating a new revenue stream and it will diversified from the spending habits of your commercial customers. Government spending can be more stable than commercial spending and having both revenue streams can offer better balance for your organization overall. To truly understand, your earning potential, it is best to define your Total Addressable Market (TAM) and whitespace.
Costs of Pursuing the Federal Market
Understanding the benefits of a Federal Sales Strategy is easy, the costs can be more complex and extensive. If you have never stood up a successful and sustainable Federal sales practice, find a consultant who has and work with them to develop a Federal Business Plan (Full Disclaimer: Sanctum Federal is a Federal Sales Consulting Company, specializing in standing up Federal Martkets for IT product companies). While you can certainly build a Federal Business Plan yourself, it will likely take your team significantly longer to do and you may miss key elements for two main reasons:
- You don’t know what you don’t know. Can you imagine working on an opportunity with the Federal Government for a year or any length of time and not knowing to ask what “color” of money the customer has to actual procure a technology or service? (Yes, the US Federal Government has different types of money they use for procurement). This is just one of the many strategic miscalculations and misunderstandings companies fall into when working with the Federal market. Companies need someone with deep and thorough experience to execute in every facet of the Federal sales market to successfully sell product to this customer.
- The complexities of the government’s buying process. As mentioned above, every agency and department faces their unique set of restrictions when it comes to procuring funds to purchase your product. Federal Consultants are well versed in this market and will be able to determine your most efficient strategy for accessing the pre-awarded government contract vehicles many Federal Departments and Agencies have to use to procure technology and services.
Whether you build a Federal Business Plan internally or use a consultant, the next thing to think about is the costs associated with your plan to do business with the Federal market. The below table offers insight into many of the elements in building a successful and long-term Federal Sales practice. The costs identified are an average across the capability shown. These costs are real and necessary, however, they reflect only each individual service vs the ecosystem of capabilities needed to operationalize the Federal market. It also doesn’t take into account existing employees’ time required to understand all the components of each service and how it fits into the entire Federal sales plan.
|Type of Service||Estimated Cost (when hiring |
separate companies to perform these services)
|Sanctum Federal’s Services|
|Federal Resellers||% of each deal||Align|
|Federal Sales Tools||$60,000+/yr||Align|
|Federal Events & Trade Shows||$1,700+/event||Align|
|Government Affairs Consulting||$84,000/yr||Assist|
Choose Sanctum Federal To Stand Up Your Federal Sales Practice
Sanctum Federal’s mission is to help organizations operationalize their Federal sales practice so they can start producing revenue and seeing the value in the Federal Market faster. We include all of these components into our 5 quarter commitments at $290,000 (this cost does not include costs associated with filing for product certifications, marketing initiatives, software, etc.) based on the following legend:
- Provide: This is a part of our core service
- Align: We offer preferred vendors to provide these services and work closely with them through implementation
- Assist: We consult through the process of identifying and selecting appropriate vendors
Upon completion, organizations that work with us will have an active sales pipeline, resellers signed, contracts engagements, certification processes begun, customer visits, closed revenue, marketing plan, hiring plan and set of tools that will keep the business healthy and profitable.
Sanctum Federal is the only service in the market to provide companies a successful Federal sales plan ready to execute. In addition to saving companies’ thousands of dollars and countless hours in the development of these plan, we also open the door for them to start earning Federal dollars faster.
Should Your Organization Stand Up A Federal Sales Practice?
Now that you have an understanding of the potential costs and benefits of pursuing the US Federal Government customer, it is time to ask yourself, is it worth it?
If your cost-benefit analysis reveals this could be the right market for your product, congratulations! You have a long road ahead but it will likely prove fruitful and worth the time and resources invested.
If your cost-benefit analysis reveals this is not the best move for your organization, congratulations! You just save yourself thousands of dollars and countless hours and can be confident that this is not the best move for your organization at this time.
Things To Look Out For
While your cost-benefit analysis is designed to help you make the best decision, you can still begin the work of standing up a Federal sales practice and not be successful. Luckily though, we have found that organizations who do not have a true grasp on the Federal Market, either due to lack of experience, lack of planning or a combination of both, will exhibit one or more telltale signs. If you notice at any point in your journey to stand up a Federal sales practice one or more of these common signs, you should take a step back and reevaluate your approach before losing too much time and money:
- Assigning your best commercial sales people to the Federal sales practice with the mentality that they will figure it out as they go.
- Hiring a new sales person that has “Federal” experience on their resume but not experience in building a new Federal sales practice.
- Paying hundreds of thousands on different consultants to help close opportunities but still not achieving long-term sustainable pipelines.
Unfortunately, too many businesses go through this list of band aids to ultimately fail at standing up a long-term, sustainable Federal sales pipeline and they develop the perception that the Federal market is not worth the investment. This could not be farther from the truth. The Federal Market has a ton of opportunity for companies but they need to approach it with the right expectations and understanding of the time and resources it takes to be successful in this space.