As a Federal Salesperson, the number one reason you need to know the Federal Government Budget Cycle all comes down to closing. By understanding how the Government is funded, you will better understand when money will be available to your customer to spend and your opportunities can potentially close.
We outline below everything you need to know about the federal budget cycle as it relates specifically to the federal sales process.
Federal vs Private Sector Budget Cycles
Federal sales is not the same as corporate sales and, similarly, the Federal Government budget cycle is not the same as the private sector. When it comes to setting a budget, the private sector typically doesn't face as much red tape as the Federal Government but even more distinctive is how each handles year-end spending.
Most private sector companies tend to pull back on their spending a few months prior to the end of their fiscal year. They do so to hopefully preserve profitability for shareholders. This means, the bulk of spending occurs at the beginning of the fiscal year when the budget is first released.
This is far from the case in the Federal market. Most Federal departments and agencies try to spend their budgeted money at the end of their fiscal year August and September in what is considered their "Use it or Lose it" time period. Since those organizations requested money from Congress for specific requirements, Congress expects them to spend it on those requirements otherwise Congress believes they did not need the funding in the first place and most times will not get funding for those requirements in the next fiscal year. So it is a mad dash to spend any remaining budget before the end of the fiscal year. Additionally, funds are often not available immediately on the first day of the fiscal year. Since passing the Federal Budget requires the President and Congress to agree on how the budget is allocated, delays can easily happen. Budget also trickles down from the top so while the Government may be funded, it could still take time before smaller agencies and departments get access to the funds.
Aligning Your Federal Sales Process To The Federal Government Budget Cycle
As a Federal Salesperson, you need to learn how to work within the tumultuous Federal Government Budget Cycle in order to hit your revenue targets.
Stage 1: Start Of The Fiscal Year
The Federal Government's fiscal year begins October 1st and, during this time, you need to be really flexible in the event the budget does not pass. You may have a solid pipeline of opportunities but if those agencies do not have the funds, then you can't expect to close any of those deals. This guide, provides some insight on how to diversify your pipeline to ensure you are not filling it with agencies that may be unfunded in the event the budget does not pass.
Stage 2: Budget Is Passed
Whether the budget is passed on October 1st or March 31st, the next stage does not begin until money is approved. Even then it can take 4 weeks to three months for money to trickle down to customer accounts to spend. During this time you should be working on demos and gaining buy-in from decision makers so that your deals can close quickly once money is distributed. This is also an ideal time to prospect new opportunities that could close before the end of the FY or that would need to request next year funds for your solution.
Stage 3: Use It Or Lose It
Starting around July 15th, agencies tend to devote significantly less time to vetting new solutions and focus primarily on closing open requests or spending the last amounts of their budget. This being said, you should focus more on pushing existing deals across the finish line and less on prospecting new opportunities. This can also be an opportunity to go to existing Federal clients that may need replacement equipment or other low cost solutions to spend up their last bit of funds.
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