Understanding funding and the budgeting cycle are key in SLED market
In my recent Arrow Channel Advisor article, “What Is Your SLED Go-to-Market Strategy?” I provided a definition of the market and delved into some of the key market segments. In this article, I provide insight into funding and the SLED budget cycle so you can decide how to best time and align your sales activities.
Sources of funding
When it comes to state, local and education (SLED) funding, understanding which pots of money can be used for IT projects is fundamental to your success.
The largest chunk of spending most states comes out of what is typically referred to as the General funds budget. This budget represents the largest share of revenue collected by states and significantly impacts a state’s overall ability to spend. General funds have the most flexibility and are recurring funds received yearly. They can be used for a variety of products and services, including IT. Most of your sales will come from this budget.
The other pieces of the pie, like Federal or Other state fees, have stipulations and limitations on their use, making them a bit more challenging to leverage. This isn’t to say that there aren’t IT opportunities related to Federal funds or Other state fees, just that those funds are less flexible in their use and allocation.
SLED budgeting process
Getting in front of your customers at the right time means understanding when the budget process begins and ends. For most states, the fiscal year starts July 1, so the budget process starts over the summer when agencies receive guidelines on priorities and necessary spending reductions for the upcoming year.
The ideal time to have conversations with agencies is during late summer into early fall. During this time, agencies will be developing business justifications. This is an important activity in the planning process, because it will spell out exactly which IT projects they will be implementing and when. Business justifications later feed into procurement planning and contract development.
Once agencies have finalized their plans, usually in the fall, they’ll submit their budgets to the Governor who will submit his final budget recommendations to the legislature between November and February.
In the January–March timeframe, you’ll start to see governors, mayors and county executives lay out the priorities and focus areas for the upcoming fiscal year in speeches similar to the State of the Union address. In the late winter and spring, the legislature will review the budget; and, if everything goes according to plan, adopt the budget before the start of the next fiscal year.
Selling your customer on your product or solution before they submit their budget means it is more likely that it will be included in their upcoming budget. If you miss this window, your sales cycle may be longer since you may need to wait for the next budget cycle, which could be a year or two from now.
As an added wrinkle, in some states this process only occurs every other year, because they operate on a biennial budget cycle. About half of the states have a biennial budget, which means that instead of passing one budget year at a time, they pass a two-year budget.
Sales strategy alignment
Make sure you that when you initiate conversations with your customers that you understand where they are in the budget process, so that you don’t have unrealistic expectations of when you will be able to close their business. And also, be make sure you are providing value to them by providing them with the information they need throughout the process, especially for business justification. The importance of timing cannot be understated!
Learn more
- If you want to learn how to target the SLED market more effectively, watch the author’s recent SLED 101 on-demand webinar.
- immixGroup and Arrow are here to help you succeed in the SLED market. Check out our SLED Support Center for resources to help grow your business.
This article is adapted from a recent Government Sales Insider blog, published by immixGroup. The original blog can be found here.
