SLED 101 Series – Follow the Funding

By Rachel Eckert, SLED Market Intelligence Manager

This second installment of our SLED 101 series focuses on funding and budget cycles.

Not all money is created equal when it comes to state, local and education (SLED) funding. Understanding where money comes from and how budgets are built will help you better time and align your sales efforts to when your customers will be most receptive to new IT project ideas.

Funding sources dictate spending flexibility.

Let’s start by understanding the different sources of spending. The largest chunk of spending in 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 include 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.

The budget process helps you align your sales 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 be having 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.

What does this mean for you? If you’re targeting a state agency with a biennial budget, then timing just became even more important. Missing that crucial planning window means you’ll need to wait even longer before they might have funding for your product or solution.

Aligning your sales strategy

Initiating conversations with your customer early in the budgeting process is key to your sales strategy. It’s best to work with them as they are developing their business justifications. This will help ensure that your solution has funding so your customer can begin the process of formulating procurement and contracting plans.

Stay tuned for our next blog on targeting and understanding the IT budget.

If you want to learn more about how to target the SLED market, watch my recent SLED 101 webinar.

We’re here to help you succeed in the SLED market. Check out our SLED Support Center for resources to help grow your business.