(that your commercial counterparts don’t understand)

The REAL differences between selling to Commercial and Federal customers

THE CONVERSATION

Have you had this conversation before?

VP Sales: Where is the deal you said was going to close this quarter?

Federal Sales Rep: It has been quoted through the reseller and is in Contracting right now.

VP Sales: Then call the Contracting person and ask for the order!

Federal Sales Rep: That would not be a good idea, the last time someone did that to this KO, they held the award for 3 months.

VP Sales: Then call the CIO and get them to push it through.

Federal Sales Rep: There is no CIO to tell the Contract shop to push it through.

VP Sales: I thought you knew your business. Who can I call to get this done?

Federal Sales Rep: Let’s talk about it some more.

This conversation is repeated hundreds a times a month, especially during the last days of the quarter.

I want to be clear. This conversation is not a negative review on any VP of Sales or anyone else. It is just a conversation to understand the challenges of the Federal market. This article provides the insight into the differences between selling into the commercial and Federal markets.

Let’s begin by reviewing what sales process most companies are comfortable with today. I like to refer to this as “the commercial sales process” or you could call it private sector sales.

 

Quick Look in Selling Commercial (private sector) Sales…

There are numerous “sales training” companies that teach sales people at all levels how to dissect a sales opportunity and how to close. WHY? Because the commercial sales processes makes sense. It is identifiable, measurable and has been studied for a very long time. Yes, there may be exceptions, but for the most part the private sector is the comfort zone for your C-Level and VP level personnel.  C-Level and VP Personnel know how their company works, and experience has taught them that any problem can be solved by a phone call to the right person.  Every sales workshop I have ever attended can be summed up in 3 steps:

1) Find/Fill a need

2) Ensure there is funding

3) Get “yes” from the final decision maker.

In fact, here are 25 examples of the Best Sales Training programs around:

The 25 Best Sales Training Programs for Every Budget and Team

https://blog.hubspot.com/sales/best-sales-training-programs

This material is standard cookie cutter course material to fit every business – every product.

 

There are hundreds more as well.

What do all of these courses have in common? Why do companies send their sales teams to learn these techniques? Strategies? Closing? Leads? Revenue? OH MY!

Let’s look at the details of a private sector sales process and company’s alignment.

An example commercial business sales transaction:

An easy, straight forward, selling process to close revenue:

SALES PROCESS COMPANY ALIGNMENT
Have a product C-Level, VP-Level, Marketing, Engineering, Support
Talk to customer VP-Level, Sales, Engineering, Marketing
Get appointment/Present to customer Sales, Engineering, Marketing
Demonstration/Requirements Sales, Engineering
Champions/Sponsors/Etc Sales, Engineering
Funding: Budget/Quote/RFP/RFQ Sales, Engineering
Channel Channel, Sales (if needed)
Legal/CFO/CIO/CEO C-Level, VP-Level, Support, Finance
Close Support, Finance

 

 

DO IT ALL OVER AGAIN!

I am not saying it is easy to close this business, and in fact it is very hard at times. What I am trying to explain is that a company selling into this market understands what it “must” do to close revenue in that market. The company focuses its resources and cash in gaining “logos” in this market to grow the market and revenues. That is why companies spend millions of dollars a year in training their sales personnel in techniques and strategies to close this business revenue.

This process is transparent (most of the time) and easily understood. The commercial sales person can normally get the company’s organizational chart and strategically and tactically understand the sales process (thus the same sales-type training from all the companies).

BOTTOM LINE: Though there may be additional steps in any company or transaction, the process can be very transparent to the product or service company. Who has to sign what, and where the order is. This can be well understood and validated.

A few other aspects of closing this revenue in the commercial sector. Companies consistently focus on tactical sales plans. This purpose of this focus is to qualify and quantify revenue on a quarterly basis. This tactical focus can be very successful in the commercial sector.

Within this selling environment, sales personnel can ask the “tough questions.” Do you have the budget? Who has to sign on the dotted line to close this order? What is the closing processes through your company? How long do these processes take to get the order? Can we get the order before the end of the quarter? Can I commit this opportunity to my company?

Then the sales person can communicate all of this information back to the company. The process can be understood and controlled by the customer and sales person. A commercial company understands the needs of a commercial company and can easily operate in that environment. They understand the process and they expect everyone that makes a purchasing decision to operate under those rules.

Thus, a predictable forecast! (most of the time)

 

FEDERAL SALES – NOT SO FAST!

The government writes its own rules.


Where to begin this conversation?

I have sold into both private and public sectors throughout my career. I understand both environments, and I like selling into both environments. That said, selling into Federal accounts has a very special place in my heart and wallet. Selling into the Federal market absolutely has its quirks and frustrations, but this market can be extremely lucrative, if you have the patience and understanding of the sales process. So, let’s begin this portion of the conversation with a story.

I have had this conversation with many companies for whom I’ve sold products and services to my Federal customers. This is just one example of the conversation:

While I was working at a company, I attended their commercial sales training, which was great. It provided us an opportunity to delve into another sales person’s commercial opportunity and examine exactly where the person was in the deal. It was a straight forward process and generic, so all sales people could use it. We put zero’s and one’s, pluses and minuses, green flags and red flags on each area in which there was concern or a need for more information. As I was going through the training I raised my hand to ask what I though was a very simple question. Below is a transcript of our short conversation (to the best of my recollection).

  • Me: Do you have an iteration of the Federal sales process?
  • Trainer: He became irritated with the question and stated, “This sales process is for all markets, including Federal.”
  • Me: Where is the reseller?
  • Trainer: You can add it into the process.
  • Me: Where is the Contracting Office?
  • Trainer: What is the Contracting Office?
  • Me: Where is the Contract Vehicle information?
  • Trainer: We need to take this off-line.
  • Me: Hmmmm… This is frustrating.
  • He did not want to talk to me after the training.

My point is that selling into Federal is not the same as selling into the private sector. It does have some of the same processes, but you need to add some complexities and nuances to close revenue.

 

THE TEN CHALLENGES OF SELLING INTO THE FEDERAL MARKET

  1. FARS
  2. ETHICS RULES
  3. OBLIGATION OF GOVERNMENT FUNDS – Below
  4. CONTRACTING OFFICER
  5. CONTRACT VEHICLES
  6. RESELLERS
  7. CONTRACTS
  8. CERTIFICATIONS
  9. CAGE CODES
  10. BUDGET CYCLE– pdf

NOTE: The context of this article is to provide insight into the differences between selling private and public sectors. I will not dig deep into each complexity. Most of these complexities will be separate articles that I will discuss in the future. I will provide high level discussion points into how these complexities affect how a Federal sales person closes revenue with their customers.

YES! Welcome to my world! Each one of these 10 challenges has a direct impact on getting an order from the Federal customer. Some of these challenges are governance, while others are procurement requirements. Why are these important? How do they effect the sales process?

Remember the commercial sales process? Let’s add in the challenges – in BOLD – of the Federal sales process:

SALES PROCESS                                             COMPANY ALIGNMENT
Need: CAGE CODE/NAICS/DUNS C-LEVEL
Have a product C-Level, VP-Level, Marketing, Engineering, Support
Talk to customer VP-Level, Sales, Engineering, Marketing
Get appointment/Present to customer Sales, Engineering, Marketing
PRODUCT CERTIFICATIONS C-LEVEL, Engineering
Demonstration/Requirements Sales, Engineering
Champions/Sponsors/Etc Sales, Engineering
Legal/CFO/CIO/CEO C-Level, VP-Level, Support, Finance – Flow downs
Funding: Budget/Quote/RFP/RFQ Sales, Engineering
BUDGET CYCLE Government – How customer gets money
CONTRACTING OFFICER Government – How customer procures
CONTRACT VEHICLE Align with Channel partner – how customer buys
Channel Channel, Sales (NEEDED!)
Close Support, Finance

 

How do you explain a Federal sales process to a company when it only accepts and understands the commercial/private sector sales process?

It’s funny. It’s not that the Federal sales process is any more difficult than commercial. What is funny is that the VP of sales does not know how to communicate this process to the company. I have had many VPs of Sales explicitly tell me that they “have sold into Federal” or “have had Federal sales people report to them.” Not surprisingly, the VP could not communicate the Federal sales process to upper management.

Let me give you some background on one of my experiences with a VP of Sales. Below was my situation at the time of this specific experience for my quarterly forecast. I was still awaiting the Federal Government budget to be passed for the current year.

  • Calendar Fiscal Year – Q1 – company
  • Federal Budget – still in Continuing Resolution
  • My forecast commit – $ZERO – had to push to Q2
  • My pipeline (best case/commit) for the current year – over $4M (quota for year $2M)
  • I had technical wins for – $2M in pipeline
  • I had – $1.5M in contracting awaiting funding from different customers
  • The VP of Sales really needed that revenue
  • What can I do? What did the VP of Sales want me to do?  What do you think?

At my Q1 quarterly business review I explained the entire situation. I stated that all my opportunities were still valid, but I may have to push them to the next quarter because the Federal budget still had not been signed into law and appropriations (money) were not provided to my customers. Of course, the VP of Sales was not happy about this news. This is where the conversation goes south!

Here were my VP’s suggestions:

  1. Go talk to the Contracting Officer and see what we can do to get the orders.
  2. Go talk to the customers – superiors – to see if they will commit the money.
  3. Give the customer an incredible deal (discount) for this quarter only.
  4. Let’s get a fishing trip together and invite the customers.
  5. Can we get our C-Level people over to all the customers for a face-to-face?
  6. Ask the reseller if we can get a pre-order if you know the orders are coming in?
  7. Ask the customer for a letter of commitment if we cannot get the actual PO.
  8. Ask the customers to use that other type of money you talked about for the orders.

Some of these suggestions have very serious and legal consequences for the sales person, the company and the customer. Each one of these questions can be its own blog article. So, what do I mean about serious and legal consequences? I will discuss each point very briefly.

    1. Remember this is not a profit-based company we’re selling to. It is a tax-based government. So In my experience with contracting offices, I have found that these hard working people are not concerned with any company’s bottom line, quarterly revenue or any other financial matters that concern commercial companies. Their concerns are to ensure that funds are spent according to governmental rules and regulations. The contracting offices do not normally field calls from companies wanting or even sometimes demanding purchase orders. Let’s just say it is never a good idea. (I have heard of companies being put in the “penalty box,” not getting awards until the KO felt the sales person understood who was in charge.)
    2. The customer cannot obligate money. Their superiors can’t either.
Only a select few people have the authority to obligate money on behalf of the U.S. government. If, without understanding the rules, a person obligates the U.S. government without that authority, they may be instead obligating themselves as a party to the contract.
The government is not required to spend funds on any goods or services procured by unauthorized personnel. Unfortunately, such purchases do occur. Thus there are procedures to handle those situations.
Nonetheless, to avoid serious financial liability, everyone needs to understand who has the authority to commit the government to purchases or contracts, and when.
Federal laws and regulations are very clear: Only a contracting officer can purchase goods or services or contract for them on behalf of the government. Without a warrant as a contracting officer, issued by an authorized government official, an individual cannot commit the government. If they do, they are in effect establishing a personal commitment and possibly personal financial liability for the action.
Congress has given authority to specific individuals, referred to as head of the contracting activity, to obligate taxpayer dollars in commercial transactions and all contracting matters. HCAs are usually general officers or senior executive service employees.
The HCA delegates authority down to principal assistants responsible for contracting and, through the use of warrants, to contracting officers, commonly referred to as KOs. PARCs are generally in command or direct a brigade-size element, while KOs work at various levels procuring a host of goods and services for Department of Defense. These individuals execute the procurement of most goods and services that DOD purchases.
Their specific authority strictly defines the ability of people in these positions to use taxpayer dollars. Each level of authority carries with it discretion to make procurement decisions based on the dollar value and type of contract.

Source: https://www.army.mil/article/111939/authority_to_spend_taxpayers_dollars_rests_with_just_a_few

  1. Regardless of “giving them a deal they cannot refuse,” if the customer/contract shop does not have the funding available, they cannot buy anything. I have seen this tactic pique the customer’s interest before, but I have never seen it work.If the money is not there, it is not there. PERIOD.
  2. The Federal Acquisition Regulations and Ethics rules are the rules that Government personnel have to abide by. You cannot treat your Federal customers like your commercial customer. Companies and individuals can get into trouble by taking the Federal customer out for dinner, ball games or anything that is over $25. Just FYI…

http://www.publiccontractinginstitute.com/federal-news-radio-myth-no-8-we-can-treat-our-federal-customers-the-same-way-we-treat-our-commercial-clients/

  1. Again, even with pressure from your C-Level personnel going into to talk to the customer, it will not have the effect that companies would believe they would have, and if your VP says the wrong thing you can almost guarantee that you will be put in the “penalty box.”
  2. No order is guaranteed (see items #2 and #3 above)..

It comes down to understanding and accepting the processes. There is no magic button. If the Federal sales person has cleared all the customer requirements and the requirement is located at the contract shop, the rest is up to the Government. Even in the contract shop, there are still additional hurdles or pitfalls that could occur. We will delve into those hurdles and pitfalls in another blog article.  In this article, I wanted to concentrate this article on the differences between commercial sales versus Federal sales processes.

 

Summary:

I have had this same discussion at almost every company I have worked the Federal market. But understanding and patience can provide an enormous potential reward for the sales person and the company. Remember, the Government buys over $81B in Information Technology products and services just this Fiscal Year alone.  Follow the money!

So, tell me what you think? Do you have any stories about selling to the Federal Government? Let me know in the comment section?  Do you have anything to add?

On the next blog, I will be directing my attention to the “Three Reasons Original Equipment Manufacturers need Federal Resellers for product sales”. I hope you will join me.

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BLOG 7: Three Reasons Original Equipment Manufacturers need Federal Resellers for product sales