Every year, the federal government spends $37 billion to procure goods and services worth $27 billion from innovative Canadian businesses. This presents a huge opportunity for growing ventures with state-of-the-art technology to look into selling to government entities. Presenting a unique set of opportunities and challenges, the prospect of working with stable, long-term clients seems enticing, but comes with intricacies in policies, procedures and processes that exist within municipal, provincial and federal government. These often require a strong sales strategy, persistence, and deep insight.  
 
In one of our popular Masterclasses led by Davie Lee, previous Co-Founder and Chief Executive Officer of a Govtech venture, Townfolio, we explored the nuances of selling to the government and uncovered strategies that can set early-stage ventures, scale-ups and enterprises on the path to success. 

The Pros and Cons of Government Contracts 

Government contracts stand out for their stability and predictability. One of the key advantages, as highlighted by Lee, is the low customer churn rate—government clients tend to stick around, with contracts lasting between one and three years or even perpetually. While these agreements often come in the form of annualized contracts, it is important for one to know the right time to approach government entities to strike a deal. “You really need to know when their fiscal year ends. If their fiscal year ends in December, you need to reach out to them in September, so that they can utilize their leftover budget towards you and your venture,” adds Lee. That’s not all – another huge benefit is that government clients are reasonable in their demands. They respect time and typically operate during traditional business hours of 9-5.  

However, working with government entities also comes with significant challenges. Sales cycles tend to be long, often requiring persistent effort and relationship building over the years. Considering high switching costs both financially and logistically, most governments rarely switch vendors. Lee says, “Since they have already invested a lot of time in adapting one kind of technology, it’s often useful to explore ways in which your solution can be added on as a techstack or if their budget has room for new technological solution.” Lee further adds how startups offering out-of-the-box solutions often cut into their profit margins to accommodate steep customization demands, and that companies need to be mindful to account for related costs in their pricing strategy while selling to the government. 

Pricing Strategies 

Having a strong pricing strategy is essential for government contracts. Often times, companies lose money on government deals as they underestimate costs associated with labor, time, and customization. One of the ways this can be avoided is by leveraging the transparency of these contracts. Being public records, you can see what competitors’ pricing is and adjust your strategy accordingly.  
 
Lee says that there’s three aspects to consider when determining your pricing. Pricing strategies should take into account whether the product or service replaces an existing solution and the associated costs. Lee adds, “If the solution is replacing personnel, for example, consider basing the cost of your solution on relevant salaries.” On the other hand, if your product provides exceptional value—10X better than the incumbent—whether in cost efficiency or functionality, you can effectively charge a larger amount for your solution. 

Davie emphasized the importance of understanding the level of agency required to extract value from a product. Government clients often need significant handholding, particularly for complex solutions. This necessitates a thorough approach to pricing, accounting for onboarding, 24/7 support, and monthly check-ins to ensure smooth implementation. 

Sales Tactics Across Government Levels 

As mentioned earlier, the trick to landing a government deal lies in patience, persistence, and long-term relationship building. Years of groundwork goes into getting in front of the right people and finally striking a deal. Lee explores four different sales tactics including conferences, webinars, cold calls and Requests for Proposals (RFPs). These four strategies work intricately together, but at the crux of all these strategies lies one overarching lesson – government entities sign contracts based on education. The more they trust you and your business as experts in your niche, the more likely they are to trust you, which eventually leads to a deal.  
 
The starting point to building this repertoire for yourself is to bag speaking opportunities at conferences and webinars hosted by government entities and not-for-profit associations. These give you an opportunity to position yourself as a domain expert and establish credibility for your brand. “When you are working on your outreach to explore potential speaking opportunities, you need to focus on building relationships with the C-suite people working for these associations. These associations are often knowledge hubs and sources of information for government entities, and so, speaking at their events will give you great exposure,” says Lee. Webinars are another effective tactic. By framing yourself as an educator, you can attract attendees looking to learn and position your solution as the answer to their challenges. Hot tip – always follow up with attendees and build relationships from there. “Webinars will give you a list of potential leads based on the attendance list. That’s a great way to have a leads list going for cold calling.” says Lee. 
 
When it comes to cold outreach, knowing your customer is critical. Identify pain points within departments of different government entities (be it finance, fire, environment etc.) and connect directly with decision-makers. Lee recommends leveraging publicly available information, such as contact details on government websites, to target the right individuals. The tricky part to cold calling is determining the right target audience based on your solution. ‘Larger cities often have bigger budgets, and it is highly possible that your email goes missing in their inbox due to the high influx of such proposals. Mid-sized cities are often a great bet, while smaller cities require significant effort for smaller returns.” adds Lee. However, this often also depends on the type of solution being offered. “Smaller cities are great for niche or lifestyle-based technological solutions. So, if you have a technology for marriage licenses, small cities might be a great target audience for your venture.” says Lee.  
 
Navigating RFPs and Government Programs 

While Requests for Proposals are considered to be the most common pathway to landing a government contract, it’s not the most efficient method. “We used to apply for government programs and submit RFPs in our initial years at Townfolio, but nothing materialized till we started leveraging our government relationships.” adds Lee. The sales cycle for these contracts is often long and tedious. It starts with meeting the same government employees or representatives on multiple occasions (usually at conferences), striking small conversations till they approach you and encourage you to apply for one of their open RFPs or government programs.  
 
Lee rightly sums up all different sales tactics and potential avenues in one invaluable insight – “In order to sell to the government effectively, you will have to take all those strategies and create a flywheel. If you are doing this for five years, you will essentially be able to create the flywheel in 2-3 years, and then word of mouth referrals will start coming to you and your business,” says Lee. 
 

A long-term game requiring patience, strategy, and resilience, bagging a deal with the government is all about balancing relationship building with efficient processes and adapting to the specific needs of various government entities. By understanding the nuances of pricing, leveraging conferences and webinars, and fostering meaningful relationships, businesses can unlock the substantial opportunities government contracts offer and effectively carve their niche in the government sales ecosystem.  

If you are interested in watching this Masterclass, head to the link here. 

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