End of the year run…Grabbing Unused Budgets

In many large companies, departments get “use-it-or-lose-it” budgets.  What this means is that they get dollars for projects for that year, and if they don’t use up all of that money by the end of the year, then they don’t get to spend it.  It does not roll over until the next year.  This is where salespeople looking to finish out their own year great can capitalize.  It requires you to be flexible in your pricing technique, but you can very often push through a sale that might otherwise take a very long time to close.

A manager at BigCo has $150,000 left in his budget for the rest of the year.  He is evaluating your product for an initiative next year, and your product costs $400,000.  Currently, in his mind, your product is completely on next years budget.  But, you ask about his unused budget and find out about the remaining amount.  You determine with him the best way to bill him the $150,000 now, and the remaining $250,000 next year.  If you can convince the manager of this, not only do you secure a sale this year, you lock up your sale for next year, and leave the manager $150,000 extra on his budget for next year.

So, how do you flush out if there is an unused budget.  Often it is as simple as asking.  Managers may not even think of this as a possibility because its never been proposed to them before.  If they are not very forthcoming, and you really want to flush it out, you should continue to ask.  One sweetener I have often used to get managers cosy with the idea is to offer them $1.10 credit for every dollar they spend with me today.  So, If they handed me an invoice for $150,000, I would credit $165,000 off the cost of the project.  This essentially makes the next year cost of my project an additional $15,000 less.  Initial hesitation is often because they may not be sure that they want to use your product, or if what you suggest is OK with their company.  But, most managers, knowing that they have money that will dissapear and that this method will free up cash for next years projects, will want to at least explore the option in my experience.  And if you have a manager willing to think outside the box, you will get the sale, and an appreciative customer who will alreayd know that you are the type of sales person in for the win-win.

Of course, you DO need to make sure that you aren’t getting a manager into hot water, and I would never suggest something that circumvented corporate purchasing policies, but there are often creative ways to unbundle or unhook your product that makes it fit perfectly into this existing and disappearing budget money.  Sometimes, the reason your product is scheduled for the next year is because it is part of some capital project that has dollars assigned to it.   Once, I had a customer who had money left in his budget for professional services, but not for software.  Yet I was trying to sell him software.  Well, my software typically included installation services, training, first year support, and some data-loading services as part of the core product.  All of those services were completely valid to be billed against his unused professional services budget.  So, I unbundled these services for him, billed him in December for those items, and then billed him for the remaining software licenses in the next year.  The tactic served me and the manager well.  I got a sale in the current year, cash in the bank in the current year.  He got to use this years dollars for next years project, and freed up more money in next years budget (which I took too!).  I also guaranteed that I was going to get a sale in the next year because by doing the first invoice, there was very little chance he would not take the second part.

As I’ve written before, you should be building relationships with your customers – not just selling them.  This is actually one of those instances where what you are doing actually benefits everyone involved.

Knowing that there are about 10 weeks left in the year, and that it can take several weeks to get the contracts done and pushed through, you should be asking about this unused budget and making the deals… TODAY!