In the 2022 fiscal year, the U.S. government spent $6.27 trillion. Needless to say, there’s a lot of money available for businesses that take on government contracts. To build a successful business, you should carefully consider the differences between B2G and B2B selling. Choosing the right focus for your marketing efforts is essential for increasing sales and becoming profitable. Keep in mind, however, that B2G poses some unique challenges, and if you aren’t prepared for what to expect, you could get in over your head. This guide will look at the key differences, benefits and challenges of B2B to B2G selling.
Understanding B2B Sales
As opposed to business-to-consumer (B2C) transactions, business-to-business (B2B) transactions take place between two different businesses.
This is when businesses sell products or services to other businesses. Many businesses rely on other businesses and their products and services to sell to consumers.
B2B transactions can be higher in value and volume compared to transactions with consumers. The strategy that a business will take with this kind of transaction differs as well. Great B2B selling will require great relationships and a strategic marketing approach.
Understanding B2G Sales
With business-to-government (B2G) sales, a business will market and sell to the government.
A B2G company may sell to a local, state, or federal Government Contracting entity and will provide goods and services. This could include technology such as computer-aided dispatch software, for example.
Because of the specific practices and protocols that government agencies have, B2G selling and marketing is very unique. It can be difficult to market to the government and meet the needs of government entities, but doing so can be well worth it.
Government contracts are often very lucrative and can be well worth pursuing, despite the competitive bidding process.
Benefits of B2G Selling
Before digging into the challenges of B2G selling, let’s look at the advantages of government contracts. Here are some benefits of B2G selling when compared to B2B.
One of the top benefits of B2G selling is that long-term contracts are common.
With B2G sales, businesses can land long-term contracts that will last for a significant length of time, such as 5 years or more. This type of stability can seem very attractive when building a business and can make seeking government contracts well worth it overall.
Level Playing Field
Another perk of B2G is that there’s a more level playing field compared to B2B.
With B2G, small businesses can easily compete with larger ones. They’ll be able to land government contracts and have the same opportunities available to them. Due to federal regulations, a certain amount of money needs to be allocated to smaller businesses.
Compared to B2B marketing, it’s easier for a small business to get a great contract and compete in B2G activities.
B2G is also more scalable than other types of sales as well.
Once your business is capable of landing a great government contract, there’s a good chance that it will be able to get additional contracts as well. Once you get one contract, it becomes easier to get more contracts and make even more money.
Main Challenges of B2G Selling
There are many challenges in selling B2G compared to B2B selling and marketing. Here’s what you should consider.
Complexity and Bureaucracy
Compared to B2B selling, B2G selling can be more difficult because the government is very complex and the methods and procedures for procurement can be very involved.
There are strict regulations with government entities. These regulations apply to the purchasing of products, so it can be difficult for your business to meet the requirements for selling to the government.
Although many government entities are going paperless these days, there’s a lot more paperwork to take care of with federal contracts and a lot more bureaucracy to deal with.
In addition to the complexity of government contracts, your business will also face stiff competition with B2G. There are also a limited number of opportunities that are available in the government.
You may find that your business has trouble with the bidding process because it can be so long and intricate. Even if you go through it successfully, it’s still possible that the contract could be awarded to another business instead.
Another challenge of B2G marketing and selling is that it can be easy to experience cash flow problems. Despite how lucrative it can be, the entire process will be slow and payments can often take a lot of time to go through.
B2B selling can be a lot simpler in a lot of ways. You’ll get paid in a more timely manner and won’t face the same challenges you do with government selling.
Another problem with B2G selling is that it can be tough to build relationships and there will be a lot of different decision-makers.
When compared to B2B marketing, there will be a lot of people to please in B2G. There will usually be many more people involved in decision-making and the paperwork that goes along with the complex process of purchasing goods and services.
With B2B marketing, you may only need to communicate with one decision-maker in a business.
Considering the Differences Between B2G and B2B Selling
If you’re thinking about seeking government contracts, you should make sure that you understand the differences between B2G and B2B selling.
While both can be great options for building a successful business, they each require a different approach. Make sure that you understand the special challenges that come with B2G sales if you’re thinking about working with the government.