Navigating the Maze: K-12 Executives Share Perspective on the 2023 Sales Cycle

The current state of K-12 district’s budgets can be characterized by one word: uncertainty. Pandemic learning loss persists despite the influx of federal stimulus dollars. With the looming expiration of ESSER stimulus funding, K-12 districts are grappling with how to meet greater student needs post-pandemic with considerably fewer resources. This dynamic is creating headwinds for suppliers serving K-12 districts, with some product categories outperforming the market and others falling behind.

This month, we share findings from a Tyton Partners survey of K-12 education company executives, who offered perspectives on how their organizations performed during the 2023 sales cycle. Our sample represented a diverse range of ~60 companies from across the ecosystem.

In the aggregate, K-12 executives are reporting a bookings shortfall this year relative to expectations, with some degree of caution for the coming years. We highlight below a few key takeaways from our survey, including a retrospective on the past sales cycle, the impact of future funding dynamics, and supplier priorities moving forward.

Bookings are down relative to expectations

K-12 bookings were down this year relative to expectations for a majority of executives. More than 50% of executives report that bookings for this sales cycle were below what they anticipated; by contrast, only 21% reported their organizations outperformed expectations.

More than 50% of executives cite increased spending caution from districts as the primary driver of lower bookings. Many executives reported that district belt-tightening lengthened the sales cycle and made district leaders more hesitant of multi-year contracts. As one respondent noted: “The time to close sales is longer than ever before.” Interestingly, poor Salesforce execution was a challenge for nearly one-third of the companies; leaders will need to tend to these internal operational dynamics especially in a tighter post-ESSER funding environment.

ESSER and state budgets are looming headwinds

The outlook among executives for next year’s sales cycle is lukewarm, particularly with two concurrent funding dynamics at play: the expiration of ESSER III funding and contracting state budgets.

Nearly 50% of leaders expect ESSER expiration to have a negative effect on their sales efforts next spring. Directionally, instructional materials and professional development providers expect to experience this expiration more acutely than their assessment, LMS, and supplemental academic services’ peers.

While the impending expiration of ESSER looms large, an estimated $50B of ESSER funding remains unspent, the equivalent of nearly half of all ESSER funding, according to Burbio. In addition, the Department of Education recently announced states and districts can apply for a 14-month spending extension, pushing potential spending deadlines into Spring 2026. While this may ease the transition away from stimulus funds in the near-term, it may only prolong uncertainty in district budgets and for suppliers.

Declines from other funding sources are compounding districts’ spending headwinds. According to a recent survey of K-12 district leaders, 42% expect decreased state funding to result in budget reductions for the 2024-25 academic year. In addition, overall public school enrollment is expected to decline 4% by 2030, building on the 3% drop – and higher in some communities – that occurred during and following the pandemic. With public funding tied to enrollment, these declines will put another damper on district budgets.

The combination of time-limited stimulus dollars, shrinking state budgets, and declining public school enrollments, in addition to the recent pain of inflation, has left many district leaders seeing dusk on the horizon. However, the degree to which these factors influence districts, and how they ultimately respond, will vary by conditions in each state and local community. These dynamics require suppliers to enhance their understanding of priority customer segments, sharpen their pricing and bundling strategies, and interrogate the messaging they deploy to make their value known to districts.

Instructional materials spending at risk?

Executives anticipate that the instructional materials category will take the brunt of spending cuts. One-third (33%) of executives anticipate district budgets for instructional materials to decrease, more than any other product category. Recent feedback from leaders of instructional materials businesses – particularly technology-based supplemental programs – suggest these declines may be as high at 10-20% in 2023 alone.

The shift away from instructional materials spending represents a noticeable divergence from prior trends. Particularly in the latter stages of the pandemic and during the early “return” to school, district leaders prioritized students’ learning loss and used federal stimulus dollars to expand the purchase of supplemental curriculum solutions. However, with too many solutions adopted and not enough progress closing student performance gaps, district leaders are beginning to winnow and prioritize their spend. As one executive emphasized: “Districts aren’t willing spend on supplemental materials at the same rate with the possibility of [continued] future deficits.”

Suppliers place bets on data and assessment

We hypothesized earlier in the year that products which incorporate data to support student success and report progress would be highly valued by district leaders. Executives seem to agree based on where they are prioritizing their internal product development investments. Nearly 50% report plans to invest in data and administrative systems product initiatives across the next 2-3 years, with more than one-third (36%) planning assessment investments.

Ultimately, these data reflect companies’ efforts to catch up or get ahead of market and customer expectations. Either way, executives seem to believe that products collecting data and/or measuring efficacy may be better positioned to justify an investment from district buyers.

Many district leaders are well into their budgeting processes for next year and actively considering how to reconcile their wish list with the dollars available in their (digital) wallet. For many, that includes a winnowing of the pandemic era adoption excesses and a sharper focus on products and services aligned to district priorities and demonstrating impact.

In a similar manner, K-12 companies should be discussing and applying the lessons learned from last year’s sale cycle to lay the groundwork for more success in Spring 2024. With funding/spending headwinds looming, now is the time to sharpen your organization’s understanding of customers’ priorities, preferences and perceptions and the actions available to best position your team for success next year.

Reach out to schedule time if you have questions, additional thoughts, or would like to continue the discussion and learn more from our team.