When you’ve decided you want to start a business, it can be a little tough to decide on a set model. You’ve probably had a lot of experience with the way businesses work. However, when it comes to establishing and running your own firm, it can be easy to start feeling a bit lost. It would be nice to have a set of instructions you can follow. However, when it comes down to it, the only person who can make these big decisions is you. Choosing to start a B2B company or a B2C company is one of the first decisions you’ll have to make. Here’s a guide to making this important choice.
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First of all, what are the fundamental differences between B2B and B2C companies? You probably already know that these stand for “Business to Business” and “Business to Customer”. While this tells you a bit about running each of these models, it’s nowhere near the whole story. What you’re going to read next may come as a bit of a shock. If you’re a first-time entrepreneur, I strongly recommend choosing a B2B model over a B2C one. Obviously, there’s a lot of money you can make running a B2C business, but only if you’re certain you can hit a homerun. Usually, this requires a length of experience, a well-planned, innovative idea, and a lot of financial wiggling room. The marketing, general operation and management of these businesses can be very tough to keep up with. This is true even for an experienced business owner! As a first-time start-up owner, I recommend sticking to a B2B model.
Of course, not every B2C start-up fails straight away! There are a few advantages which consumer-orientated companies can enjoy over others. First of all, B2B companies generally have long sales cycles. With the idea of a B2C company, a lot of budding entrepreneurs are hooked in by the prospect of turning a quick profit. Also, B2C companies are in a better position to exercise their brand, and use it to justify significant rises in price. Don’t put too much value on these factors though. There are even more downsides for first-time business owners in the B2C model.
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First of all, when you’re running a B2C company, it’s hard to make any significant progress without a physical store. Online business is massive, true. However, consumers who want physical products will feel a lot more secure going to a business with an actual shop front. If you had the choice between viewing a couple of pictures of a product, or seeing and feeling it in the flesh, which would you prefer? Marketing a B2C company can also be exceptionally tough. You’ll often need a lot more money to run a successful B2C marketing campaign as well. Before you make a single sale, you need to learn about all the different factors which make shoppers want to buy a product. Also, unless you have an idea which is going to fill a massive gap in the market, you may find it difficult to reel in consumers in the first place. When the consumer finds a type of product which they like, they’ll return to that specific one again and again. Because of this, you’ll need to spend a lot of time hammering your product into the heads of your target audience. Convince and Convert have a helpful article on this. Finally, there are a lot more start-up costs to running a B2C business. Typically, these include warehousing, shipments, and designer fees. However, there can be much more depending on your business plan.
If you’re in or before your start-up period, the B2B model is probably looking pretty appealing now. Although generally easier to manage compared to the alternative, there are still a few things which you might not like about the B2B option. Here are some of the factors to consider before you settle on one business model.
First of all, if you’re running a B2B business, you’ll need to invest a lot more time and resources in building up your customer relationship. With this business model, making a sale isn’t as simple as a consumer picking a product off a shelf. You need to focus a lot of energy on kindling a good, beneficial relationship with your potential buyer. You may need to go in for a formal sales pitch, which will have to be honed and fine-tuned. You may need to have detailed, in-depth conversations with several different people at the company you’re selling to. Odds are your target buyer is going to be a much larger firm than yours. They’ll have a lot of options when it comes to suppliers, and they’re not going to make a snap decision. It can often help to have some kind of feature which sets you apart from competitors. Software packages such as the Adeptia Integration Suite can be very enticing for large business owners. However, within a lot of industries, persistence and proven knowledge are usually all that’s needed.
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Planning to establish sales in B2B takes a lot of work too. As I mentioned before, you’re going to be talking to a lot more people aside from the business owner on the customer end. Let’s say you’re in a B2C model, if your customers simply aren’t buying. You can usually tweak one or two parts of your marketing strategy, and pick up where you left off. As a B2B business, this part of the process is much more complicated. Having put all that work into a sales pitch, if one higher-up at your prospective buyer says “no”, then it means no. You’ll be back to square one, and will need to start planning and preparing the pitch all over again. Preparation for this phase is one of the most essential things for any B2B company. You’ll need to research every single higher-up at the company you’re targeting, and tailor your pitch to suit them.
Companies are also concerned with establishing a long, beneficial relationship when compared to consumers. Let’s think of a supermarket for example. If they were to change who their apple suppliers were, even once a year, it would present all kinds of trouble for the business. There would be all kinds of logistical factors to think about. Furthermore, the two businesses would have to work at getting used to each other’s way of running things. Large businesses, which you’ll probably be targeting, prefer to go with a single supplier which they can rely on for a long time. Even when they could have significantly lower prices, it usually takes special circumstances for a large company to switch suppliers.
Another disadvantage you’d have to accommodate for is worse lead prospects. When you’re running a B2B business, you’re likely to have far fewer leads to target than with a B2C model. The world is full of businesses, but not quite enough to level the playing field. Think of Amazon. This is a website orientated wholly on the consumer, and the take here is vast. Anyone with an internet connection can log on, and make a purchase with a few clicks. By contrast, if you were making automotive parts, your lead pool is only going to be made up of a few international car companies. With the amount of car badges that are now subsidized, the lead pool would be especially small! This feature of the B2B model is something of a double-edged sword. On one hand, your target audience is much more defined, which makes it easier to choose a firm and tailor your sales pitch to them. On the other, it’s just as easy and open for your competitors!
Whether it’s a B2C or a B2B model, product knowledge is a big part of running a successful business. However, depending on the model you’re operating in, this phrase can mean completely different things. For example, if there’s a consumer choosing between three brands of chocolate bar, they won’t need much time to mull it over. They know that the ultimate consequences are no big deal. A CEO choosing a new accounting program for their business is something else. They’re going to have a completely different perspective. They’ll take their time, and carry out their own research into the software and its alternatives. With the latter, you’ll need some extensive, technical knowledge of whatever it is you’re selling. The executives you pitch to are going to ask themselves: “What are we going to gain from this?”. You need to answer that for them straight away. With a lot of B2C niches, all you need to win your customer over is attractive packaging and stats which you can conjure out of the air. In a B2B model, you’ll need technical, proven knowledge to throw around.
If you thought the choice between these two models was tough before, I’m sure you really do now! Although each route has its ups and downs, you can make a killing in either using the right approach. Think about what you want from your venture, and take your time to review your strengths and weaknesses before proceeding.