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B2B Business: What Is a B2B Company?

By
Joshua Weatherwax
Table of Contents

Are you looking to start a B2B business?

We think that's a great idea! B2B businesses have been growing faster than ever, especially online businesses selling on a b2b ecommerce platform.

B2B Business

We can give you the tools and information you need to start your own on the right foot.

Read on to learn what is B2B, see some examples of how they work, and get advice on creating a business plan and proposal.

What Is B2B Business?

Business-to-business, or B2B, is a company that sells its products or services directly to another company. This is in contrast to the B2C model where they sell directly to individual consumers.

B2B Business Model

The B2B business model features the exchange of products and services between two or more businesses. These businesses include product manufacturers, wholesalers, distributors, retailers, and more.

Advantages and Disadvantages of B2B

Advantages of B2B Business Model

The B2B business model comes with a number of advantages that make it a worthwhile endeavor.

Here are just a few:

  • Bigger order volume and value. B2B sales leads have consistently high value and orders are made in bulk. (You can also use bulk shipping for them.) This means you can make a large amount of revenue with far fewer sales than comparable direct to consumer brands.
  • Higher conversion rates. Businesses convert better than individuals. This means B2B marketing (see what is B2B marketing) efforts are more successful and you waste less money trying to attract new customers. That's why DTC marketing is a costly venture.
  • Stronger relationships. It’s much easier to build lasting relationships with business consumers than with individual customers. You can grow your business with a much more selective group of clientele.
  • Streamlined business structure. Selling to businesses can be much simpler than selling to individuals. That’s because communication between businesses happens regularly and you don’t have to guess as to what they want.
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Disadvantages of B2B Business Model

Though there are many benefits to the B2B business model, there are also a few drawbacks.

Here are fives of them:

  • Slow buying decisions. B2B consumers take a long time to make purchasing decisions. This is because multiple stakeholders are involved and sales often take a series of meetings and discussions to be approved.
  • Limited market base. There are far more individual consumers in the world than businesses. That means you have fewer potential customers and the ones you do have are very important. If you lose even a single customer you can really hurt your bottom line.
  • Inverted structure of power. In the B2B model, the power rests with the buyer. They can be demanding, drive changes in the sales process, and have very specific requirements that the business must meet to make the sale.
  • Very competitive. Since the market is much smaller, competition is more fierce in the B2B model. You need to be ready to react to any marketing or discounts offered by your competitors. Providing superior service is a necessity.
  • Difficulty forecasting. Both manufacturers and resellers can run into issues with demand forecasting. This is because B2B has a shorter inventory cycle count, which sometimes makes physical counts of inventory challenging. This can, in turn, lead to overestimating demand and leave all parties with dead stock (see dead stock meaning).

B2B Business Examples

There are a few different models for B2B businesses. To help clear things up, here are a couple of examples.

One model:

Let's say a farm raises chickens for their eggs. Each day they collect the eggs, clean them, and then sell them in bulk to local restaurants. These restaurants then cook and resell the eggs for a profit. Both parties profit from selling to their intended consumers.

Another model:

Another company manufactures clothing. Instead of investing in their own online storefront and distribution channels, they choose to sign up and sell through a B2B wholesale marketplace.

Upon production, product is shipped to the marketplace's warehouse. When sales are made, the online wholesale marketplace packs and ships the product while taking a small percentage of the revenue. All other proceeds go to the manufacturer.

B2B Business Plan Sample

A B2B business plan is a roadmap for the goals, funding, and strategies you intend to use. To build a business plan you need to ask yourself a number of questions and conduct research to determine the answer.

Questions like these:

  • What is your purpose? The goal here is to come up with a firm statement as to why your business should exist. This will be the prime selling point to customers and investors.
  • Is B2B the best choice? You should seriously compare B2B vs B2C models for your industry to determine which is right for you. Don't force a model that won't work.
  • What value does your product/service bring? Your business should directly fix a problem or add additional value to your target consumers. If not, you'll have a hard time convincing businesses to start a relationship with you.
  • What capital do you need to start? This is a vital question to ask, especially if you'll be seeking investments. You should err on the side of caution and plan for high starting costs and a lack of profits for the first year.
  • How will you market the business? Marketing is more than just advertising. You need to know how you'll get your business in front of others if you plan to make sales. A good marketing plan can let you start growing your business from day one.

B2B Business Proposal Sample

After developing a business plan, the next step is to come up with a business proposal you'll share with prospective clients. If you answered all the questions above, you're in a great position to get started. There are many templates available online, but they essentially look like the outline below.

Here's what your B2B business proposal should look like:

  1. Title page, cover letter, and table of contents. No proposal will even be looked at if you can't provide this simple set of pages. Make sure to include your company name and logo here.
  2. Proposal summary. Give a quick synopsis as to why you've given them a proposal and why they should read it. Keep it short and save actual data for more important sections.
  3. Statement of issue. Here you'll outline the perceived problem that the business has in your eyes. It could be a set of issues or even something they aren't aware of.
  4. Business approach. Next, you will outline how your business can fix those problems.
  5. Methodology. This section is the full strategy you'll use to fix the problem in detail. Timelines, numbers, and firm plans are paramount in getting the point across here.
  6. Who you are. Outline why you are qualified to help them. Include past wins and testimonials if possible.
  7. Costs. This section is the most important and likely the one that will make or break a deal. Include as much detail as possible and separate each service or product you are offering.
  8. Terms. Finally, it's time for the legalese. A net 30 schedule and methods for B2B payments are some things that should be included here.

Business to Business B2B eCommerce Websites

B2B eCommerce websites are sites owned and operated by individual companies to sell their products or services to other businesses. These sites make B2B transactions more streamlined than the traditional model. In fact, the growth of the internet has led to more than 70% of companies placing the majority of their purchases online. B2B business play a major role in eCommerce growth. They can be run on a company's owned headless eCommerce platform or through an online marketplace.

Business to Business B2B Wholesale Marketplaces

B2B wholesale marketplaces have become some of the largest and most profitable sales platforms in the world. These sites and apps allow businesses and individuals to increase their sales and reach markets that they could not otherwise. They're also a great way of knowing how to find vendors and how to buy wholesale products. The most well-known wholesale marketplace in the world is Amazon.

Some marketplaces also let companies lower their inventory carrying cost by participating in dropshipping or kitting.

For wholesale food distributors, the best B2B eCommerce marketplace is BlueCart. The ordering process is streamlined and customizable and connecting with buyers has never been easier.

It's the perfect all-in-one solution for food distributors looking to grow their bottom line.

B2B Business

Are You Down with the B2B?

The B2B business model is a tried-and-true form of commerce. These businesses are continuing to grow at an exponential rate through the internet. Armed with the information above, you're well on your way towards starting or growing your own B2B business. You should also make sure to set measurable eCommerce KPIs, so you can continuously improve your business and increase eCommerce sales.