What are B2B Sales? What Does B2B Even Mean?
What are B2B Sales?
B2B sales means “business to business” sales. This means that one business sells a product or service that will help serve another business. B2B sales are different than the more conventional B2C “business to consumer” sales. B2C sales refer to a company selling to the public, otherwise known as retail. These differ because the purchasing business can benefit from discounts and lower costs. This is sometimes a result of purchasing large quantities, thus helping the selling business, or vendor, sell more of its product.
There are two types of B2B sales. The first is meant to help a business meet their working needs, like supplies, equipment, etc. This process is more closely related to B2C sales, as the purchasing business will most likely be the end user of the product. The next type of B2B is wholesale or component related. This tends to be more of an inter-industry relationship as the purchasing business wouldn’t usually be the end user, but act as the “middle-person” in the transaction.
These relationships, once built, can be long lasting and beneficial to both businesses. They help save on overhead and operating costs. Another difference is who you'll be dealing with. B2B sales often involve special representatives, higher-ups, or those on executive boards rather than retail sales employees. Either way, all types of businesses, especially start-ups, need referrals to increase their sales, and B2B relationships can help with that.
What is an example of a B2B sale?
A restaurant may buy beer from a brewery at cost or a discount to sell from their in-house taps. The quantity they buy is higher than that sold to a consumer but the PPU (price per unit) would be lower or discounted because of the large quantity. B2B sales is meant to benefit the buyer and the seller and help both businesses make money. Another example would be if you own an auto repair shop, you would deal with a wholesale a tire company but sell their tires to retail customers. This type of wholesale relationship helps increase your ROI (return on investment). B2B sales can also involve services instead of physical products. This is more like a "barter". For example, an accountant might need computer services but the computer company may need an accountant.
How do B2B Sales Work?
B2B sales can be thought of as a form of supply and demand. When looking at this business model for your company, you need to consider the following:
What do I need to run my business?
What are my basic needs to operate?
This can start at the most basic level like paper and pens & go up to machinery and merchandise.
What products or services are crucial to my bottom line?
What services or products do I need to complete your business model?
How can I cut costs by using B2B sales to get these services?
i.e., an accountant, a lawyer, insurance.
Make a list and organize it into two groups:
1 - Order of Importance:
What do you absolutely need to turn a profit? For example, a hair salon business, order of importance may go like this:
- Hair Dresser
- Salon Chair
2 - Low to High Budget:
Price out what you need. This will help you determine your more expensive costs. It’s important to get your higher-priced needs through B2B sales so you can save by paying at a discount and/or building a wholesale relationship. That way you save on your bottom line and have more to put towards start-up cost. Some questions to ask yourself are:
- What local companies provide the products/ services I’m looking for?
- How can they help me grow and how can I help them in return?
- Can I sell their product as a retail item or service?
These companies can be your vendors. When thinking about vendors, it’s important to realize the product is something you’re going to use and also likely recommend to clients. Consider the option to sell this as a retail add-on. Promoting and selling your B2B partner’s product can help grow both of your businesses and improve relationships. Here are some other questions to ask yourself:
Can I buy wholesale products and make a profit selling it retail?
How can vendors promote my product?
What can my company provide for a B2B sale to another company?
How does my business benefit my partners in a unique way?
What sets me apart from the competition?
Why would I choose your pizza over the guy a block away? What’s so great in your special sauce?
Once you have considered and answered these questions, you can easily start your business to business sales process. Remember, your ROI should always be higher than you PPU, and take into account any applicable taxes. The last thing you want is to at least break even, then realize you have to pay Uncle Sam as well, thus resulting in a loss. Before speaking with another business, know your budget and your price points.
When you sit down to meet with a new partner, don’t just go in and find out what they can do for you. Find out how you can help them as well, to start a quality business relationship. When the sales funnel goes both ways, you’re more likely to have a longer, more successful relationship.
What are the benefits of B2B sales?
Lower Cost! The cost of doing business is often what shuts down a startup within the first five years. Cutting costs by working with your vendors is the best thing you can do. Especially if the relationship can help you increase your overall ROI.
Faster Order Fulfilment: Building relationships with your vendors means not waiting in line with everyone else for your products or services. It also means ordering in bulk so you can order less frequently.
Quicker Client Growth: Growing your clientele will be easier than your competitor due to your referral network. Because you’ve become an affiliate of your vendors and suppliers, you are more likely to be the one they recommend over someone else.
Higher Organic Reach: Your online network will also grow due to your B2B relationships. Businesses tend to feel more comfortable discussing clients and companies they work closely with. Therefore, you’ll extend your organic online reach to your customers or even, open up an entirely new demographic because of these relationships.
Now, let's get networking…
What is the process of B2B sales:
- Make a list of your first five vendors or service providers.
- Contact at least two and set up a meeting with each one. Meeting with multiple vendors can give you a better idea of the going rates and how B2B pricing would be specific to your product or service.
- Layout what you need. Know what you’re willing to spend.
- Don’t settle. If you’re not happy with a negotiation, take your business elsewhere.
- Find the best fit for your business.
- Is there a possibility of barter or credit arrangement where cash doesn’t change hands?
Last question: How can I find businesses to work with?
- Join networking groups.
- Ask your current network for referrals.
- Work with a business coach or SBA professional.
- Contact leaders in your field for advice.
You’re all set! Sign the contracts, shake hands, and get to business.