Business 2 business companies are those businesses that trade wholly, or primarily, with other businesses. Also known as B2B, or business to business companies this type of business is distinctly different from business to consumer, or B2C businesses.
A good example of a business 2 business company might be an accountant who provides services only to companies. The good thing about having this type of business is of course not dealing with the general public. In dealing only with other businesses there are norms of operation that are generally accepted and so the scope of things that can go wrong is reduced.
A good example of this is any type of contract. In dealing with the public, anything that even vaguely looks like a contract must be clear, easily understood and come with get-out clauses such as cooling off periods etc. In dealing with a business, there is a general understanding that the other party is sophisticated enough to make their own decisions and so there are fewer hoops to jump through.
In fact, the entirely random nature of the general public requires safeguards on a wide range of levels from shoplifting to actual physical security for staff against violently disgruntled customers.
This is not to say that business 2 business companies have an easy life, they do not and problem customers can come in many forms.
One distinctive characteristic of business 2 business companies in general is the value and volume of transactions. By and large business 2 consumer companies require large volumes of relatively small transactions. Business 2 business companies tend to undertake fewer transactions, but of a higher value. For some businesses of this type one, or two sales per year can be enough to keep the whole business going, or even allow it to grow. This of course increases the risk associated with an individual sale: if you only have to make one sale a year and it goes wrong you are in big trouble.
From this it is clear that by-and-large the sales processes associated with business 2 business companies are more complex and, generally speaking, require sales personnel that are more experienced and more extensively trained. This is true of the process knowledge of handling the sale, but perhaps more critically it applies to the technical knowledge associated with the sale. Larger value contracts inevitably attract more detailed technical questioning from the customer and more qualification from the seller to ensure a good fit. An inability to deliver the final service can be very expensive for all concerned.
A2Z Business Brokers deals with all types of business, but it has to be said that, for the most part, business 2 business companies generally carry more complexity. This does not always have to mean more risk, but it often means more reward. Certainly, for the investor without a good understanding of the market being entered, the business 2 business world does carry more risk and very good preparation is definitely required.
Fortunately, we at A2Z Business Brokers have a good understanding of both the risks and potential pitfalls inherent in taking on this type of business and can advise accordingly.
If you are looking to invest in business 2 business companies of any kind, or even have one to sell, then please get in touch for a confidential, no charge initial consultation.