B2B - What is it?

15/10/2018 08:00 | Start a business

b2b

The term "B2B" is regularly used to describe a specific type of company that specialises in inter-business commerce. Here, we take an in-depth look at what the term means, how it is applied, and what you need to consider before making any investment in a B2B franchise.

B2B definition

B2B stands for "business-to-business" and relates to those organisations who sell products and services to other businesses, rather than individual customers. B2B companies have played an essential role in the modern economy and are particularly significant in service-based economies.

Typically, they thrive due to their ability to provide other businesses with the products and services they require at a more affordable rate or at a higher quality than they could do themselves. They do so by developing specialist expertise or focusing their efforts on a single aspect of design, manufacture, or service provision.

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B2B examples

In the world of franchising, theres a wide array of B2B organisations to choose from. ActionCOACH is a prime example of how profitable B2B management consultancy work can be. They provide management training and mentoring services to professionals around the country, ensuring they have the skills necessary to further their careers and improve the performance of their business.

Signarama is another excellent example of a successful B2B franchise. Specialising in creating outdoor signs for businesses of all shapes and sizes, they work hard to foster strong relationships with their clients. As you'll see, this is particularly important for B2B organisations.

B2B marketing

In recent years, one of the key growth areas for B2B companies has been marketing. This has been driven by the increasing importance and availability of digital technologies, as well as a surge in demand for online marketing consultancy services. B2B businesses like Activ Net Marketing are the perfect example of a digital marketing franchise that specialises in providing other organisations with the advice, products, and services they require to succeed in the competitive modern business environment.

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Five things to consider before becoming a B2B franchisee

Though a B2B franchise may sound like an ideal investment, there are a few things to consider before you make a commitment and sign the franchise agreement. They include;

1. You still need people skills

With B2B franchises, there's the common misconception that, just because you're not dealing with the general public, you won't need well-developed communication and people skills. This isn't true. As a B2B franchisee, you'll still be handling customers - it's just that your customers will be individuals from other businesses.

Communication skills are a vital skill for all business owners. B2B franchising depends on you building long-term relationships with other business owners. Without good people skills, there are no strong, long-term relationships, and there's no franchise. It's as simple as that. If you're going to succeed in a B2B business environment, you must be comfortable working closely with others.

2. Poor service is not an option

As weve already mentioned, B2B organisations depend on long-term business relationships. Whereas traditional retailers experience large volumes of foot traffic and, to some degree, can afford to lose some business due to less than satisfactory service, this is not the case with B2B operations.

B2B companies only thrive when theyre capable of capturing repeat custom. Without repeat business, there arent enough customers to sustain or grow a B2B franchise. A B2B organisation must be efficient and offer high-quality products and services time and time again. They need to understand that their clients are the lifeblood of the business and that absolutely everything has to be done to ensure they're happy with the working relationship.

3. Are you in the financial position to operate a B2B franchise?

Compared to traditional B2C companies, a B2B business makes different demands on your finances. If youre to become a B2B franchisee, you need to be aware of these differences and ensure that youre in a financial position to meet them.

For instance, B2B companies often invoice their customers for services provided or products delivered. Some businesses take a considerable amount of time to pay their invoices, which can often result in the supplier having to wait to receive the money they are due. This wait can cause cash flow issues, and B2B owners need to structure their business to compensate for this if they're going to succeed. A B2B organisation may require more substantial amounts of working capital to secure their future and franchisees need to understand this when they perform their due diligence.

4. Make sure you question the franchisors sales pitch

Many franchisors will employ a honed and refined sales pitch to win over the hearts and minds of potential franchisees. While most of what they say will be true, a lot will be exaggerated or purposefully vague and abstract. This means that you need to question and fact-check wherever possible.

For instance, if a franchisor tells you that your franchise territory will consist of 10,000 businesses, you need to ask them how they define "business." Do all these 10,000 businesses need your product or services? If not, how many potential customers are there in reality? Likewise, you need to be clear about what you get from the franchise package. A good way of checking the veracity of the franchisor's promises is by talking to existing franchisees.

5. Where is the industry heading?

Finally, you need to consider where your industry is heading and whether any significant changes are coming that could damage your business. At the moment, digital disruption is a key driver of change in the B2B sector, and all franchisors should be aware that digital technologies are having a remarkable impact on how businesses provide services and what services they're providing.

You can find out about the latest development in your sector by talking to industry experts or seeking out trade publications. It may also be possible to attend seminars, workshops, or conferences that discuss ideas relating to the future of specific industries. As with most things, the more you know about the future of an industry, the more likely you are to make sound investment decisions.

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