Business-to-Business: Breaking Down the B2B Business Model
July 9, 2018
Business-to-business (also referred to as “B to B” or “B2B”) is a fairly common business term. It’s been around for decades, but these days you seem to hear it all over the place.
With the advent of the internet, phrases like “business-to-business marketing“, “B2B sales”, “B to B services” and more have all become commonplace, but what do they mean? Should you try and get in on the action? And most importantly, how do they affect you and your business?
In this article, we’re going to answer all of those questions.
We’ll take a look at what business-to-business refers to, what it entails and why B2B has become such a hot topic in the business world. Sound good? Let’s get started!
What is Business-to-Business?
For business jargon, “business-to-business” is actually pretty straightforward. Business-to-business refers to any business activity between two companies.
So, if the CEO of Microsoft gives the CEO of Lockheed-Martin a call, that’s technically “business-to-business communication”. If Asahi Glass Co sells windshields to Ford, that’s “business-to-business sales”. If you own a business and see a retargeting ad from Disruptive Advertising after reading this article, that’s “business-to-business marketing”.
Essentially, business-to-business is an adjective you can use to describe a certain type of business activity.
This is important, because business-to-business activities are very different from other business activities. For example, Ford sells cars to consumers. This is called “business-to-consumer (B2C) sales”. Lockheed-Martin does aerospace R&D for the US government. This is called “business-to-government (B2G) research and development”.
Each of these different categories of business activities (B2B, B2C and B2G) is focused on different groups of people with different needs, interests and concerns, so these adjectives help you understand the context of a conversation.
Generally speaking, “business-to-business” is most commonly used to describe businesses that sell to other businesses. As we’ve just discussed, this term is used a lot of different ways, but if someone says they run a “B2B business”, what they mean is that their business sells products or services to other businesses.
Types of B2B Businesses
As you can probably imagine, the B2B business model covers a lot of different products and services. Most businesses are supported by dozens-to-hundreds of B2B suppliers, providers or partners.
Taxes, payroll, security, research and development, web design, call centers, human resources, marketing and advertising…you name it, there’s a B2B business that does it. You can even hire a B2B business to provide CFO or CTO services for your business.
Now, historically, opening a B2B business could be fairly challenging. B2B businesses are often fairly niche and—when you were limited to supporting the businesses in your immediate vicinity—it could be hard to get started.
The internet, however, changed all of that.
Today, a business in San Jose, California can easily build a relationship with and supply parts to a business in Long Island, New York or Frankfurt, Germany. In addition, the internet allows B2B businesses to offer a variety of services to other businesses anywhere in the world.
With all that in mind, let’s take a look at some types of B2B businesses that are doing particularly well in the current market:
Many entrepreneurs and business owners have great ideas…and no idea how to market them. That’s where hiring a marketing agency can be really handy.
Online advertising has made it easy for businesses to sell to anyone, anywhere. But, as online advertising becomes increasingly more powerful, it also becomes increasingly more complex.
As a result, you need paid search specialists, social media mavens, content marketing masters, conversion rate optimization oligarchs… (okay, got a little crazy with the alliteration there). Marketing has gotten too complex for one person to be an expert at everything and many businesses can’t afford to hire an in-house marketing team to bring in the customers they need to succeed.
Marketing agencies help bridge that gap.
For example, at Disruptive, our marketing consultants are members of marketing teams. These teams include experts from a wide range of online marketing specialties. Individually, each team member is good at what they do, but collectively they provide much more value than any single person could.
By hiring a marketing agencies, businesses get all the benefits of an in-house marketing team at a much cheaper price. It’s a win for everyone, which is why marketing agencies have become such a popular B2B business to start.
These days, every business needs a website. But, as with marketing, not every business has the in-house skills needed to create and maintain an effective website.
Business-to-business web development services are the answer to this problem.
Web development companies help businesses design, create and maintain their websites. Depending on the client’s needs, that may be as simple as helping a new entrepreneur create a basic site or as complex as creating a custom app for a billion-dollar enterprise.
While these 3 examples are just a few of the more popular B2B services businesses, they give you a good feel for how a B2B services company works: they identify a need that many businesses can’t afford to cover in-house and find a way to meet that need at a much lower cost.
Software as a Service (SaaS)
B2C software as a service (SaaS) businesses like Dropbox, Mint or Evernote are well-known and incredibly successful. However, the SaaS business model tends to work even better for B2B businesses.
If you’ve ever used Salesforce, Zendesk, Hubspot or almost any other software platform that helps with a business-related task or activity, you’ve worked with a B2B SaaS company.
Almost any B2B activity is a candidate for a B2B SaaS companies: project management, marketing automation, inventory management, financial tracking…the list goes on and on.
SaaS businesses are particularly great B2B opportunities because of their scalability. You don’t need thousands of employees in hundreds of locations to create and run a good SaaS company.
A few good developers and a solid software that addresses a real business need is all you really need to create a successful B2B SaaS company.
While business-to-business commerce has flourished since the Silk Road, the digital age has opened new doors for countless B2B commerce businesses.
With the advent of B2B ecommerce, businesses can now easily identify and access raw materials, components and other products from all over the world through B2B supply and procurement exchanges called “e-procurement sites”.
On these sites, a company’s purchasing agent(s) can look at supplies from a variety of vendors, place bids or request proposals—all without leaving the office.
Alternatively, many B2B businesses use brokering sites to meet their supply needs. In effect, these brokering sites work as the “middleman” between businesses and suppliers, helping to connect the right businesses for a fee.
This is all good news for business-to-business companies.
While B2B commerce is nothing new, B2B ecommerce makes it much easier for businesses to find the right supplier or manufacturer for their needs instead of relying on whatever contacts or network they might have already had.
“Business-to-business” is a fairly simple business term, but it’s an important part of the business vernacular. After all, it’s pretty hard to run a business these days without working with a variety of B2B suppliers, providers or partners.
Fortunately, the internet has made it easier than ever to run a successful B2B business. This is good news for companies everywhere, because it means you can easily find a B2B business to help you with any business need.
If you’d like to start a B2B business, there’s never been a better time! All you need to do is identify a need in the marketplace that you can help fill, get the right pieces in place and market yourself to the world!
Still have questions about B2B? Have any additional insights into how the internet has changed B2B? Leave your thoughts in the comments!