When you are starting a new venture, its important to stack as many of the odds in your favor as possible.
For example, having paying customers before you quit your day job. Someone I knew named Leo picked up his first large customer on the drive home from being fired. He had been working with that customer and informed them he wouldn’t be returning onsite. The customer was so disappointed that they offered him the contract on the spot.
Another way to stack the odds in your favor is to pick a business model that is easier for you to execute.
Throughout the years I’ve tried a variety of business models. It’s not uncommon for me to ideate multiple business models in a given year. This process allows me to find opportunities where I have an outsized chance of winning.
My early ventures were B2C focused, or Business-to-Consumer. Some of my revenue streams are still B2C. For example, my courses are sold to individual consumers. Other revenue streams of mine are B2B, or Business-to-Business. A lot of the consulting work I do involves helping businesses raise capital and/or launch products.
Both B2B and B2C models have nuance to them. They each have positives and negatives.
Positives and Negatives of Selling B2B vs. B2C
B2B Positives:
- Higher LTV: Individual sales to business customers tend to be high than to consumers. As does the LTV, Lifetime Value, of a B2B customer. For example, my B2C sales average around $50. Whereas my B2B sales average in the thousands of dollars and upwards of $10k+.
- Decision-making: B2B customers are typically more logical and informed. They are less emotional.
- Loyalty: B2B customers tend to be loyal. Meaning, once you get a B2B customer the switching costs are high enough that they likely won’t look to move their business unless they are dissatisfied.
B2B Negatives:
- Longer sales cycles: B2B sales often involves multiple decision-makers and sometimes lengthy approval processes.
- Payment terms: B2B customers will often negotiate harder for discounts and/or extended payment terms.
B2C Positives:
- Larger markets: In terms of number of customers, there are more consumers than businesses in the world to sell to.
- Faster time to revenue: B2C has shorter sales cycles and payment is almost always instantaneous.
- Lower CAC: The Cost-Acquire-Customer is often lower in B2C.
- More automated: my B2C models are more automated than my B2B businesses.
B2C Negatives:
- Higher churn: Consumer churn rates are usually higher. i.e. they are less loyal.
- Price sensitive: Consumers are likely to be more price sensitive and seek deals.
- Lower ticket prices: To reach a certain sales volume will require a higher sales volume due to lower ticket prices.
Why I prefer B2B vs. B2C
I continue to have multiple business models. Some that are B2C and others that are B2B. Still, I prefer B2B. The biggest reason is that B2B customers are, in my experience, less demanding. I’ve had B2B customers who have paid me north of $10k for a service that were no where near as demanding as B2C customers who are interested in buying a $49 product of mine.
For example, just this week I had a prospect interested in one of my courses. We exchanged at least ten emails for a $29 product. I don’t want to sound ungrateful for the people that are interested in those products. But, I’ve had B2B customers who have paid me thousands of dollars ask fewer questions. That said, one of the main reasons I keep my B2C models is that they require less of my time to operate. I typically close B2C models that required a lot of hands on support to maintain.
If you are considering a new venture, consider the differences between B2B and B2C models and make sure they fit with what you are wanting from a business.
Other things to consider
Something else you should consider, when deciding between B2B vs. B2C models, is whether or not your have the right experience to serve one or the other. If you’ve never worked in a B2B model, it could be a big leap for you to start selling to and fulfilling B2B customer engagements. The inverse is true as well.
Businesses and consumers each have different needs and wants. Make sure you are equipped to serve them well, regardless of whether you prefer one model or another.
If you are interested in checking out one of my B2B models, take a look at my go-to-market agency, Limitless GTM. Just click the button below.
Also, I'm paying a $1,000 referral fee to anyone who refers a Limitless GTM customer that subscribes to the annual plan.
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