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What is Business to Business Marketing?

It has been common to hear the media and a lot of people in the corporate world talk about business to business marketing. If you listen to the American corporate World, it will not pass you to hear a lot of companies strategizing on how they will win not only the consumers but also the other businesses. It will be prudent that as you think of how you can win an individual consumer, you should also focus on targeting the big giants in the business world as you draw strategic plans towards the success of your business.

Business to business marketing is the marketing of goods and services to other businesses.

A lot of companies are providing their services to the other companies in their lines of production. Companies will therefore need each other in business. Banking institutions will keep money for the manufacturers or the same banks will also need printed papers or other services from the said manufacturers. That is just one example of business to business service. A good bank will try to strategize on how to win other businesses to open current or savings accounts with them. That is plainly a good example of business to business marketing.

Other good example of business to business marketing is where companies approaching others to buy raw materials for their processing functions. There are so many companies that are in the business of looking for companies to supply raw materials to them .The companies buying the raw materials may also need to do business to business marketing to win the other. There will be thus a kind of mutual relationship between the two companies.

If you are creating a business that at one point you will be required to do business to business marketing, it may mean that you will be supposed to demonstrate to the company that you will be marketing to why your products and services are better than those offered by the others that are offering to them.

Before you do business to business marketing, you should be well aware that the standards of the products and services that you are offering are supposed to be of higher standards than when you are selling to a consumer.
As opposed to business to consumer marketing, under the business to business marketing, you will be focusing on a more targeted market. You will not ignore the consumer in the picture because if the businesses you are targeting is not doing well in as far as the product that it is selling to the consumer is concerned, it will not buy the products that you will be selling much.

For business to business marketing, you must be able to focus on the following to have the best of the market:

Quality of the goods
You will have to provide goods and services that are of the highest quality to be able to win the attention of the other businesses.

Customer support
You must know how to win and maintain a customer, in this case being the fellow business, with excellent customer support.

Maximizing the Value of Your Business

Maximizing the value of your business requires that you know:

- The two – and only two – types of business buyers
- Which buyers will pay the most for your business and why and
- How to tailor your business so it meets the needs of those buyers.

There are two types of business buyers: investment buyers and strategic buyers.

Investment buyers purchase businesses based on cash flow. They’ll buy a company to get an income and for an opportunity to grow and improve the business for more cash flow. The value of a business to an investment buyer is a function of how much cash flow the business produces and the risk of how likely that cash flow is to continue or grow in the future.

Strategic buyers, on the other hand, purchase businesses based on something more than just cash flow. They’ll buy a company to get access to a component of the company that can be used to improve the buyer’s existing business and for the cash flow it produces. These components can include a customer base, special technology or employee capabilities. The key for you as a business seller is that, because of the added benefit to the strategic buyer, they’ll pay more for your business than an investment buyer.

Consider a technology company (we’ll call it BuyerCo) that wants to sell its product into a new market. It could try to sell directly to that market. But its sales would be limited by the experience and credibility of BuyerCo’s sales team in the new market, and by its understanding of the new market’s needs and terminology.

If, on the other hand, BuyerCo bought another technology company (we’ll call this one SellerCo) that already served the new market, BuyerCo would acquire SellerCo’s customer base and products or services, as well as an experienced sales force with a reputation and staff experienced in the new market.

SellerCo is worth more to BuyerCo because, in addition to the cash flow coming from SellerCo’s existing operations, BuyerCo can grow its original business by selling more of its current products through SellerCo’s sales channels, as well as cut costs from duplicated back office operations. Now BuyerCo can make a business case based on the return from the added sales plus SellerCo’s cash flow and can, therefore, pay a premium over a straight cash-flow-ROI analysis.

Unfortunately, most small businesses are purchased by investment buyers because the owner hasn’t planned the exit in advance, considered who could be a strategic buyer or tailored the business for those strategic buyers.

Creating a strategic buyer market for your business requires forethought and planning.

Consider what companies would likely be strategic buyers for your business. Do you have a particular niche (market, geographic or other) that another industry could exploit with current services or products? Does your business have one or two large direct competitors? What other businesses could benefit from access to your customers, your systems or your technologies?

Once you’ve identified possible strategic buyers, you must put in place the structure that will maximize the value of your business to those buyers.

First, build a good quality customer base in a well defined niche. Compete only on service or technological expertise. Determine your company’s value proposition (which, for a small business should never be lowest price) based on your customer’s needs and make sure you create a long lasting relationship so they buy from you again and again.

Next, watch your profitability constantly. Analyze every decision based on profitability. If you invest in the business, make sure you know when you’ll receive cash flow from that investment. Be sure profit will grow. Then, systematize the business, hire the best employees and pay and incentivize them to view the business as owners, even if they’re not. If the business requires you to run it, it will be much less valuable to all buyers. Your key employees are part of your business’ value proposition and you should have ‘golden handcuffs’ keeping them in place.

Of course there are particular things to do for your company, depending on its size, market position and product or service.

While planning your exit with an experienced business advisor professional will likely increase the wealth you realize from your business, taking even just a few of these steps will put you above most other businesses owners.