Prior to starting a business, the aspiring entrepreneur must decide what kind of entity they wish to begin. Leave VC dreams to the jaded, and months of useless planning up to the coaches. An entrepreneur can cut his or her options right in half by choosing whether to do a B2B or B2C sales/marketing-based organization.
If the entrepreneur wants to make it to owning a beach house, a couple BMWs, and a diversified portfolio, here is what the small business owner needs to know regarding the two business styles:
B2B vs. B2C: What is the Difference Between the Two?
B2B Marketing, by definition, is the marketing or advertising of a product or service from one business to another businesses. More casually and broadly speaking, you can also call "B2B" any sales or marketing geared toward municipalities or government.
Example: Software sales to hedge funds or to the food packaging services industry
B2C Marketing, by definition, is the marketing or advertising of a product or service by a business directly to the consumer.
Example: Retail clothing sales, or a subscription-based website that ranks colleges and sells tips on applying and gaining acceptance to various high-end universities (targeting the website's visitors before the website's advertisers)
What are the Pros and Cons of Each?
B2B Marketing- and Advertising-Based Companies:
Businesses tend to have more money. It is also more transparent which company can write the bigger check: General Electric or Anytown USA Hardware Co.
Typically, a single B2B transaction can yield thousands of dollars for the small business owner, where selling a simple B2C product or services amounts to a much smaller profit.
B2B Marketing services can usually be done from a virtual office and the need for storage and distribution can more easily be circumvented then (for instance, gift baskets).
In B2B Marketing companies, many players can remain in the same vertical and still feed off the target market. In B2C, well, when was the last time you logged into MySpace (assuming you aren't in a band)?
You can turn B2B success into B2C success if you're uncommonly gifted, insanely creative, and even more driven by money. A good example would be when I was in Macy's and saw Donald Trump signature ties. Not a bad gig, turning commercial real estate into neckties.
B2B Marketing-oriented companies have long sales cycles and can often see extended periods of cash flow shortages.
B2B Marketing-oriented companies often have to compete against industry giants, thus fighting every inch to make a name for themselves in an industry that's already been defined, and redefined again.
B2B Marketing-oriented companies eventually involve some sort of office leasing. I can vouch that it was not fun receiving hate mail from competitors regarding whether our team was interviewing candidates from the kitchen table.