When most entrepreneurs and consumers think of franchises, they tend to think of business-to-consumer (or B2C) franchises. Indeed, B2C businesses comprise the majority of the franchise economy and have much more visibility when it comes to everyday transactions. When you consider the fact, however, that every company (B2C or B2B) requires suppliers and services, the opportunities in the B2B marketplace start to look very appealing. And franchising, of course, is no exception.
In short, B2B refers to the strategy of developing and marketing products/services to businesses instead of consumers. And while B2C franchises tend to be higher profile or outright massive, that also means that the opportunity to market B2B products/services to them is massive because every business has to outsource some parts of their business.
That being said, the question remains: “Just what are the opportunities to franchise entrepreneurs in the B2B marketplace?” Well, B2B franchises are a drastically different business model than their B2C counterparts, and insofar as they are drastically different, they offer their own, unique advantages and opportunities for entrepreneurs.
1. Less Competition and Less Market Saturation
To put it simply, B2B marketplaces are often much less crowded than the B2C market, which means your B2B franchise business will have more opportunities to grow. Opportunities in the B2B market include can include both products and services at the same time, allowing entrepreneurs to establish relationships with their clients the extend beyond an initial transaction.
According to Bobby Harris, founder and CEO of the Florida-based shipping franchise BlueGrace Logistics, “…B2B franchising is a hidden secret.” While most people like the security of something a bit more tangible, continues Harris, “B2B is a little different. It’s more fluid. If you take a really astute businessperson with the cash required to enter a B2B franchise, and they put in the effort, they’re going to see a great return. Compared to B2C, it’s like taking a gun to a knife fight.”
2. Higher Customer Retention
Customer retention rates also tend to be higher when it comes to B2B services, primarily because those services tend to be ongoing. Essentially, an ongoing service offering gives B2B franchisees greater opportunity to establish long-term relationships with their clients.
As Jonathan Klorfein, director of client services and franchise sales for the 180-unit staffing company, Labor Finders, explains, “A B2B franchise requires someone who feels more comfortable talking the business language and has a desire to assist and see others’ businesses grow, rather than one that provides a consumer product.”
In other words, since the appeal of most B2B services is based on an ongoing need, the likelihood of establishing a lasting, long-term client relationship is much higher. Indeed, as Catherine Monson, CEO of Fastsigns International, points out, “The caliber of [B2B] relationships is very rewarding.”
3. Scaling is Easier
Because the average B2B transaction is much larger than what you’ll find in the B2C marketplace, many B2B franchisees find it easier to grow and scale their business (despite fewer overall transactions). Essentially, every transaction bolsters your revenue significantly more than any B2C transaction, giving you the cash-flow you need to invest back into your business.
The B2B model also allows franchisees to reduce their overhead because they don’t necessarily need to operate out of costly retail space. And because of this ability to keep overhead relatively low, B2B franchisees retain more freedom to scale their business to meet their needs, as well as the demands of their client base.
4. Niche Marketing Opportunities
While B2C franchisees mostly need to cater to vast groups of consumers to remain competitive and survive, B2B franchisees are able to choose what size businesses they want to target. This allows B2B franchises to better refine their marketing efforts in order to generate very specific leads. In other words, the ability to market your B2B services to specific clients gives you the freedom to work with the exact clients you that are right for where your business is at that time.
5. Graduated Growth Opportunities
Just as B2B franchises can refine marketing efforts to attract certain niches of business clients, they can also grow their business in a more tiered manner by choosing precisely which niche of clients they wish to target next. This freedom allows franchisees to construct a more strategic expansion plan.
Essentially, B2B culture more readily encourages the a graduated approach to growth, meaning that you can make growth/expansion decisions more strategically and rely less on seasonal or retail trends. And since those expansion decisions tend to be more graduate and strategic, there tends to be less risk involved in them – i.e. it’s much less likely that a sudden shift in consumer trends will end up compromising your growth plans.
The Careful Consideration of B2B
While both the B2B and B2C marketplaces represent considerable opportunity for franchise entrepreneurs, the graduated, focused approach required of most B2B franchises business models make for a more stable investment in the long-term. B2B franchises (much more than their B2C counterparts) are simply better positioned for customer retention, and all the other long-term benefits that come with it.
“In B2B,” says Catherine Monson, “you have long-term, repeating relationships. You make an impact in your local business community. You can drive around town and feel great pride in what you do, and that you’ve helped others be successful.”
In today’s global community, concerted local action is more important than ever. If you’re thinking about running your own business, reduced competition, higher customer retention, ease of scaling, the ability to market to niche clients, and opportunities for graduated growth are a few reasons to consider a business-to-business franchise.