B2C companies are rapidly becoming more customer-centric, but are B2B small businesses getting left out in the cold?
A lack of sales projections can mean that B2B start-ups are left flapping around in the dark when it comes to ordering. So why are traditional contracting models still being applied by B2B suppliers, which threaten the integrity of the relationship and the very ability of the start-up to stay afloat?
As a homegrown food company and start-up, I have found that business must be conducted one day at a time. When a company is new on the ground, there is very little data to create any sales projections, and hence, ordering can be a dangerous game at the best of times. Much of it is based on guesswork and ‘asking around’ the industry, not to mention utilizing Google.
I struggle to find value in the traditional model of contracting for us as a small business. Traditional contracting requires numbers that are set in stone, and prices are based on this. So, if you want the product at a cheaper rate, you must order a specific number. Then, you must commit to that number. Not only can this be a logistical nightmare, but it also creates a rocky partnership between the two businesses from the outset. As a small business, you are working hard to build a reputation for yourself. So, breaking contracts from the beginning is not ideal. Yet, the lack of sales projections means that you can only make gross calculations as to your requirements. As a small business owner, it leaves you in a challenging place.
When it comes to contracting in our modern technological world, surely there is a better way of going about things. Even if technology cannot provide a path, I feel like flexibility and trust would help most situations. I know that any company that showed us trust, flexibility, and understanding upfront would have our business for a very long time. That is because these things breed loyalty. We can often get stuck in the idea that commerce is a grey area where numbers rule and emotions have no place, but this is not true. Humans still operate businesses, so there will always be emotions at play.
Modern psychology tells us that when someone does something for us, we subconsciously feel indebted to pay them back. Society has conditioned us to feel like giving, and taking must be balanced out. A popular sales technique is to begin by giving your customers something. This is also why many businesses give away something for free upfront. It automatically creates a sense of loyalty and subconscious debt. Incredibly, so many companies do not understand this. Instead, they see the value of the next dollar above the value of the long-term customer relationship.
Big businesses use contracts to protect themselves against being abused or ripped off. It has become common practice. But to some degree, the method of beginning with a contract can create a negative mindset from the start. It is like the corporate version of a pre-nuptial agreement. The marriage hasn’t happened yet, and already there is a symbol of the relationship failing on the table.
Traditional contracting has grown to such a degree that anyone entering into a business agreement based on word of mouth would be considered crazy in today’s market. This sad situation could be regarded as a reflection of the world that we have built; One where we want to trust each other, but various cases we have been shown tend to make us wary of each other instead. We read about one bad situation in a nest of a hundred positive ones, and we focus on the negative one, assuming that the world is like that.
Some might say it is naïve to think that a business relationship can begin with trust instead of suspicion. This doesn’t mean that contracts must be done away with altogether. It just means that surely there is potential for more flexibility in these arrangements. Such flexibility would be a heavy load off the average small business. It would balance the risk between the suppliers and new buyers instead of the buyers taking all the risks. You have to wonder if flexibility might help increase the success rate of smaller businesses.
What I am proposing here is not such a radical idea. It doesn’t ‘break’ the world of business by introducing ‘human’ values of trust and mutual understanding. It just seems that with the way the world is moving, aren’t we beginning to understand that the cloak and dagger approach in business just isn’t working? A contract doesn’t have to be like an alliance being signed in the middle of a war. Can’t it be a moment of unity, where two businesses form to make a new ‘virtual’ business that works together, as one, towards a new set of goals?
A small bakery might have the intention to sell a hundred pies a day. The local flour company might have a goal to sell five hundred bags of flour a day. Instead of a tight-fisted contract, the mutual agreement might begin with the question — How can the flour company help the bakery sell more pies each day?
A smart flour company executive might recognize that it is in his or her company’s best interests to help the bakery sell more pies. The result would be more flour orders as the company grows and a stronger relationship with more loyalty blossoms.
We naturally want to help our friends. That doesn’t have any less meaning in the business world. This same smart flour executive might understand that the bakery is a goldmine; It is a source of money for his or her company. So why would they want to put in place policies that jeopardize the success of the bakery such as strict ordering policies and penalties for breaking contracted numbers?
Establishing business rules and governance structures for the relationship can be a give-and-take process meaning that both parties are likely to benefit from the link. This is critical since, while it may not seem evident at first, their goals are inseparably tied together. The success of the smaller business has a direct impact on the intent of the more prominent company. The more pies that sell, the more flour will be sold. It’s as simple as that.
This might be one of those subjects where the untrained eye sees it as more of an ethical move than a strong business strategy. But hopefully, if we are smart, we can lift ourselves above the education we have been given about how the business world works. Business is changing fast. B2C enterprises are recognizing that success is only to be bred by a customer-focused firm; One that utilizes data to transform and innovate in line with rapidly changing customer needs. The B2B business has been put on the backburner while such radical transformation occurs at the front end.
Perhaps because B2B is called B2B, the sense of being customer-focused is lost. Businesses treat businesses with a greyer state of mind. They are treated with more suspicion. There might be something in recognizing that a B2B company is always, at its core, a B2C business. While the form of the customer is different, there is still a buyer at the end of the line which responds to all the same things that a customer does.
I feel like if we fast-forwarded five years, many people might be talking about these kinds of subjects, particularly the great divide between B2C and B2B business. It has not quite become the elephant in the room yet that B2B buyers are still treated like B2C customers were in the eighties, but it will soon enough. It only takes one well known Harvard professor to put a skirt on the elephant and make it dance. The next thing you know, the whole B2B industry is going through a tremendous overhaul, and B2B business becomes as customer-centric as a modern-day B2C business.
OK, so we might not be quite there yet. But the rapid growth of information systems and big data are revealing things about business that would have been considered absurd in the seventies. As these ridiculous concepts come to life more and more, we ask ourselves, ‘maybe they weren’t so absurd after all?’ It seems like many of these radical ideas are based on the broader concept of interdependence — The idea that everything in existence is utterly reliant on everything else for its life. The air relies on the trees, which depend on the soil, which relies on the rocks and the wind. It goes on. Buddhist philosophy says that if you take any single element out of the universe, nothing else in the world could exist. Yet, particularly in business, we are still lost in the idea that we are independent and need to fight each other. But this is changing quickly, and the data is revealing that we are tied in together whether we like it or not. Hopefully, it won’t take too long for the B2B sector to wake up to this.
My writing is based on actual events and stories. It is as real as it gets. I changed parts of the stories and excluded real names, as I don’t want people to get hurt. But most of the stuff I write is authentic and includes my thoughts and feelings.