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When sisters Eve Lane and Holly Lane-Mixon launched Zebra Lane on a shoestring budget of $500 in 2003, they knew they wanted to expand their fraternity and sorority stationery and gift business beyond the retail realm into the world of business-to-business–conducting transactions between themselves and wholesalers or retailers.
Six years later, the company does both: business-to-consumer, selling direct to consumers at conventions and through an e-commerce site featuring more than 400 products, and b-to-b transactions which they often solicit from clients at trade shows. Through these efforts, Zebra Lane grosses annual revenues close to $200,000. But the transition into b-to-b was neither easy nor instant.
At startup, 100% of Zebra Lane’s business was direct-to-customer sales; today, it’s 65%, with the remaining coming from wholesale trade. But given the success of recent b-to-b exchanges, the company is looking to up the ante to 70% wholesale and 30% retail.
“Having a small company and working with the end-customer is a job in itself,” says Lane-Mixon, 32. “But business-to-business customers have a whole new set of needs.”
“Once you change your strategy, unless you have multiple and unlimited resources, you are really talking about two different business models” says Tiffany Bussey, director of the Morehouse College Entrepreneurship Center in Atlanta.
Transitioning into a b-to-b while operating a b-to-c entity can be done, but it is a considerable challenge, especially for small companies with limited resources. To transition successfully, Bussey suggests companies retool their business plans carefully because the b-to-b model requires a completely different marketing strategy from that of the b-to-c model.
“One of the biggest mistakes businesses make in terms of advancing from b-to-c to b-to-b is they don’t advance their business plan,” says Sean Rugless, president of the Greater Cincinnati African American Chamber of Commerce. “It is the one document necessary for lending and mentorship, and sometimes b-to-b companies require [an updated plan] as well because they want to know what you are doing in order for them to grow too.”
Rugless also says companies making the shift should refresh their understanding of cash flow management. “With b-to-c, you are instantly paid. The consumer walks in, buys your product, and you have cash flow,” he explains. “With b-to-b, you expand the timeline necessary to realize payment. You may do business today and not be paid for 30 to 60 days.”
While moving into a b-to-b relationship requires huge investments in time, resources, and talent–none of which small businesses have amply available–the results can be rewarding in diversifying revenue streams and expanding from what may already be a saturated consumer market. Of course, Rugless recommends that entrepreneurs stabilize their consumer arm before introducing another business model. “The focus is going to be split with new demands,” he warns, and says business owners should prepare to feel conflicted. “One of the biggest challenges many face is trying to figure out how to do both extremely well.”
Approach the Right Strategy with B-to-B