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-businessâ€”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 Laneâ€™s business was direct-to-customer sales; today, itâ€™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.
â€śHaving a small company and working with the end-customer is a job in itself,â€ť says Lane-Mixon, 32. â€śBut business-to-business customers have a whole new set of needs.â€ť
â€śOnce you change your strategy, unless you have multiple and unlimited resources, you are really talking about two different business modelsâ€ť 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.
â€śOne of the biggest mistakes businesses make in terms of advancing from b-to-c to b-to-b is they donâ€™t advance their business plan,â€ť says Sean Rugless, president of the Greater Cincinnati African American Chamber of Commerce. â€śIt 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.â€ť
Rugless also says companies making the shift should refresh their understanding of cash flow management. â€śWith b-to-c, you are instantly paid. The consumer walks in, buys your product, and you have cash flow,â€ť he explains. â€śWith 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.â€ť
While moving into a b-to-b relationship requires huge investments in time, resources, and talentâ€”none of which small businesses have amply availableâ€”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. â€śThe focus is going to be split with new demands,â€ť he warns, and says business owners should prepare to feel conflicted. â€śOne 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