Why B2B Startups are Easy or Hard
I appreciate those who work on hard problems. Scratch that. I admire them. Too often though, I see startups that sell directly to businesses building upon concepts that are unnecessarily hard. In a business you have cost centers and profit centers where most B2B startups fit in with their customers. If you’re in the profit center portion of your customers’ business, then good for you. This does not apply to you.
What I am talking about here is B2B products that is a cost center for it’s customers’ business. It may lead to greater efficiency and cost savings, but by itself does not generate revenue. My first company was a B2B solution, and at the age of 21 I was learning about this first hand.
Repeat after me. The single hardest product to sell to a business is one that creates a new cost that previously did not exist. You may have built a great solution for tracking marketing data for a company. Guess what, most businesses have a marketing budget. You just have to convince the customer to divert a chunk of their existing budget to you. That’s a relatively easy problem to have.
Now, let’s say you want to create a platform that lets businesses create better employees by offering online training through using a game theory based system. Sure, there may be some companies who have a budget for professional training. But what do you do if 90% of the potential customers that you would sell to have no money in their current budget allocated to internal employee training?
This is the challenge when you create new cost centers for a business. Your product is now under the additional burden of proving that it is worthy of new expenditures. You’ll lose half these battles right away because internal priorities don’t align with you on the issue. There’s nothing you can do about that. At least in an environment where you’re competing for existing budget dollars, you have a fighting chance.
What you must consider when you’re dealing with creating new expenditures with your product is developing early alliances with well-respected companies that others tend to follow. If your product is amazing and makes corporate life better for these businesses, you’ll end up succeeding anyways, but remember that the hill is always taller when you have to make the market rather than improve it.