Building B2B connections can allow your business to flourish in an ever-more crowded marketplace and is something that most entrepreneurs should strive to achieve. There is, however, something of a fly in the ointment when it comes to this concept: not all B2B connections are beneficial.
The longer you run your business, and the more B2B relationships you engage in and develop, the higher the chances that you will eventually experience a B2B connection that you soon begin to see as detrimental, rather than beneficial, to your company. This is never an easy situation to deal with, but there are a few rules you can stick to in order to ensure the issue is as well-managed as possible…
Rule #1: Be patient, but not too patient
The most common issue you’re likely to experience with a B2B relationship is late payment for goods or services. This can be a tough tightrope to walk, especially if the company has previously paid on time; you want to give them the benefit of the doubt, so you let the invoice date overrun a little, hoping they’re just behind on their accounts and the funds will be with you soon.
This is a sensible decision, but there is a point at which you have to draw a line. As a general rule, if you have invoiced twice, and the payment is now 60 days overdue, you should begin to investigate options for B2B collections to resolve the problem. A little leeway is fine, especially for a company you have been working with for a long time, but you need to establish a red line; if that line is crossed, you escalate to debt collection.
Rule #2: Exclusivity has a premium
Exclusivity is a component of many B2B connections; for example, you may agree to supply a product to just one store for a set period of time. If you’re just getting started, it’s tempting to accept exclusivity in this scenario, because you want to get the product on the shelves.
However, exclusivity should always come with enhanced prices. If a company wants to stock a product or use a service, and they wish to be the only business who can do that, they need to pay a premium to achieve that. Otherwise, you’re hamstringing your business, and becoming tied into a contract that prevents you from making deals with anyone else. Exclusivity can be worth it, not least if the contract you sign with the company is long-term, but you should always strive to achieve a better price in exchange.
Rule #3 – Look for company health
Every so often, a major business will collapse into liquidation and default on their debts, setting off a kind of domino effect: smaller companies, who were reliant on the major business, collapse too, unable to absorb the losses they will experience as a result. This can mean that there is a risk your business will fail through no fault of your own; you’ll be a victim of the mistakes of another company, a company you trusted to honor contracts and settle their debts, but who can no longer do so.
Unfortunately, very few businesses will actively warn their suppliers or B2B connections that there may be problems in the pipeline, so you have to take it upon yourself to research the health of any company you work with. Look at their annual reports, Google their name, and – where relevant – watch their stock price. If there’s a sign of a problem on the horizon, you need to know about it as far in advance as possible, so you can protect your own business from being dragged down in the event of a collapse.
In conclusion
B2B connections and relationships are essential, but it’s also important to adhere to a strict set of rules when working with another company – and the three mentioned above are a great place to start.