3.02 – Exploring Business Types
At a basic level, all businesses aim to sell something to people who want to buy it, while making a profit. However, the types of businesses and the ways they operate can vary widely, even within similar fields.
Selling To Other Businesses
Business-to-business (B2B) enterprises, such as those offering market research, database management, corporate clothing, management consultancy, telemarketing, or graphic design, involve one businessperson selling to another.
The advantages of B2B are clear: you’re dealing with people who have a definite need, often buying in large quantities and at regular intervals. For example, while an individual might buy a dozen envelopes a few times a year, a business could order thousands every month. Although corporate customers are harder to win, they tend to be more valuable and prefer long-term relationships.
Eporta: Conquering the B2B Market
Eporta, co-founded by Aneega Khan, is described as the ‘Airbnb for design’. The eporta Marketplace helps interior design professionals, property developers, architects, and businesses source products and manage their projects online. Based in London, Eporta successfully raised $8 million from venture capital firms and private backers. By January 2021, it was a leading B2B solution for the interior design industry, active in over 80 countries.
However, there are downsides. Business customers expect credit and may take 60 to 90 days to pay. If they go bankrupt, they can leave significant debts, potentially affecting suppliers. Additionally, establishing a presence often requires attending costly and time-consuming exhibitions or advertising in trade directories.
Opening all hours
Traditional shops, restaurants, and similar businesses have long opening hours and must meet the high expectations of savvy consumers who are aware of competitive prices and standards of service. The benefit of retailing is that you’re typically paid upfront. However, meeting legal and customer service standards is crucial, as failing to do so can result in significant costs beyond simple refunds.
Many new retail start-ups are internet-based, with websites serving as virtual shop windows. Products might be stocked in third-party warehouses, reducing upfront costs but necessitating staying current with fast-changing internet technologies. This approach keeps initial costs lower but demands vigilance in technological advancements.
Manufacturing
Manufacturing offers greater control over the quality, cost, and specifications of products than retailing or wholesaling. However, this control comes with significant overheads, such as factories, equipment, raw materials, and employee costs, incurred well before orders are confirmed. This path typically requires manufacturing experience and substantial financial resources. The UK manufacturing sector reports numerous work-related accidents annually, highlighting the significant risks and responsibilities towards employees.
A more feasible route for new businesses is subcontracting, where work is done for a manufacturer on part of a product. Common subcontractors include plumbers, electricians, and carpenters in building work, and metal and plastic casing producers in civil engineering.
Service Industries
Service industries dominate the British economy, accounting for about 70% of GDP. These include financial intermediaries, hairdressing, real estate, computer services, research and development, education, health and social work, refuse disposal, recreational, cultural, and sporting activities. Although service businesses don’t typically involve physical goods, most manufactured goods include a service element. For instance, car manufacturers are separate from garage chains that repair those vehicles. Some companies, like Dell, manufacture and provide delivery and other services.
Service businesses require a high degree of personal involvement, making people skills crucial. If you enjoy understanding customer needs and going out of your way to meet them, a service business could be highly rewarding.
Conclusion
Understanding the various types of businesses and their unique characteristics can help you decide which path aligns best with your skills, interests, and resources.
Whether selling to other businesses, retailing, manufacturing, or providing services, each type offers different challenges and rewards. Choose a business type that not only suits your abilities but also aligns with your long-term goals for satisfaction and success.
