What is B2B? Definition and examples

Published Thursday 3rd April 2025

Business-to-business definition

B2B (business-to-business) refers to companies selling products or services to other businesses, not individual consumers. These deals help companies specialize in what they do best while outsourcing other needs to experts.

For example, a SaaS provider like Xero delivers cloud-based accounting software to help businesses lower costs, manage finances, and boost productivity.

Why B2B matters: key benefits

B2B relationships help companies reduce costs, boost efficiency, and scale effectively.

Increase efficiency and productivity

B2B partnerships streamline operations, automate processes, and reduce manual workload.

For example, work management software helps businesses centralize project management, making collaboration easier.

Learn more about improving efficiency

Lower costs and boost profits

B2B deals help businesses cut costs through shared resources and economies of scale.

For example, a construction firm partners with an equipment rental service instead of purchasing expensive machinery.

Enhance scalability and growth

B2B partnerships help businesses scale efficiently by outsourcing specialized functions to another business with more expertise in those areas.

For example, an eCommerce store uses a fulfillment center to handle surges in orders without expanding its warehouse.

Learn more about the stages of business growth

Drive Innovation and competitive advantage

B2B collaborations drive innovation as businesses share new technologies, industry insights, and emerging market trends. For example, SaaS companies release continuous software updates, giving clients access to the latest tools without upfront investment.

Learn how your small business can compete with large retailers

Build stronger business relationships

Long-term partnerships create mutual value and trust – according to McKinsey, 44% of B2B businesses emphasize relationships as a reason for their sustainable growth.

For example, a SaaS company offering white-labeled software trains its partner's sales team, strengthening both companies’ market positions.

Here’s more about building business relationships

How the B2B model works

In a B2B model, businesses trade goods, services, or knowledge to support each other’s operations and growth.

Transactions in a B2B model

A typical B2B transaction follows five steps to clarify terms, reduce risk, and ensure reliability.

1. Initial contact – A business identifies a need and approaches potential providers. For example, a supermarket contacts a food manufacturer to produce its store-brand snacks.

2. Negotiation – Both parties agree on pricing, contract terms, and service levels. For instance, the supermarket and manufacturer negotiate pricing, production capacity, and exclusivity terms.

3. Implementation – The service or product is delivered as agreed. For example, the manufacturer produces and delivers the snacks to distribution centers.

4. Payment – Terms are defined and invoices are exchanged. For example, the supermarket issues a purchase order with ‘net 30 days’ payment terms.

5. Ongoing support –providers offer customer service, training, and updates. For example, the manufacturer provides quality control and restocking based on demand.

Examples of B2B companies and industries

Many industries and companies depend on B2B providers for materials, services, and technology to run their core operations, become more efficient, and grow as a business. Here are a few examples:

• Manufacturing and distribution companies operating with a wholesale business model source raw materials, components, and equipment from other suppliers to create finished products.
• Software and tech businesses provide cloud computing infrastructure, development tools, cybersecurity, and software-as-a-service tools to simplify other businesses’ processes. Xero (accounting software) and Hubspot (marketing and sales platforms) are examples.
• Financial services firms – banks, fintech companies, and consulting firms – provide business consulting, payment processing, risk management, and financial analysis. Examples include Bank of America (banking), Stripe (online payment processing), and Accenture (business consulting).
• Healthcare organizations, like hospitals, collaborate on patient referrals, share health data, and buy specialized equipment.
• Education sector – schools and universities partner with technology providers and publishers to create learning resources and online platforms.

We’re seeing the rise of B2B eCommerce as transactions are increasingly moving online, with 71% of businesses now offering eCommerce, and online sales accounting for 34% of revenue. Digital platforms help businesses automate orders, simplify procurement, and improve efficiency.

B2B vs B2C: what’s the difference?

While B2B serves other businesses, B2C (business-to-consumer) companies sell directly to individuals.

B2B vs B2C: key differences

While B2B serves other businesses, business-to-consumer (B2C) businesses sell products and services directly to individuals as the end consumers.Apple, Ikea, Alibaba, Sony, and Netflix are all B2C businesses.

The differences between the two models boil down to the length and duration of relationships:

• Sales processes – B2B has longer, more complex sales cycles with multiple decision-makers. B2C sales are faster and more straightforward.
• Customer relationships – B2B focuses on long-term partnerships with managed accounts, while B2C emphasizes brand identity and emotional appeal.
• Why they buy – B2B buyers prioritize return on investment and efficiency. B2C buyers are driven by emotions, preferences, and price.

Let’s look at how B2B and B2C transactions might differ in practice.

• B2B: Xero provides accounting software to businesses with specialized features like payroll management and financial reporting. The sales process involves demonstrations, free trials, and ongoing support to meet specific business needs.
• B2C: Mint is a personal budgeting app with tools to perform basic tasks for tracking spending. It emphasizes usability, immediate value, and lifestyle benefits rather than business outcomes.

B2B vs B2C in practice

Here’s how B2B and B2C transactions differ in practice:

• B2B: Xero provides accounting software to businesses with specialized features like payroll management. The sales process includes demos, free trials, and ongoing support.
• B2C: Mint offers personal budgeting tools with a focus on simplicity and lifestyle benefits, not business outcomes.

Challenges of B2B transactions

B2B transactional arrangements can involve longer sales cycles, complex negotiations, and intricate pricing structures.

Complex negotiations

B2B sales typically involve multiple decision-makers – so there’s plenty of approvals, negotiations, and technical evaluations needed, leading to extended timelines.

For example, selling software to large enterprises means talking to – and managing relationships with – IT directors, department heads, and finance officers, who each have different priorities.

Elaborate pricing structures

B2B pricing often includes volume discounts, service tiers, and performance-based clauses.

For example, price negotiations can be complex, requiring specialized expertise from both parties to carefully negotiate and get the best deal.

Accounting software enhances your B2B relationships

Strong B2B relationships drive efficiency, scalability, and long-term growth.

Xero accounting software gives your business the smart accounting tools and automations to help you streamline your financial admin, and your invoicing and payments processes – smoothing your transactions – strengthening your B2B partnerships and helping you do better business.

Learn more about how Xero can help your business