What is B2B? Definition and FAQs
B2B transactions form the backbone of commerce, connecting businesses through sales, partnerships, and services.
Written by Shaun Quarton—Accounting & Finance Content Writer and Growth Marketer. Read Shaun's full bio
Published Thursday 23 July 2026
Table of contents
Key takeaways
- Business-to-business (B2B) refers to transactions where companies sell products or services to other businesses, forming a global market worth an estimated $28 trillion in 2026.
- B2B sales cycles typically take 3 to 12 months and involve multiple decision-makers, so building long-term partnerships and trust is more important than quick transactions.
- Australian small businesses are paid in an average of 23.9 days, with invoices arriving an average of 6.6 days late, making reliable invoicing and payment tracking essential for B2B success.
- B2B ecommerce is now the top revenue-generating channel, with online sales accounting for 34% of a typical organisation's revenue according to McKinsey.
Business-to-business definition
Business-to-business (B2B) refers to transactions where companies sell products or services to other businesses rather than individual consumers. It's one of the most common commercial models, covering everything from raw materials and manufacturing to software and professional services.
B2B partnerships let you focus on your core strengths while outsourcing other functions to specialists. The result is greater efficiency and lower costs for both sides of the transaction.
The B2B market is enormous. According to Grand View Research, the global B2B ecommerce market is valued at an estimated $28 trillion in 2026. In Australia, B2B relationships underpin industries from construction and healthcare to technology and financial services.
How the B2B model works
The B2B model involves trading goods, services, or knowledge between businesses to support operations and growth. Unlike consumer sales, B2B transactions typically involve longer relationships, larger order values, and more complex decision-making.
Transactions in a B2B model
B2B transactions typically follow a 5-step process that helps reduce risk and build successful partnerships:
- Initial contact: identify your needs and research potential suppliers. A restaurant chain seeking catering equipment would shortlist manufacturers at this stage.
- Negotiation: agree on pricing, terms, and service levels. This might include volume discounts, delivery schedules, and warranty terms.
- Implementation: receive products or services as specified. The supplier installs equipment and trains your staff on its use.
- Payment: process invoices according to agreed terms. Common arrangements include Net 30-day payment terms with early payment discounts. According to Xero Small Business Insights, Australian small businesses were paid in an average of 23.9 days in the December quarter of 2025, one of the fastest results since tracking began in 2017. However, late payments remain common, with invoices paid an average of 6.6 days past their due date.
- Ongoing support: maintain the relationship through regular service, updates, and account reviews.
B2B ecommerce and online transactions
B2B ecommerce refers to online platforms where businesses buy and sell products or services to other businesses. It includes supplier portals, online wholesale marketplaces, and digital ordering systems.
B2B ecommerce offers several advantages:
- 24/7 ordering: customers can place orders anytime without waiting for business hours
- Automated reordering: set up recurring orders for regular supplies
- Better pricing visibility: compare options and access volume discounts online
- Streamlined procurement: reduce paperwork and speed up purchasing approvals by using integrated payment systems
Many B2B businesses start with phone and email orders, then add ecommerce as they grow. Accounting software like Xero integrates with ecommerce platforms to keep your financial records updated automatically.
B2B vs B2C: what's the difference?
B2B (business-to-business) means selling to other businesses. B2C (business-to-consumer) means selling directly to individual customers. The key difference lies in who makes the purchase decision and how long that decision takes.
Understanding these differences helps you choose the right business model and sales approach.
B2B vs B2C: key differences
Apple, Ikea, and Netflix are examples of B2C businesses selling directly to consumers. B2B and B2C differ in several important ways:
- Sales cycles: B2B involves 3 to 12 months with multiple decision-makers, while B2C involves minutes to days with individual buyers
- Customer relationships: B2B focuses on long-term partnerships with dedicated account management, while B2C builds brand loyalty through marketing and emotional connection
- Purchase motivation: B2B decisions are driven by return on investment (ROI), efficiency, and business outcomes, while B2C choices are influenced by personal preferences, emotions, and price
B2B vs B2C in practice
The 2 models differ in real-world transactions:
- B2B example: Xero provides accounting software to businesses with features like payroll management. The sales process includes demonstrations, free trials, and ongoing support tailored to business needs.
- B2C example: Netflix offers entertainment subscriptions focused on personal enjoyment and lifestyle benefits rather than business outcomes.
Hybrid B2B and B2C models
Some businesses operate as both B2B and B2C, serving business customers and individual consumers through different channels.
Coca-Cola is a common example. It sells to distributors and retailers (B2B) while also operating vending machines and retail venues that serve consumers directly (B2C). Office supply stores work similarly, selling to businesses through corporate accounts and to individuals through retail shopfronts.
Hybrid models offer diversified revenue streams and market flexibility. If your business serves both markets, you'll need different sales approaches for each.
Why B2B matters: key benefits
B2B relationships reduce operational costs, increase efficiency, and accelerate business growth. They let you access expertise, technology, and resources without building everything in-house.
Increase efficiency and productivity
B2B partnerships help you automate manual tasks and centralise business processes. Setting and achieving clear efficiency targets improves business performance.
Key benefits include:
- Reduced workload: automate routine tasks to free up staff time
- Better collaboration: connect teams through centralised systems
- Faster decisions: access real-time data when you need it
A project management tool is a good example. It centralises task tracking, file sharing, and team communication in 1 platform, cutting down on email chains and missed deadlines.
Lower costs and boost profits
B2B partnerships reduce costs through shared resources and bulk purchasing power, potentially reducing expenses by 20% to 40% depending on the partnership.
Cost-saving strategies include:
- Rent equipment: access expensive machinery without large capital outlay
- Share services: split costs for specialised expertise with other businesses
- Buy in volume: get better pricing through combined purchasing power
A construction firm might rent excavators for $800 per week instead of purchasing for $80,000, saving capital and avoiding maintenance costs.
Enhance scalability and growth
Scalability means growing your business without proportionally increasing costs or complexity. B2B partnerships help you scale efficiently by outsourcing specialised functions to businesses with more expertise.
An ecommerce store might use a fulfilment centre to handle order surges without expanding its warehouse. A growing consultancy could use contract accountants during busy periods rather than hiring full-time staff.
Drive innovation and competitive advantage
B2B collaborations help you innovate by giving you access to new technologies, industry insights, and emerging trends. You can adopt new capabilities without building them yourself.
Software as a service (SaaS) companies release regular updates, so you always have the latest tools without upfront investment. This keeps you competitive without requiring in-house development resources.
Build stronger business relationships
Long-term B2B partnerships create mutual value and trust. Some professional service firms have grown organically to include dozens of clients over several years, built entirely on referrals and repeat business.
Consider a SaaS company that offers white-labelled software (software that partners can rebrand as their own). By training its partner's sales team, both companies strengthen their market positions.
Types of B2B businesses
B2B covers a range of business types and models. Understanding where your business fits helps you identify potential partners and customers.
Common B2B categories
Most B2B businesses fall into 1 of these categories:
- Producers: make products that other businesses use as components, such as microchip manufacturers supplying computer makers
- Resellers: buy finished goods in bulk and sell to other businesses, such as wholesalers supplying retailers
- Service providers: offer professional services like accounting software, marketing, or consulting
- Government suppliers: provide goods and services to government agencies and institutions like schools or hospitals
B2B business models
Beyond categories, B2B businesses also operate under different strategic models:
- Vertical B2B: businesses that serve a single industry from top to bottom. For example, a company that manufactures, distributes, and services medical equipment exclusively for the healthcare sector.
- Horizontal B2B: businesses that provide products or services across multiple industries. Accounting software, office supplies, and HR platforms are common examples.
- B2B2C (business-to-business-to-consumer): businesses that sell through another business to reach the end consumer. A food manufacturer selling through a supermarket chain is a typical B2B2C arrangement.
Examples of B2B companies and industries
B2B companies operate across every industry. Here are examples by sector:
- Manufacturing and distribution: source raw materials, components, and equipment to create finished products
- Software and technology: provide cloud computing, development tools, cybersecurity, and SaaS solutions (examples include Xero and HubSpot)
- Financial services: offer business consulting, payment processing, and financial analysis (examples include Stripe and Accenture)
- Healthcare: collaborate on patient referrals, share health data, and purchase specialised equipment
- Education: partner with technology providers and publishers to create learning resources and platforms
More B2B transactions are moving online. According to McKinsey, ecommerce is now the top revenue-generating channel in B2B, with online sales accounting for 34% of a typical organisation's revenue. Digital platforms help you automate orders, simplify procurement, and improve efficiency.
B2B challenges
B2B transactions present unique challenges that can slow growth and increase costs. Understanding these obstacles helps you prepare better strategies and build more resilient partnerships.
Multiple decision-makers
B2B sales often require approvals from several people within an organisation, including IT directors, department heads, and finance officers. Each decision-maker has different priorities and concerns, which means you'll need to address a range of questions before closing a deal.
Extended sales timelines
The need for negotiations, technical evaluations, and internal approvals can stretch sales cycles to 3 to 12 months. Patience and consistent follow-up are essential during this process.
Complex pricing structures
Volume discounts, performance-based clauses, and custom service agreements require careful negotiation. You may need specialised expertise to structure pricing that works for both parties while protecting your margins.
Customer concentration risk
Relying on a small number of large clients for most of your revenue creates vulnerability. If a major client leaves or reduces their orders, it can significantly impact your cash flow and operations.
Customisation at scale
B2B customers often expect tailored solutions, but delivering customisation across a growing client base is resource-intensive. Finding the right balance between personalised service and operational efficiency is an ongoing challenge. Working capital management becomes critical when you're balancing customisation demands with profitability.
Managing your B2B relationships
Managing B2B relationships means maintaining consistent communication, reliable processes, and mutual accountability with your business partners. Effective relationship management drives long-term success through improved efficiency and trust.
Key strategies include:
- Communicate clearly: schedule regular check-ins and share transparent reporting
- Deliver reliably: maintain consistent delivery and payment schedules
- Integrate technology: automate invoicing and enable seamless data sharing
- Track performance: monitor key metrics and address issues quickly
Payment timeliness varies significantly across industries. Data from Xero Small Business Insights shows that in the December quarter of 2025, wholesale trade invoices were paid an average of 8.8 days late, while hospitality invoices were only 3.2 days late. Understanding your industry's payment norms helps you set realistic expectations and plan your cash flow accordingly.
Xero accounting software helps you strengthen B2B relationships by automating invoicing, streamlining payments, and providing real-time financial visibility.
Simplify your B2B finances with Xero
Your B2B relationships depend on efficiency, trust, and clear financial management. Whether you're selling to other businesses or sourcing from suppliers, managing these relationships effectively helps you grow.
Xero accounting software simplifies your B2B financial management. You can automate invoicing, track payments across multiple partners, and see your cash flow in real time. This helps you build trust with partners and focus on growing your business. Get one month free.
FAQs on B2B
Here are common questions about business-to-business relationships.
Can a business be both B2B and B2C?
Yes. Many businesses operate hybrid models, serving both business customers and individual consumers. Coca-Cola sells to distributors (B2B) while also operating retail venues (B2C).
How do I know if my business is B2B or B2C?
Consider who pays for your product or service. If you sell to other businesses to support their operations, you're B2B. If you sell to individuals for personal use, you're B2C.
Do B2B companies need ecommerce websites?
An ecommerce website isn't required, but it's increasingly common. Online sales now account for 34% of B2B revenue according to McKinsey. Benefits include 24/7 ordering, automated reordering, and simplified procurement.
What payment terms are typical for B2B transactions?
Common terms include Net 30, Net 60, or Net 90, meaning payment is due 30, 60, or 90 days after invoicing. Many suppliers offer early payment discounts, such as 2% off if paid within 10 days.
How long does it take to establish a B2B relationship?
B2B sales cycles typically range from 3 to 12 months, depending on contract complexity and size. Once established, B2B relationships often last years.
What is the B2B ecommerce market size?
The global B2B ecommerce market is valued at an estimated $28 trillion in 2026, according to Grand View Research. Online channels are now the top revenue-generating channel for B2B businesses.
Related terms
Learn more about business-to-business
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