B2B vs. B2C: If You Go B2C, You Will Earn $0 😇

30 May 2024

According to my research, 69.8% of makers prefer starting a B2C product instead of B2B: https://x.com/alexanderisorax/status/1772249784251777384

I had 100s of conversations with makers. I can clearly understand the main reason behind this decision: it is easy to come up with an idea. You just solve your own problem.

As an individual, you have many problems: finance tracking, habit tracking, note taking, gym/yoga routines journaling, making screenshots, and time tracking. Plenty of sweet ideas to choose from! 😎

But building startups is tricky. There is much more besides the idea.

Moreover, after reading this post, you will understand that the idea is secondary.

So you have this idea of a new revolutionary note-taking app. What is good about building it?

  • [ ]it is fun to build because you will solve your own pain.
  • [ ]it is fun to build because you know exactly which features the product needs.
  • [ ]it is fun to build because your friends will be able to use it and say “Well done!”.
  • [ ]it is fun to build it because you can try new fancy boilerplate/framework/library.
  • [ ]it is fun to build it because you can brag it at parties.

If you are building apps for fun, you can stop reading now 👋

But if you want to eventually make yourself financially independent, please go on.

3 problems of making a B2C startup

The biggest B2C problem is competition. In the past year, ten new note-taking apps were launched on r/sideProject. Those 10 are your direct competitors (there are obviously more).

Besides indies, you have competitors among corporates: Apple has the Apple Notes app, which is free, pre-installed, and already used by everybody. Google has a free note-taking app that is promoted to millions of users on their calendar every day.

Besides corporates, you have competitors among big tech: EverNote and Notion. According to Kantar, Notion has spent >$7M on marketing in 2022, nearly doubling last year’s spend of $3.8M. What is your marketing budget? 😶

High competition leads to a problem: the high CAC (customer acquisition cost). Obviously, when there are a lot of mighty players in the game, it is painfully hard to win. So you will have to pay extra for ads, make extra great in-product marketing, create extra great TikToks, buy more influencers, and build an extra loyal community.

Yes, you can do the proven trick: niching down. For example, make a note-taking app for ADHD people only. You will have less CAC because Notion won’t target such a small group and won’t provide specific features. But the problem is that you are making your market smaller. To earn money in a B2C market, you need to have thousands of customers. If you are niching down, you are playing the B2C game fundamentally wrong.

The second big B2C problem: low checks. Remember yourself spending more than $30 for an app? Me neither. A 2021 report by App Annie found that the average consumer spend per active iPhone in the US across all apps was ~$11.50/m. ACROSS ALL APPS.

The third big B2C problem: low retention. Individuals buy what they want, while companies buy what they need. Once an individual gets tired of learning a new language, or stops doing habit tracking, or gets too lazy for yoga, they delete the app. Or if they are bored with your fancy app, they can switch to a new, fancier app they found on TikTok today. You will have to be constantly providing extra value to your users to retain them: add new templates, add social activities, run events, and add integrations. Or hide the “unsubscribe” button and pray people will forget to cancel it (please don’t).

So you have to pay more to get low-paying customers, which will leave you soon… Mm-hmm 🤔

You may say, “But Obsidian did that! So can I!”. OK. If you want to try, go on. But your chance of failure in this case increases from 90% to 99%.

I can’t help you from this point. Because literally ALL I DO in my life besides going to GYM is helping makers to increase their chances of success from 10% to at least 50%. It’s my work, my hobby, my passion, and my mission. So if you want to make your startup journey harder, we are not speaking the same language.

B2B is just simpler

OK, what about B2B? Do these problems affect it, too? Let’s compare:

  1. CAC in B2B can be x100 bigger. But this problem is solved by niching down. You make your startup aimed at a small group of companies and sell only to them. Example: CRM for corporate travel agencies only. There are 10,000 corporate travel agencies worldwide. Have only 1% of them as your clients, charge them $100/m. Bam. You earn $10k/m. Salesforce and Zoho won’t target corporate travel agencies because their marketers can’t create ads for every niche they are targeting. So you create ads or content or do cold outreach and win the clients.
  2. Checks. In B2B, you can charge A LOT. Naughty Mailchimp charges hundreds for simple emails. And they pay! Charge for volume, charge for AI credits, charge for traffic, charge for seats, charge for integrations (a friend of mine is making a productivity app for B2B. He charges $300/y for the app and $3000 once for custom integrations. Easy LTV x10.). Businesses will be throwing checks into you if you save their money. If you save them $200, they pay $100. Simple math.
  3. Retention. Unicorn Platform still uses Uploadcare as it was on its first day in 2019. They don’t want to switch from it because it just works. The LTV is over $10K! John Rush (the guy who bought the SaaS from me) prefers spending valuable time of developers on providing new features and integrations rather than cutting a few hundred bucks per month. And he is right because a better product brings much more than $200/m.


And for dessert, here are two real examples of people choosing B2B over B2C:

1. Micha Mazaheri, the founder of Paw, a Mac app for testing APIs. Paw started as a B2C tool. "Switching from licenses (B2C) to recurring subscription revenue paid by companies (B2B) was a game changer." After four years, this pivot grew Paw to $50k/MRR.

Source: https://x.com/IndieHackers/status/1789671877318774941

2. My friend is making a screenshot tool. Unlike the numberless indie screenshot tools, which die after one year, he is still alive after ten years and making $400k/year. It is because he is selling it to corporates. It is hard, it requires extra security features, it requires a sales process. But he earns money because a huge company will happily spend $1,000/m for a tool that saves 100 hours per month for their workers.

Thanks for reading my post! 🙂 If it is helpful to a single maker, I will be happy.

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