FAQ: Business Model in a B2B Company

Because sales growth is not the same as profit growth. Sales is the value of your invoices. Profit is what is left after everything else.

In B2B service companies this paradox comes up regularly. More clients come in, the team is running at full capacity, the calendar is packed. And there is no more money left in the account. The owner sits over the bank statement in the evening and thinks: how is this possible, we are doing more than ever.

There are usually three causes. First: new jobs are priced worse. The company takes everything that comes in, because “revenue is revenue.” But some of those jobs have a margin on the edge of profitability. Second: costs grow faster than revenue. More clients means more people, more coordination, more revisions. Third: nobody calculates the real cost of delivering a project. People look at the invoice value, not at how much energy and resources it took to earn it.

The solution is not to sell even more. It is to understand where the company makes money and where it loses it. And to have the courage to stop taking projects that look profitable but are not.

Take the revenue from the project and subtract every cost the company incurred to generate that revenue. Not just the team’s hours. Everything.

Time spent communicating with the client. Meetings, emails, phone calls. Time spent on revisions and scope changes. The project manager’s time. The owner’s time, if they were involved in the project. Time spent acquiring that client, including sales meetings and preparing the proposal.

Multiply those hours by your internal hourly cost. Not the rate you invoice the client. Your real cost: the employee’s salary plus overhead (office, tools, social security contributions, vacations, downtime).

What is left after subtracting is your real margin.

Most B2B service companies never do this exercise. They look at the invoice value and assume that since the invoice is big, the project is profitable. And then it turns out the “biggest client” generates the lowest margin, because they take up the most time, generate the most revisions and negotiate the lowest rates.

Calculate the margin on your last five projects. Honestly, including all the costs. The results will surprise you.

It depends on what you want to achieve. But in B2B service companies a retainer has several advantages that project billing does not offer.

Predictable revenue. With a retainer you know how much comes into the account every month. With projects, revenue fluctuates. One month is a record, the next barely covers costs. Planning is practically impossible.

Lower cost of sales. You acquire a retainer client once. A project has to be sold again from scratch every time. Every new sale means meetings, proposals, negotiations, the risk of losing. With a retainer you bear that cost once and have the revenue for months.

A deeper relationship. A retainer client knows you and trusts you. You do not have to rebuild credibility from scratch every month. That lets you work more efficiently and deliver better results.

The downside of a retainer: it requires delivering value continuously. A client who pays every month expects to see results every month. You cannot hide behind “the results will come at the end of the project.” You have to show value regularly.

Not every service suits a retainer. But if yours does, it is worth seriously considering this model. Because a company with five retainer clients sleeps better than a company with twenty one-off projects.

Stop telling the client how many hours you will spend on something. Start telling them what you will change in their situation.

A company that says “our rate is 200 zł per hour” invites the client to compare it with someone who charges 150 zł. The client sees no difference in the quality of an hour. They see a difference in price.

A company that says “the solution we build will shorten your sales cycle by 40% and let you forecast revenue instead of guessing” is having a completely different conversation. The client compares the price with the value they will get. Not with the competition’s price.

To price this way, you need to know three things. What problem you solve. How much that problem costs the client. And what value you deliver by solving it.

This requires a deeper discovery call. You cannot price for value if you do not understand the client’s situation. “How much does it cost?” is a question you answer only once you know how much the client is losing on their current situation.

You do not have to stop billing hourly starting tomorrow. But the way you present the price changes perception. “120 hours at 500 zł” is a cost. “A system that will give you predictable sales” is an investment. Same work, different packaging, different conversation.

Calculate the real cost of delivery. Not the one in the contract. The true one.

Take your last five projects. For each one, calculate how many hours really went into it. Not how many were in the quote, how many actually. Add the hours of everyone involved: developers, the PM, the tester, the owner if they were involved. Add the sales hours: meetings, the proposal, negotiations. Multiply by your internal hourly cost. Subtract from the project revenue.

The result can be surprising. A project that looked big and important on paper turns out, once real costs are counted, to have earned less than a small, simple project that went through without revisions.

A pattern I see in service companies: projects for large clients have the lowest margin. Because a large client has requirements, procedures, revisions, meetings, reporting. A small client with a clear scope and a quick decision is often more profitable.

You do not have to do this exercise every month. But do it once. Honestly. And based on that, decide which projects you want to take and which you do not. It is one of the hardest business decisions, but also one of the most profitable.

Don’t raise prices. Raise the value and adjust the price.

If you tell the client “starting next month it gets more expensive,” all they hear is “I’m paying more for the same thing.” The natural reaction is to look for an alternative.

If you say “we have expanded the scope of our work together with X, improved Y, added Z, the new price is…”, that is a different conversation. The client sees they are getting more. And the price is a consequence of the value, not an arbitrary increase.

A few rules that work in B2B services. Raise prices for new clients right away. That is the simplest and painless option. For existing clients, raise prices once a year, announcing it in advance. Not “more expensive from tomorrow.” Rather “a new rate from January, and here is why.”

Most important: don’t apologize for the increase. Price reflects value. If your service is better than a year ago, the price should reflect that. A client who leaves over a 10% increase probably never valued what you do. And a client who stays confirms that the value is higher than the price.

One more thing: companies that never raise prices earn less every year in real terms. Because costs rise and revenue stands still. It is a quiet erosion you don’t see on invoices, but you see it in the bank account.

Because it sells people’s time. And time is limited.

In a product company, adding another client costs little. Software serves a thousand users the same way it serves ten thousand. In a service company, every new client means additional hours, additional people, additional coordination. Growth is linear, not exponential.

That doesn’t mean a service company can’t grow. It can. But it has a natural ceiling that comes from the model. More clients require more people. More people require more management. More management requires more structure. At some point the cost of managing growth starts eating the margin that growth was supposed to bring.

Three ways to push that ceiling higher. Specialization: do less, but charge more. Productization: turn part of your services into repeatable packages with a clear scope and price. Recurring revenue: a retainer instead of one-off projects, so you don’t have to sell from scratch every time.

None of these turns a service company into a product company. But each of them pushes the ceiling higher and makes growth healthier.

Body leasing is a model in which the company sells its people’s time. The client buys a developer for 160 hours a month. The price depends on the hourly rate. The margin is limited, because the client always compares the rate with the market.

Selling solutions is a model in which the company sells an outcome. The client buys not a developer but a solution to their problem. The price depends on the value, not on the number of hours.

The transition is not easy and does not happen overnight.

Step one: identify what problems you actually solve. Not “we write code.” What does that code change? Does it automate a process that cost the client 50 hours a month? Does it integrate systems that until now required re-entering data by hand? Name the value.

Step two: build your offer around the problem, not around resources. Instead of “team augmentation, 3 developers, rate X,” say “we will build a system that solves Y within Z months for amount W.”

Step three: start with new clients. Don’t change the model for existing clients overnight. Offer new clients a solution from the start. Gradually show existing ones that they can buy differently.

This is a change that takes months. But companies that have made it have higher margins, more stable revenue and clients who treat them as partners, not vendors.

It means the revenue is there, but the cash flow doesn’t add up.

In B2B service companies this is common. The invoice is issued, but the client pays in 60 days. The project lasts three months and the invoice comes at the end. The team has to be paid every month, and the project revenue arrives once a quarter.

The second reason: hidden costs. The company looks at invoice values and thinks it is making money. But it doesn’t count the costs that are scattered and invisible. Revisions, extra meetings, downtime between projects when people have nothing to do but salaries still have to be paid.

Third: no reserves. The company spends everything it earns. It doesn’t build a financial cushion. One delayed project, one invoice paid a month late, and suddenly there is nothing to cover current costs with.

The solution: separate profitability from liquidity. These are two different problems. A company can be profitable (make money on projects) and at the same time have a liquidity problem (no cash for current costs). Watch payment terms. Invoice in stages instead of at the end of the project. And build a reserve that covers at least two to three months of fixed costs.

Recurring revenue is revenue you have every month without having to sell from scratch each time. In a B2B service company it most often takes one of three forms.

Retainer. Ongoing work with a client for a fixed monthly fee. The client pays for access to your time, your expertise or a defined scope of work. This is the simplest form of recurring revenue in services.

Maintenance subscription. The client bought a project and now pays for its maintenance, development and support. This works in software houses and implementation companies. The project ends, but the relationship continues.

Fixed service packages. Instead of one-off jobs, you offer a package: X hours of consulting a month, a standing audit once a quarter, regular reviews, new videos for the channel or content for the blog.

To build recurring revenue, you have to design your offer around a long-term relationship, not around a one-off transaction. That means thinking of the client not as a project but as a partnership.

Companies that get 50% or more of their revenue from retainers and ongoing contracts are in a fundamentally different situation than companies living from project to project. They can plan and invest. They have predictability and more peace of mind.

When the cost of serving them is higher than the revenue they generate. And it’s not just about money.

The cost of serving a client is not just the team’s hours. It’s energy. The owner’s time spent on extreme situations. The stress of a project manager who knows this client always has comments. The drop in morale of a team that doesn’t want to work on this project.

It’s worth letting go when the client systematically negotiates every invoice. When the project scope grows at every meeting and the budget doesn’t. When they demand a level of involvement that makes working with other clients impossible. When the company’s values and the client’s diverge to the point where working together generates friction at every step.

The hardest thing is letting go of a client who pays a lot. Because they look like the most important client in the company. But calculate how much you actually earn on them after accounting for all costs. And calculate what you could do with the time that would be freed up.

Letting go of a client is not a failure. It’s a strategic decision. A company that consciously chooses who it works with builds a client portfolio that generates profit and satisfaction. A company that takes everything builds a portfolio that generates turnover and exhaustion.

Client acquisition cost (CAC) is the sum of everything you spend to get one client to sign a contract. Not just the advertising budget. Everything.

The salesperson’s hours on meetings, calls, emails. Hours spent preparing the proposal. The owner’s time at the sales meeting. Marketing and lead generation costs. Tools: CRM, LinkedIn Premium, cold emailing tools. Divide the sum of these costs by the number of clients acquired in a given period.

Why don’t most companies calculate it? Because these costs are scattered. The salesperson’s hours are not recorded separately as “cost of sales.” The owner’s time in meetings is not written down anywhere. Marketing spends the budget, but nobody connects the spend to a specific client.

And they should. Because CAC set against the margin from a client tells you whether your sales are profitable. If the cost of acquiring a client is higher than the margin from the first project, you only start earning from the second one. And if the client doesn’t come back for a second one, you are working for free.

At one company I worked with, we calculated this precisely. The cost of acquiring a client was almost equal to the margin from the first project. Half the clients didn’t come back. They hadn’t known this for three years.

It depends on what you sell and to whom.

If you sell services with a clear, repeatable scope, a price list makes sense. The client sees what they get and for how much. The decision is faster. You don’t have to prepare an individual quote every time. It saves your time and the client’s.

If you sell complex services, where the scope depends on the client’s situation, a price list can hurt. The client sees a price without context and compares it with the cheapest competitor. Or decides it’s too expensive before understanding what they would get. A price list turns a conversation about value into a conversation about price.

A compromise that works in many B2B service companies: a range instead of a price list. “Engagements start at X thousand zł a month” or “a typical project at your scale falls in the range of Y to Z.” That gives the client a sense of orientation without blocking the conversation about value.