Few would argue with the statement that it is vital for a business to have a thorough understanding of its customers’ needs, and few would disagree with the statement that it is important for a sales team to have a good working relationship with its B2B customers. But should you (the business owner) develop a friendship with the ultimate decision-makers of your largest B2B customers?

Those arguing for it would say, if you have such friendship, you would be more likely to resolve problems and hiccups, more likely to hear what your competitors are up to, and more likely to get early news of developments in the market and in that customer’s business. All of which can be crucial to the long-term success of your business.

Others would say that role is one for your sales team and that it is not dependant on friendship but on having a good business relationship. They would also say that a good business relationship is developed by meeting customer requirements on product quality and supply, ensuring there are no problems or hiccups your side, and if any arise, that they are solved early. This is not dependant on having fostered a friendship and is not dependant on the nature and extent of entertainment provided. This is not saying that entertainment is not necessary. It often is. There can be a lot of merit in celebrating the award of a contract that required a lot of time and effort on the part of both parties, and merit in entertaining at the start of a new relationship and from time to time to show appreciation for the business.

Complications arise where you’re on first name terms with your B2B counterparties, have included them in your social circles and generally developed good friendships with them. When faced with a business decision regarding such a customer, what hat do you wear– that of your business or that of a friend? While you would endeavour to come to an amicable arrangement, you need to be clear in whose best interests you’ll be acting.  Are you the person who will go above and beyond to help a friend in need or will you have the attitude of ‘it’s not personal, its business’? The former could severely damage your business, the latter your friendship.

Consider this example: Your friend, whose business is one of your largest customers, tells you he’s in a bit of a pickle because one of his major customers is a bit late in paying, so asks you for more time to pay. In return he says he’ll put in a bigger order – buy more from you. You’ve got to know him well, regard him as trustworthy, know that his business is growing well, and you recognise that it could ruin the friendship and jeopardize the business relationship if you don’t agree. So, you agree to give him more time to pay. True to his word, he places a much larger order, takes delivery and continues growing his business. Your exposure to his business has now more than doubled, putting your business at risk. You would probably be aware that many businesses have gone under for growing much quicker than they are able to fund the growth in its working capital, or because their banker lost confidence in their ability to determine who to advance credit terms to and to ensure adherence to such terms. You would also probably be aware that many businesses have faced financial pressures because of a domino effect down the supply chain. If a bank (or other major creditor) pulls the pin on a large business down the supply chain, that can cause a domino effect up the supply chain. While recognising that by giving your friend’s business more time to pay could have an adverse effect on your business, you probably wouldn’t want him to consider you to be a ruthless businessman and pass that conclusion on to your other friends. As a result, the decision would be a difficult one to make.

Having friendships with your business’ largest B2B customers is also a concern for third parties – such as suppliers and their trade credit insurers, lenders, any new investors and any prospective buyers. One of the questions they consider is: What will happen to your business if you are no longer there – due to a sale or unplanned early loss to the business, whether through illness or death.  They will be worried about your business losing customers and sale revenues after you leave the business or are lost to it. They may also be concerned you may advance credit terms when you would otherwise not have done so. This reduces the value they regard your business to have and may even result in them declining to lend, invest or buy.

Suppliers, trade credit insurers, bankers as well as any prospective investors or buyers of your business will probably ask subtle questions to establish the nature of your relationship with the decision-makers of your business’ major customers.  Don’t think that because the questions aren’t blatant, the matter is not important to them. They also have ownership and employment interests they need to protect.

While it is probably not wise to cultivate a friendship with your businesses largest B2B customers and not wise to be perceived as such by those parties, it is important to foster a good business relationship with the decision-makers. That’s because – if a problem arises that cannot be resolved at a lower level of the two businesses, you can get together with your counterparty to work out a solution.  And you’re more likely to get a better outcome for your business if you understand his or her character, motivation and pressures.

There is merit in the phrase – at home I’m a communist, amongst my friends I’m a socialist, in my business I’m a capitalist with a conscience – and merit in keeping those relationships separate.  This does not suggest that one should not do business with friends. It merely shows that difficulties can arise from such relationships. So, if you decide to supply a friend’s business, it is probably best to ensure it represents only a small proportion of your sales and that it is clear from the outset that it’s a relationship between two businesses and that your friendship sits outside it. While that is easier said than done, it is important to set out at the outset the basis on which you’ll do business.

R&M can assist you to implement processes to protect your business from pressures you may face from parties who may consider you to be friends.  For some insight into what it offers, why and how it goes about its business, see R&M’s Advisory webpage –  https://www.rogersmorris.com.au/rm-advisory/ .