Welcome to the last, and most important, in my series of posts on metrics unique to Enterprise-Driven B2B Networks. The last metric, buyers per supplier, is easy to calculate if your platform is architected as a network. (If you did not architect your platform so suppliers have one account for all buyers, shame on you.)
Suppliers Per Buyer
Every enterprise-driven B2B network proudly tells you they are great at enabling your enterprise’s suppliers. Whether it is to drive adoption of electronic POs, Invoices, payments, or supplier information management compliance, the network will give you plenty of references of how many suppliers they have enabled for other buyers. Don’t get me wrong, the number of suppliers per buyer is really important. For instance, suppliers per buyer tells you how:
- good a portal the platform is from the buyer’s perspective,
- good the platform’s modified CAC/LTV is, and
- fast the platform will likely grow as they add buyers
Again, these are super-important aspects of the platform. But suppliers per buyer does not tell you much about the network effect the platform is achieving. For that, you need to know the opposite ratio: Buyers per supplier. (And buyers per supplier is not just the inverse of suppliers per buyer. English works that way, the math does not!)
Buyers per Supplier
What you want to know is: for each supplier on the network how many different buyers are they actively interacting with (over some periodic basis like a year)? If a supplier has only one buyer on your network are you a network to them, or are you a nuisance?
The more buyers a supplier has on the network, the:
-lower the cost to acquire them (CAC for suppliers)
-lower the cost to serve the supplier
-higher the retention rate for suppliers
-higher the suppliers’ NPS will be
In SaaS-speak this all adds up to a much better LTV/CAC ratio for the supplier part of your network. Finally, I would bet the higher the ratio of buyers to suppliers, the more likely the platform can sell suppliers other services of value!
This ratio of buyers per supplier is critically important. Yet, I cannot tell you how many B2B networks have never analyzed their business this way. This ratio has enormous implications for platform architecture, data rights, product development, pricing, strategy—almost every aspect of the business. I’d even venture to say this is the key metric that most separates the good enterprise-driven networks from the great ones.
(NB: As I have mentioned in each prior post in this series, for Order to Cash networks, simply reverse the words “buyer” and “supplier”.)
Read on if you are a geek. (And, if you have read this far, you likely are one.)
For those who are network nerds, the concept of buyers per supplier is called measuring the degree of the supplier nodes on networks. An enterprise buyer acts as a hub, which is a node with a very high degree (e.g., lots of suppliers connected). Often an enterprise’s suppliers may have a degree as low as 1. (Meaning the supplier has only that one buyer on the network.) A network with a thick distribution of suppliers with a degree much larger than one is typically a much healthier one.