In a business letter, a salutation is not the same as for an informal letter. It is imperative that it comes off as a respectful salutation that carries a decent ring to it. The letter should be written with the addressee in mind and his last name is the common preference. You may put both but the last name makes it appropriate and personal.
Use of ‘Sir’ or ‘Madam’ is also okay especially if you do not know the names of the addressee. Salutations like Dear Mr. Manager or use of first names may come off as rude or bad mannered and are therefore not suitable for use. Even if the two parties know each other well and humor each other more often than not, the respect and courtesy should flow both ways no matter how frequently they send each other mail. A business letter should remain just that in writing. A business letter!