You've cut expenses to the bone. But how do you keep operating when you simply have a lot less cash coming in?
For many business owners trying to survive the Covid-19 pandemic, part of the answer is to give what they have and get what they need using as little cash as possible. Good, old-fashioned bartering and trading, in other words.
It's something Ted Dang, founder of Oakland, California-based property-management company Commonwealth Management, is discussing now with his small-business tenants. They include a book store, a hair salon, and a nail shop, all of which have had to close since March. His offer to them: Pay up to half the rent each month in barter. Dang, of course, does not need thousands of dollars in books, haircuts, or manicures. That's where Bellevue, Washington-based online trade and barter exchange BizX comes in.
For about 15 years, Dang has used BizX as a way to find landscaping, painting, and carpet cleaning services for his properties, as well as to fill tough-to-lease spaces in slower economic times. Instead of a direct trade, the platform lets members conduct transactions in BizX dollars, essentially a currency pegged to the U.S. dollar that business owners can use for whatever goods or services they happen to need. For example, Dang says that a sign company used to pay him $2,000 a month in BizX dollars to rent a space in one of his properties. He'd then spend a portion of that on janitorial services from another business on the platform.
"The biggest problem with trade is the fact that both sides need to have what the other wants at the right time," says BizX CEO Bob Bagga, who founded the company in 2002. "The net result with BizX is you gain new customers you wouldn't have had and you increase your cash flow." BizX members, who pay nothing to join, maintain profile pages on the platform's directory and also can publish offers for specific deals. The platform lists 7,000 businesses, including Inc. magazine.
That's an especially enticing idea in this business climate. The BizX website, Bagga says, has seen a 30 percent jump in traffic from March to April, and membership is up year over year.
Bagga had been in the trade business before, having launched and taken public an offline barter exchange company in 1999. When September 11 happened, he had been taking some time off but in his regular discussions with fellow founders, he heard the same thing: Business had stopped, and cash flow was tight. "The advice I got was to get back into that business," he says.
BizX makes money by taking a 7.5 percent fee on both sides of a transaction. The company became cash-flow positive within about eight months of starting, Bagga adds. The company went on to appear on Inc.'s list of the fastest-growing private U.S. companies seven times, most recently in 2015. The bartering industry is also flourishing-- BizX is one of some 200 such exchanges in the U.S., including Milwaukee's International Monetary Systems, Pittsburgh's Green Apple Barter, and Barter Business Exchange in Cary, North Carolina.
Give some, get some
While some BizX members are national brands not limited by geography, the company primarily serves the business communities in Seattle, the San Francisco Bay Area, and San Diego. (It also has a presence in Dubai.) The platform is at its most effective when it's serving a community of at least 400 to 500 small and midsize businesses that represent a wide variety of industries, Bagga says. BizX tends to see the most activity in categories such as real estate, construction, business maintenance, digital services, and travel.
Restaurants and hospitality companies also are barter economy enthusiasts. Adam Dover, the owner of Oakland-based Carrie Dove Catering company, has been a BizX member for nearly a decade. In mid-March, as he watched his company's bookings evaporate, one of the first things he did was assign an employee to scan BizX's directory for more cash-saving opportunities.
Carrie Dove's revenue is down 98 percent for the quarter, and the company has furloughed all but eight of its 26 full-time workers and all of its 80 part-time servers. It is now operating only a dinner delivery service, for which Dover used BizX dollars to print new menu cards.
In stronger economic times, he says he may barter up to $200,000 a year in catering business on BizX and get in exchange about the same amount on information technology services, kitchen cleaning, and more. When he built a new 14,000-square-foot facility a few years ago, he says he was able to offset around $200,000 of the project by using BizX. He also uses BizX dollars for employee bonuses, which they can use on vacations, restaurant meals, or any other services available via the platform.
"The beauty of it is, if I do an event for San Francisco magazine and they pay us $35,000, I can spend that $35,000 in 25 different places of direct need for us," Dover says.
Trading and bartering does come with some challenges. Some seasoned members say they sometimes run into companies that treat their trade clients differently and even price their services differently for non-cash transactions.
"They'll say, 'Oh, you're just a BizX client. I don't need trade right now, I need cash,'" says Peter Klauser, co-founder of Seattle-based branding company Bullseye Creative Group, who typically conducts up to 10 percent of his sales on BizX. "I get it, but they're not looking at the bigger picture. The word-of-mouth referrals are very powerful." During the Covid quarantine, Klauser has been spending BizX dollars to redo his company's marketing materials. He's also using them to put together a "welcome back" day for when the office reopens, complete with all-day catering, car-detailing services, and company swag baskets and spa treatments for his six-person team.
Unlike traditional transactions, in which a business owner might be more concerned with making the sales side of a deal, in a trade situation you often must put in more work on the spending side, Dover says. For BizX transactions to make financial sense, you need to spend your dollars, which means doing research on the platform to find the best service provider. "I might have to make six more calls than normal," Dover says, because some companies will accept, say, only 50 percent in BizX dollars and want the rest in cash.
Currently, the biggest challenge in a barter system is being able to stay in business long enough for trade to work. Dang is still waiting to hear whether his small-business tenants will be able to pay half their monthly rent and trade the remaining amount.
"Retail merchants are under so much stress. This should be something they consider," he says. "They're on leases--they can't just get up and walk away."