BizX CEO Bob Bagga had just graduated from the University of Toronto in 1991 and was poised to enter law school at York University when he decided to open a record store near the York campus. The plan was to make a little extra money and gain some business experience while he earned a law degree. That plan was derailed when a friend introduced Bagga to the concept of bartering — the exchange of goods and services using alternative currency or even no currency at all.
“I kind of studied it, and a light bulb went on. This could be huge!” recalled Bagga from his office at BizX’s headquarters in downtown Bellevue.
Instead of law school, Bagga borrowed $10,000 and, in 1992, started Barter Business Exchange, a platform that allowed business owners to barter with one another for a variety of goods and services. He aspired to get 500 businesses on board, and collect small service fees with every transaction. At best, it would be a small operation that would generate a modest income.
“We were lucky,” said Bagga, 48 now and still shocked by Barter Business Exchange’s success. “We were in the right place at the right time, and we grew that company to about 6,000 businesses across Canada, including the likes of Rogers Broadcasting, Revlon, and Kodak.” Bagga merged the company with Seattle-based International Barter Corporation in 1999. The following year, it was acquired by Network Commerce for $45 million.
Bagga was back in the bartering business two years later, when he co-founded BizX with two other industry veterans — Chris Haddawy and Raj Kapoor — using $65,000 of their own money. The company was profitable within seven months, according to Bagga, and today employs approximately 40 people in offices in Bellevue, San Francisco, San Diego, and Dubai. BizX counts more than 5,000 members, and its roster of participating businesses includes American Red Cross, CBS Radio, Dell, Holiday Inn Express, American Red Cross, Oakland Athletics, San Francisco 49ers, Seattle Sounders, and others (full disclosure: 425 Business’ parent company, Premier Media Group, is also a BizX member). Last year, BizX handled nearly $100 million in transactions, and earned revenues of approximately $13 million, said Bagga.
He outlined the company’s business strategy using some simple math. The annual U.S. Gross Domestic Product is approximately $21 trillion, and small- to medium-sized businesses represent approximately one-third, or $7 trillion, of that figure, according to Bagga. At any given time, these businesses are operating at about 80 percent capacity, meaning, say, empty hotel rooms, restaurant tables, or seats at sporting events add up to about $2 trillion worth of money that is wasted and goes unclaimed. “Our goal is to capture two percent of that, which is over $40 billion in the U.S. alone,” said Bagga.
“A lot of people don’t even recognize it; they don’t even realize it’s going to waste, but it is,” he added. “If you don’t sell that hotel room tonight, it’s gone. If the baseball team doesn’t sell its tickets, they are gone.”
BizX’s strategy is to help business owners take those available hotel rooms that will go unclaimed anyway and, instead, trade them for goods and services with other businesses using an alternative currency, or BizX dollars.
“With BizX, we have created this community that brings businesses together and gives them a platform to transact with one another,” said Bagga. “This becomes very powerful. We help bring them new customers and increase their cash flow. That’s why members are part of BizX.”
There are no fees for business owners to join BizX, and BizX collects a fee (typically 12 to 15 percent, in real U.S. currency) only after businesses have successfully completed a transaction. Those fees are used to host the network, keep records of transactions, and hire staff to develop and build the BizX network.
Twenty-five years in the bartering business has turned Bagga into a respected industry veteran. In 2015, he was inducted into the International Reciprocal Trade Association’s hall of fame (yes, there is such a thing).
Bagga discussed the concept of bartering, how BizX works, and his career in the industry.
Q: Bartering is a very old practice that dates back centuries. What is it about bartering that still appeals to you and many business owners?
A: Bartering is the oldest form of money. Before cash was invented, there was bartering. I will give you this, and you will give me that. Even today, approximately 30 percent of all commerce in the world is noncash. When Pepsi went into Russia, they didn’t want rubles. They got ships full of vodka in exchange for their marketing rights. When Mercedes-Benz went into Ecuador, they took bananas in exchange for buses because they were competing against Volvo and Saab. If you have ever done a trade or done something without spending cash, once you’ve been bitten by the bug, why would you? I think it’s the best-kept secret. If you don’t need to spend cash, why would you?
Q: What is BizX’s business model, and how does it help companies?
A: The problem we are solving with BizX is inefficiency. There are a number of problems with bartering. The first problem is that you both have to have what each other wants at the same time. The second challenge is how do you keep track of it all? The third challenge you run into is what happens if (one company) goes out of business by the time the (other company) goes to collect? Having said that, when the sun, the stars, and the moon are aligned, it works very well, and it is very prevalent.
BizX is able to solve all three of those problems because we have now created this financial product, this financial currency, that’s liquid. It gives you all the financial advantages of bartering, but it also gives you the liquidity of cash.
Q: What is a practical example of how BizX works?
A: Let’s say a lawyer needs a new website and it’s going to cost $10,000. He or she will usually write a check for that website to pay for it. With BizX, that lawyer can go to our mobile app or BizX.com and find another member in our community of like-minded businesses that wants to connect, share, and do business with each other. That lawyer would shop around and get proposals like they normally would. But when it comes time to pay, rather than writing a check, they would just use their BizX card or the mobile app.
The lawyer’s account gets debited by 10,000 BizX dollars, and the website company’s account gets credited by 10,000 BizX dollars they can go and use on whatever they want within the network. Maybe they need an accountant. It could be 1,000 BizX dollars for an employee appreciation party, or 3,000 BizX dollars for signs, printing, and graphics. Whatever they need. The lawyer, in turn, owes 10,000 BizX dollars, and they are going to get new business from the BizX community. It could be 10 cases at 1,000 BizX dollars each, or it could be one case for 10,000 BizX dollars.
Q: You have been in the bartering industry for more than 20 years, and BizX was founded 15 years ago. How have you seen BizX and the industry itself change over the years?
A: It’s interesting because we are now talking about building this huge community. If you look at companies like LinkedIn, Facebook, YouTube, and PayPal, they built massive customer adoption first, and then figured out monetization second. We are doing it backward. We were profitable (early on), but we didn’t go after mass adoption. In fact, it was the opposite. When I started BizX, I was very picky, having done the dot-com thing. We were going to keep it super small and be very boutique. There was a bit of a velvet rope — you couldn’t sign up online, and you had to pay a fee to get in. That has shifted in the last few years. It’s a bit like turning a ship around.
Q: Do you see opportunities for bartering everywhere you go?
A: It’s not just me. For people who come here and get the bug, there is a different way of thinking. If you walk into a restaurant and there are 10 tables sitting empty, you think, “Why aren’t they filling them using BizX?” If I see an empty billboard, hear a public service announcement on the radio, or see an empty filler ad in a magazine, I know they’ve got an empty spot. People within BizX tend to look at the world differently. We see this capacity where there is waste as opportunity. I think that gets indoctrinated into you once you are here.