A Little Guy's Marketplace

• Share

(2 of 4)

Business models vary, but exchanges typically generate revenue by charging suppliers to submit bids and taking commissions on closed transactions. That's how BizBuyer.com works. Launched in June 1999 and based in Santa Monica, Calif., BizBuyer boasts more than 20,000 qualified vendors in 34 products and services, including telecommunications, insurance, legal services and business consulting. Buyers pay nothing. BizBuyer charges vendors a commission of up to 10% of the value of the transaction, depending on the service. Since its launch, BizBuyer has processed more than 40,000 requests worth in excess of $200 million. "Not only do we save small businesses time and money on the purchase," says BizBuyer founder and CEO Bernard Louvat, "but we eliminate all the what-ifs."

Steve Simpson is one of many converts to small-business Web services. Last February, Simpson co-founded Adoto, a Seattle-based manufacturer of software for online clothing retailers. With competitors breathing down his neck, he needed to hire staff quickly to ready his software for market. But he couldn't afford to pay someone to look for the help, let alone do it himself. Like Register, Simpson discovered BizBuyer through a banner ad. He put in a request for several programmers, and the following day got six prospective hires. In addition to locating qualified workers, he used BizBuyer to find companies that installed telephone and computer networks he also needed. "As a result, we were able to get to market twice as fast," he says.

Speedy procurement is just part of the appeal. There are other cost advantages. Because it's expensive to establish contact with small-business customers, vendors are willing to cover all the transaction costs. And letting vendors battle in cyberspace drives the price down for the buyer. At cyberspace auctions, vendors know they have competitors and make every attempt to offer the best price. Auction sites are placing an increasingly high priority on prequalifying vendors, screening out sketchy suppliers and creating an important safety net for small businesses. "Knowing vendors are qualified can save a lot of time and money," says Simpson. "In some cases, small businesses have only one chance to get it right."

Buyers and large vendors aren't the only firms tapping these exchanges; small-business sellers also recognize the benefits. For 15 years, Gordon Clotworthy's company, the Information Refinery, based in Mahwah, N.J., has sold marketing lists to small businesses in the Northeast, finding customers through costly direct mailings and trade-magazine ads. Earlier this year, Clotworthy discovered Onvia, a Seattle-based small-business exchange with more than 60,000 suppliers across 117 services. He signed up with Onvia, and receives one to 10 requests for lists a day and contracts at least once a week to businesses around the country. The Refinery's sales through Onvia average just under $600, with the biggest one to date $30,000. Onvia typically collects $3 a bid from the seller regardless of whether the bid is accepted--a small price to pay, Clotworthy says, for spending just 15 minutes a day online. "These sites guarantee a constant flow of customers for small businesses with limited budgets," he says. "That's critical."