From working from home to redrawing supply chain routes, businesses have been forced to be flexible and get creative to adjust to the "new normal" of a dramatic and disruptive market downturn. While some firms can get by with only a few tweaks, others have had to entirely rethink their business models to stay afloat.
For micro, small and medium-sized businesses, that overhaul isn't an easy one. Yet for many SMBs, there may be liquidity hiding in unexpected places.
Bill Angrick, chief executive officer of Liquidity Services, told PYMNTS that offloading unused assets can be an efficient way to access much-needed working capital to endure a market downturn, and even accelerate the formation of new businesses to give the economy a boost.
"With every downturn, there are opportunities," he said in a recent interview. "You have to focus on what you can do, and not what you can't do as a small business or an entrepreneur."
Any B2B eCommerce platform to facilitate sales, however, must be ingrained with payments security and buyer-supplier trust.
Business Model Flexibility
"Companies have been trying to leverage new technology and more flexible business models to manage their working capital and their balance sheets," Angrick said. "We've seen this play out in every sector of the economy."
Small businesses, in particular, may have thousands, or even hundreds of thousands, of dollars stored within their existing assets, with everything from furniture to delivery trucks not in-use today having the potential to provide valuable capital to SMBs.
Liquidity Services is looking to unlock that capital through its AllSurplus B2B marketplace, a portal through which businesses and entrepreneurs can list and procure these items. Angrick described it as "a page in the playbook of managing a leaner, more asset-like business," a trend he said is accelerating in the current market climate.
Angrick also noted that the opportunities presented by a market downturn are not reserved for the sellers alone. Entrepreneurs and startups can today find an opportune moment to launch their businesses, with everything from retail space to human capital being more affordable, as well as the availability of used assets that can be procured online.
For small businesses that want to offload unused assets, the natural destination may be an online marketplace like eBay or Craigslist. While these portals are familiar and easy to use, Angrick noted that they fail to address the biggest challenges of B2B eCommerce, particularly when asset values can be as high as hundreds of thousands of dollars.
"Trust is the currency of a successful marketplace," he said. "Both buyers and sellers have to trust that the process is transparent, and transactions are properly traced and administered."
One of the biggest risks of these consumer-focused platforms is fraud: Sellers risk not getting paid for their assets, while buyers risk acquiring items that are faulty or don't match the listing description.
A technology that sits between buyer and supplier can mediate concerns on both sides. Angrick highlighted the importance of a solution like AllSurplus that not only facilitates the actual listing and auction process, but also manages the payment. A buyer can send funds to AllSurplus via wire, ACH, card or PayPal, with those funds not released to the seller until the buyer receives the item and confirms the purchase was valid. Additionally, the seller does not ship the asset until payment has been received by AllSurplus.
Not Just For A Downturn
As small businesses struggle to obtain their portion of stimulus funding, the ability to sell unused assets could help keep firms afloat.
"If you can't borrow money, or raise money from equity sources or VCs, this is an obvious way to help shore up your working capital and liquidity as you move through what appears to be a really tough market over the next few months," said Angrick.
While the coronavirus has injected a whirlwind of pressure on the market, the ability to adopt a new business model and unlock a new revenue stream isn't only for times of economic distress, and selling off unused assets is not always a one-off strategy of last resort. For many businesses, B2B sales can open up an entirely new revenue stream.
Angrick said there are plenty of scenarios where businesses can find value in selling unused assets. A restaurant that undergoes a refurbishment may have light fixtures and bar stools no longer in-use. A company exposed to market seasonality may choose to sell off equipment that goes unused during a slow season, and likewise may decide to purchase an asset in preparation for a busy season.
And as more organizations rethink their business models, many of the changes could remain well after market disruption eases. Selling unused assets, or procuring used assets at a discounted price, can bolster balance sheets during even minor downturns.
"Ultimately, you have a couple of different ways to manage a business down cycle that's not necessarily an extreme situation like the one we have," said Angrick. "Anytime you're managing a business, you've got to manage working capital."