Going Back to the Future With Bartering
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The concept of barter is thousands of years old and was the primary way goods and services were exchanged before currency was ever invented.
Yet today there are still thousands of small business owners who take advantage of the many benefits of bartering. Business 98’ magazine reports on how you can actually significantly grow your business by bartering.
Joe Ryan, the owner of the Milwaukee-based restaurant Bangkok-Orchid, tripled the size of his business through the use of barter. Ryan increased his building from 1,200 to 4,000 square feet, doubled the number of tables and added a bar, lounge and dance floor.
By using barter he acquired electrical work, tables, chairs, menus and a state-of-the-art telephone system. Ryan says, “I use cash for perishables, liquor, wages, rent and taxes. Everything else is up for grabs. We don’t spend cash unless something is unavailable through barter.”
You can barter individually or through a barter exchange group. Regardless of how you choose to barter, there are some fundamental rules that you must follow in order to be successful:
Work on deadlines for completion - Let it be known what the specific date is that you need goods or services. On the other side of the coin, make sure you meet the other party’s deadlines as well. Being honest and straightforward will help your business barter effectively.
Put agreements in writing - Remember that bartering is still doing business even though it is less formal than traditional modern business methods. A written contract makes sure that both sides understand what is expected, what is being exchanged and what is required to fulfill the agreement.
Barter for equal value - Everyone wants to be treated fairly. Always go for an equal exchange, not an unfair and/or unethical advantage. Also, look out for dishonest people so you are not shortchanged yourself.
Approach barter like you market your business - You are really selling the idea of accepting your business in exchange for theirs. Keep this in mind when you introduce people to the barter concept or bring in your business to a new barter exchange.
Understand that you and your barter associates are customers - If your barter associates were paying you cash, you certainly would not cheat them, be rude or cut corners on quality. You should expect the same thing from your barter associates - to be treated with respect and fairness.
If you want to go through an established organization, there are many local, state and national trade associations you can use to take advantage of the many benefits of barter. The concept is that members of these trade associations “sell” their products and services at their prevailing prices for 100% trade dollars.
For example, if you own a wallpaper company you can offer $1,000 worth of your products to obtain $1,000 worth of trade dollars good for any product or service in the network. You can use your trade dollars to obtain office equipment, cleaning services, printing or whatever your business needs.
You get exposure to all of the other businesses in the network, have the opportunity for great word-of-mouth advertising and receive quality goods and/or services in return for your time and investment in the association.
The International Reciprocal Trade Association reports that there are nearly 700 retail trade exchanges in the United States with a combined membership of more than 400,000.
When you join a barter exchange you can expect to pay an initiation fee of $100 to $500, annual dues (typically under $200 in cash and an equal amount in trade dollars) and a 10-15 percent commission on each trade.
For your investment of money, time and trade dollars you receive ongoing account maintenance, a monthly statement, checks or debit cards and a membership directory.
There are a few exchanges that will actually give you a line of credit so you can start trading right away. Some of the excellent benefits of a barter exchange are:
More cash to use NOW - Since very few businesses run at full capacity, barter exchanges can help you to keep more cash in your coffers. You can trade your time, space, personnel or inventory for trade dollars that you can choose to save or spend with other exchange members instead of cash. Some merchants actually pay their creditors with trade dollars instead of actual cash.
Other businesses use their barter credits to give employee dental and vision care or even to buy thank-you gifts for good customers. You do have to use your trade dollars within a certain period of time though. In most trade exchanges credits expire after three months to five years so you have to use them or risk losing them.
Create new business at a faster pace - As a barter exchange participant, most people are of course actively looking for needed products and services. Within the exchange there is less competition than in the cash-paying marketplace. A barter exchange member usually finds new business at a faster pace than someone looking for cash paying customers.
Joining an exchange exposes your business to thousands of potential clients. You meet and work with other businesses that you might never have come in contact with before. This allows you to gain some new customers that will come back to buy your goods or services even after bartering with you.
Less loss from unused inventory - In ordinary circumstances you might have to sell your extra merchandise at a loss to clear the floor. Bartering can allow you to trade away excess product for full wholesale value.
A Barter Exchange Important “To-Do” List:
Consider the need for your products or services. Your business will only benefit and save money if you have barterable goods or services. So do your homework!
Find an exchange that matches YOUR needs. Are the suppliers in the exchange you are looking at businesses that offer things you want AND need?
Compare the barter exchanges in your area. What are the fees services of each exchange?
Find out how much advertising the exchange does for members. Get a membership list of total active barter participants.
Find out if the exchange issues a line of credit.
Ask if you will have an individual representative assigned to your account.
Find out if the exchange allows you to trade beyond your regional area. This is of paramount importance if you do business nationally or internationally.
Ask for references and contact the local Chamber of Commerce and the Better Business Bureau.
Talk to members to see if they are satisfied with the exchange.
Know that you should actively communicate with and build a mutually beneficial relationship with your barter exchange.
Tell your exchange if you have plans to move, renovate, expand, if you have extra manpower or inventory or if you plan to take a vacation. This way you can get the best deals for your barter dollar.
This communication also helps you to understand what to barter and what to buy for your business so you can know how to get the most bang for your trade buck.
Evaluate the cost of trade BEFORE joining and exchange. Trade dollars are obviously more expensive for some businesses than for others.
NATE tells barter exchange members to not make a habit of doing more than 5 or 10 percent of yearly revenues through trade. It is important to know that the IRS views barter income the same as cash for tax purposes. Barter exchanges issue 1099-B forms to members and to the IRS at the end of each year. Try to use trade credits for tax-deductible expenses when you can.
Consult your accountant for more in-depth information concerning the tax laws on trade.
For more information on barter you can contact: The National Reciprocal Trade Association 6305 Hawaii Court Alexandria, VA 22312 ITEX Corporation P.O. Box 2309 Portland, OR (800) 326-0296
For the Western Region - International Barter Corporation, (206) 870-9290 Trade Club Exchange, (714) 891-8497
For the Midwest Region - Illinois Trade Association, (847) 390-6000 BarterCorp.Inc., (630) 953-8100, (440) 835-0550 or (414) 790-4560
For the Southern Region - Crescent City Trade, (504) 529-4646
Coastal Trade Exchange Inc., (561) 489-9000
For New England - New England Trade, (781) 388-9200 Bartermax Inc., (617) 769-3400
To help you find a barter group right for you there are trade exchange collectives comprised of a number of trade exchange groups.
These include:
The National Association of Trade Exchanges (NATE). You can call (216) 732-7171 or visit their website at http://www.nate.org
The International Reciprocal Trade Association (IRTA). You can call (312) 461-0236 or visit their website at http://www.irta.net
To learn more about barter here are several resources you can check out and study:
101 Ways to Grow Your Business With Barter: A Guide to Thriving in the 90’s and Beyond ($16.95 from WPR Publishing) by Kirk Whisler and Jim Sullivan. This book gives advice on making the most of business-to-business trading. Call (760) 934-7474
Barter Referral Directory: Small Business Edition ($29.95 from Prosperity and Profit Unlimited) by Barter Publishing. This research project offers a nationwide listing of barter and trade exchange groups. Regional directories are also available. Call (303) 575-5676.
Survival Bartering ($8 from Loompanics Unlimited) by Duncan Long. A valuable heap of information that covers reasons for bartering, getting good deals and protecting yourself from rip-offs.
Barter News, “The official journal of the reciprocal trade industry.” Full of tips, columns and success stories about businesses that barter and is published quarterly. Annual subscriptions are $40.
You can also check out “Who’s Who in the Reciprocal Trade Industry”. This is an annual publication from Barter News magazine that lists more than 450 barter service providers. For both publications you can call (714) 831-0607 or visit the website at http://www.barternews.com/
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Michael L. Stahl is an expert on personal and organizational excellence who works with companies to help them create inspired performance at all levels. He speaks extensively in North America and has worked with companies from mid-size to Fortune 500 level. A black belt in Tae Kwon Do and co-founder of the Center for Inspired Performance in Orlando, FL, Michael provides companies with the tools they need to control their destiny by creating the future. For more information or to contact him please go to www.michaelstahl.com
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