03/ 15/ 2006
by Glenn Townes
If you examine its history, you will see that bartering—trading what you have for what you want without exchanging cash—is, perhaps, the oldest form of business and commerce, a practice dating back to the days of hunters and flint spears.
Long gone are the days of trading three chickens for a leather saddle or animal skins for food. Contemporary bartering has indeed become the modern way to trade, especially for businesses with a surplus of inventory, unsold goods and idle labor. Some companies use the barter system as a marketing strategy, trading products and services for advertising. According to statistics from several national trade associations representing bartering groups and associations, about $7.87 billion in goods and services were traded in 2001.
Despite the numbers, many small-business owners are still woefully remiss about this popular and even lucrative form of exchange. Since the competition for securing customers and maintaining a profitable business is always increasing, entrepreneurs must explore the financial and marketing benefits of the concept and use it to their advantage.
One of the first questions business owners ask is, "What do I have to barter?" The answer is simple: Examine your inventory. Do you have free time, idle press time, empty guest rooms or products that have been sitting in a storage room for months? Perhaps the most productive way to barter is to join a barter exchange group. Some experts liken joining these groups to working directly with an outside salesperson who brings your company business.
If an entrepreneur writes checks out of a business account and belongs to a national barter exchange group, for example, the opportunity to receive services without spending cash, while increasing your income and expanding the networking pool are limitless. Consider the following scenario:
An entrepreneur who owns a small graphic arts business joins a national bartering exchange group. He accumulates credit in his barter account by providing product/services of his business to fellow members. The amount of credit he earns is based on the retail price of what it costs him to design everything from the stationary to the leaflets he provides. He can then debit from his account the costs of the products or services he needs from other barter members. Through this exchange program, the business owner can book a hotel room, travel, buy supplies, dine out or do almost anything that fellow members offer in their businesses. In addition, members spread the word about businesses with which they barter, which leads to more customers.
Generally, this is what is involved in joining a barter association: Expect to pay between $200 to $600 to join. In most cases, you will be assigned a broker who will organize your trades and keep a record of the amount of barter dollars in your account. It benefits the broker to actively promote bartering since he or she generally receives a commission of between 10 and 15 percent on each transaction. Barter association members must also pay a monthly maintenance fee that can run as high as $30.
Here are some tips to follow if you are considering joining a barter exchange group:
- After locating a barter group in your area, arrange to visit the office.
- Ask to see their list of client. Check to see if the barter exchange has a formal directory or a computer handout.
- Choose three or four people from the list and ask them to share their experiences with you.
- Select an exchange that has members with businesses that your business can utilize, such as restaurant owners, graphic artists, computer software specialists, etc.
- Check for national affiliation. If the local company is a member of a national bank, trade association or some other organization with a national presence, you can spend your barter credits while traveling.
- Finally, make sure that your exchange group stays in constant communication with you through newsletters, e-mail, faxes or mailings.
To locate a bartering exchange group, check out Bartermax at www.bartermax.com or the International Reciprocal Trade Association at www.irta.net.
