The Business of Bartering
Secrets of the Trade Revealed
BY JACK SCHACHT
Just because you're short on cash doesn't mean that you have to go without.
More and more people are turning to bartering - and finding that it can be good for business. Retailers, manufacturers,
and service businesses are now using barter to turn downtime and/or excess inventory into a way not only to
accumulate trade dollars, but to attract new business. |
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In its simplest form, bartering involves an equal trade.
One business swaps a good or service for
another. A lawyer, for example, may swap a few hours of legal assistance for a stay at an out-of-town hotel.
Through professional barter exchanges, where members pay a commission for goods or services traded, more
complicated trades are possible. Here's how it works, A business lists a good or service for trade through the exchange.
In return, the business receives a trade credit based on the dollar value of the good or service offered. The business can
then use its trade credits to "purchase" goods or services offered by other members. The result is that the business is
hooked up with a network of actively bartering businesses. The network of goods and services available through
barter is growing. As bartering becomes more popular, some barter exchanges are starting to trade with each other,
further expanding the bartering opportunities available to their members. |
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| Advantages of Bartering |
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By bartering, businesses can acquire the goods or services they need
without tapping into their cash flow. Bartering also bolsters the bottom line by enabling businesses to trade
away excess inventory or resources. Bartering also provides another way of advertising your business. By
bringing together buyers and sellers who may not have used each other's services before, bartering can
introduce your company to new customers. These may be one-time customers or people who come back to
purchase goods or services once they've become acquainted with the business. Companies that actively
barter may do as much as 5 to 10 percent of their business annually through trades. That adds up. And the
ability to barter is not limited by size. The corporate giant all the way down to the one-person, at-home
business - and everyone in between - all can use barter as part of their business transactions. Bartering
turns your downtime or excess inventory into valuable commodities.
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| Common Misconceptions About Bartering |
Business people who
want to get involved in trading should remember that there is no tax advantage to bartering. Barter and cash
transactions are the same in the eyes of the Internal Revenue Service - both are taxed equally. In fact, barter
exchanges must report goods and services sold through barter to the IRS. Bartering also offers no guarantees.
Some trades may happen quickly, while others may take some time. An item a lot of people want, such as an
airline ticket, may be snapped up right away, while carpeting may take a few months to trade. And you can't
always count on getting what you want when you want it through barter. The amount of certain goods and
services available for trade may fluctuate during the year. For example, a computer technician trading his
services may not be available to fix your computer on a moment's notice. He's going to be offering his services
during his downtime, which might not coincide with your computer breakdown. |
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| How Barter Exchanges Operate |
Barter exchanges typically charge a one-time
membership fee. Some exchanges also may extend a line of credit to new members. That way, they can
start using credits before they've sold anything through a successful trade. Barter exchanges also offer
the advantage of not requiring an even trade. You can use credits accumulated for one item to trade for
several different items that together add up to your total credits. So you can use the credits you earn by
trading carpeting to one company to secure, say, a rental car, a hotel room, and a meal at a restaurant.
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| Make Bartering Work for You |
You have to weigh the disadvantages against the
advantages. Bartering turns your downtime or excess inventory into valuable commodities. It increases
your sales while enabling you to purchase goods or services you need without dipping into your cash. Remember,
to make bartering work, you have to be patient, you have to persevere, and you have to pick and choose what
you want to purchase through barter. |
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