For many years, the general manager of a small hotel in Milwaukee has been trading expensive services such as carpet steam-cleaning and air-conditioning maintenance for overnight accommodations in rooms that would likely be vacant. A Connecticut college barters adult education college tuition for tile and construction work in its buildings. One salon owner bartered his styling services for electrical work, upholstery, a water cooler, accounting and a whitewater rafting trip in Maine. All of these for-profit and nonprofit businesses are part of regional retail trade exchanges, which give them the opportunity to connect and build relationships with new prospects, while trading for goods and services they need.
“In my experience, about 60% of businesses use bartering for business purchases, and the rest use it for personal items, such as vacations, or to reward employees,” says Gary Oshry, president and owner of New England Trade and treasurer of the National Association of Trade Exchanges (NATE). “One of the things that’s becoming popular right now is using bartering to provide medical services to employees—things like eyeglasses, dentistry, acupuncture or chiropractic care that isn’t covered on many health plans.”
‘In my experience, about 60% of businesses use bartering for business purchases, and the rest use it for personal items, such as vacations, or to reward employees.’
Dipping into a bigger pool of prospects
At its core, bartering, or reciprocal trade, is about preserving cash flow and utilizing unused time or excess inventory. But there are other benefits to business owners. You may start your relationship with another business as trade partners, but—assuming they like what you have to offer—there’s a good chance you will convert them to a paying customer at some point. More barter often means more referrals; people will be talking about your business and sending new cash customers your way. Entering a new network of regional businesses means tapping into markets you might not have found otherwise.
“There was a time when people thought barter meant your business was in bad shape,” said one small business owner in a New York Times article. “Now, a lot of people are saying their business is doing good, but they say ‘I can get 10 percent more business through barter.’”
Barter exchanges aren’t the only way to trade for needed services. Informal bartering is still quite common, especially on the local front. A plumber may swap services with an electrician on a project, for example. But one-to-one bartering has its limits. You have to find a partner that has exactly what you want.
Retail trade exchanges, on the other hand, accommodate hundreds of businesses that are inter-trading using their own virtual currency. For example, an exchange member—say, a design firm—uses the exchange’s online directory to purchase $1,000 of a caterer’s services. In return, that caterer gets $1,000 in “trade dollars,” which can be applied toward any other business on the exchange. Goods or services in the trade exchange’s marketplace are priced at fair market value, and businesses usually report the value received to the Internal Revenue Service as income (trade exchanges are legally required to report the barter income of each client to the IRS).
Choosing a trade exchange
Before jumping in feet first, it pays to do your homework. See that an exchange is legit by checking its accreditation status with the Better Business Bureau. Find out whether it is a member of NATE or the International Reciprocal Trade Association (IRTA), both of which require participating exchanges to meet a code of ethical standards.
You should also explore how the exchange will promote your products or services to other members. Do they do broadcast emails? Do they have face-to-face opportunities to network with members? Look for exchanges that offer “barter brokers” who assist with the sale and purchase of barters and recommend your business to others.
Lastly, keep in mind that barter exchanges are not free. They usually charge a membership or monthly fee and take a small commission on each transaction. If you don’t have the time to engage in barter transactions or there aren’t goods and services on the exchange that meet your needs, don’t sign on the dotted line. Barter can be a great tool to build sales and relationships, but only if you use it.
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