Can Barter Save Your Business?

Barter exchanges are probably the most misunderstood of all business systems. Those who join a barter exchange often do not understand how to use them effectively. Those who don’t join them cite reasons such as “it wouldn’t work for my business”, “the fees are too high” or “it’s better to run newspaper ads and do letterbox drops”. However, I have met many people who say that “Barter saved my business”.

In some cases, these reasons are valid. However, in many situations it is simply that the business owner has a “closed mind” on the subject. Just because Joe says it didn’t work for his scrap metal business doesn’t mean that it won’t work for your business.

If you want more customers or clients you owe it to yourself to find out just what a barter exchange can do for you. For many of us it brings a new batch of clients who refer cash paying customers. It can be a Win/Win/Win situation for those who take the time to learn how a barter system can work for them.

According to Wikipedia “a trade or barter exchange is a commercial organization that provides a trading platform and bookkeeping system for its members or clients. The member companies buy and sell products and services to each other using an internal currency known as barter or trade dollars. Modern barter and trade has evolved considerably to become an effective method of increasing sales, conserving cash, moving inventory, and making use of excess production capacity for businesses around the world.”

Businesses who join a barter exchange earn trade dollars or credits instead of cash. These credits are then deposited to their account. They can then purchase goods and services from other members by using their trade dollars. For example, if I buy a meal at my favourite restaurant with trade dollars, the restaurant owner can then use those credits to purchase uniforms, have his till repaired or get some plumbing or electrical work done by other members of the barter exchange. There is no obligation to purchase from the business you sell to, and vice-versa.

The larger exchanges will charge an upfront fee to join. Usually, this will be determined by your expected level of participation and the credit limit offered by the exchange. This fee can be as low as $500 and as high as $2,500 or more for a much larger credit limit.

Credit limits can be substantial ($50,000 trade or more) for barter exchanges who have reciprocal agreements internationally. The smaller and more localised exchanges are often free to join and are gaining in popularity. They will also offer credit limits ($500 to $1,500 credit limits are common).

Barter exchanges make money by charging a commission on each transaction. Transaction fees can vary greatly between exchanges… I have seen fees ranging from 3% to 15% per transaction. As a trade off for these transaction fees the barter exchange does all the record keeping, encourages the members to do business with each other and conducts Trade Shows and Member Functions.

Trade exchanges can act as a “not so silent” salesperson for your business.

The best exchanges will also put buyers and sellers in contact with each other via emails, phone calls and regular newsletters. Many exchanges offer “eBay type” auctions and have overseas holidays for sale on trade.

Property sales are also available on a part cash part trade basis (eg. 10-20% deposit paid on trade and the balance paid for by cash). This allows many trade members to enter the property market, something they couldn’t have previously afforded.

Currently, over 400,000 businesses are involved in registered Trade Exchanges worldwide and annual business turnover exceeds $12 billion. Barter is Big Business!

So, can barter save your business during these times of financial downturn? For many people, the answer has been “Yes”. Personally, I love the concept. It allows me to meet lots of business people that I would not have previously done business with.