Whoever said cash is king never tried bartering.
For small business owners grappling with excess capacity and an inability to get a loan from banks, bartering can be more valuable than cash.
Bartering dates back to ancient times, when folks swapped goods and services for other goods and services they had. The modern way of bartering is to have networks of businesses across the globe that trade products and services either in person, over the phone or via the Internet without the use of cash.
Whether a lawyer in Houston has spare time on his hand or a local newspaper had extra ad space, businesses -- largely small ones -- can use bartering to get a host of services. Basically a small business joins a barter exchange and instead of using cash for goods and services, trades its excess capacity for things it needs. For example a furniture retailer could sell a couch and in return get credits that can be used for printing brochures. That couch may have languished in the store but on the exchange it found a buyer.
Bartering is a “great benefit to small businesses that want to use excess capacity as a currency,” said David Wallach, president of the International Reciprocal Trade Association, an industry trade group for barter exchanges. “It’s very profitable to businesses. That’s why they join it.” Members in bartering exchanges typically pay a membership fee or monthly maintenance fee and a percent of the sale.
At ITEX, the Bellevue, Wash., membership trading company that has 24,000 members and 90 offices around the country, that percentage is 6%. According to Alan Zimmelman, a spokesman for ITEX, barter exchanges work best in local economies and is done predominately via the phone or electronic messaging, rather than over the Internet. Members will use the Internet to search for ways to spend their barter dollars but will call or email one of ITEX’s brokers when they want to engage in a trade. “The Internet will grow but it is a slow process,” said Zimmelman, noting it’s easier to pick up the phone, send a text or email. ITEX members do use the Internet to post advertisements or electronic newsletters.
Members of bartering exchange NuBarter do use the Internet to make deals, even though the company has customer service reps at the ready to help members. On NuBarter.com members are given a line of credit and search for what they want to use that line of credit for. Once they find something they click buy and the seller is contacted via an email. If it is approved the seller and buyer will make arrangements.
NuBarter, which is based in Savannah, Ga., but has offices around the country and a network of barter exchange partners around the world, put together a network of roughly 2,300 members who trade among themselves. A line of credit is given to the members and NuBarter’s job is to make sure the goods and services stay balanced. For instance, NuBarter won’t let 10 hair salons on the network if there is only demand for two. What’s more, in order for a small business to be allowed into the network, it has to go through an interview process. The line of credit is based on criteria, including years of service, number of employees and size of the business, said Gary Field, president of NuBarter.
Members of NuBarter pay a one -time fee of $495, $15 monthly and a 12% cash fee on all transactions. For the fees, small business members get assigned a trade broker and access to business seminars, similar to Chamber of Commerce events. According to Field, NuBarter is a win-win situation for small business members because their barter dollars never go to waste if a service is not completed.
“If someone doesn’t get the services, they don’t pay,” Field said.
For small businesses that don’t want to become a member of one of these bartering exchanges, there are a host of websites that let individuals trade goods and services. BarterQuest is one example. On its site, goods, services and real estate can be traded around the world.