Secrets of the Trade Revealed: Bartering for Business
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.
Bartering enables businesses to trade excess time or inventory for the products and services they need. Trading excess inventory can be a great way for companies to supplement their advertising budgets. For example, if a company has merchandise in excess inventory, it can liquidate those products. Or, it can trade the products through an exchange where it often will receive trade credits for the full wholesale value of those products. The company can then use those trade credits to purchase advertising. So, by bartering, the company is gaining on two fronts: it's receiving top dollar for excess inventory and it's able to do more advertising that it would otherwise be able to do.
Take a radio station that wants an economical way to entertain its top advertising clients. The station may offer advertising time and trade its barter credits in for meals at a local restaurant. The restaurant might trade its credits in for computer equipment. And the computer company might trade its credits in for radio ads. Three separate businesses have taken part in a buy and sell transaction without ever exchanging a dime.
The network of goods and services available through barter is growing. Today's barter exchange may have as many as a few thousand members nationwide. As bartering becomes more popular, some barter exchanges are starting to trade with each other, further expanding the bartering opportunities available to their members.
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. A hotel, for example, can fill empty rooms during its off season, a print shop can run jobs during what would normally be a slow time or a newspaper can fill up its advertising space.
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. The National Trade Association, based in Niles, Illinois, is one of the nation's largest barter exchanges. 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.
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 that they don't require 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.
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, bartering exchanges must report goods and services sold through barter to the IRS.
Bartering also offers no guarantees. Some trades may happen quickly, others may take some time. An item a lot of people want, such as airline tickets, 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. Likewise, a carpet store may offer enough carpeting in trade to cover your office floors, but the carpet selection may be limited. And you'll probably be hard-pressed to find a Florida hotel room over the Easter holiday.
But 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.
So while bartering may impose some limits, it can still provide advantages to the business traveler. You may not be able to trade for a hotel room or car rental during peak travel seasons, but you'll probably be able to pay for at least some of your travel expenses during the year through trade. Bartering may also provide an added bonus: You may discover a great restaurant or comfortable hotel you might have otherwise overlooked if it weren't for bartering.
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.
And don't think that you have to limit bartering to business. Bartering may be a great way for a busy business owner to take a vacation. There's no rule that says that the trade credits you rack up for selling excess inventory has to go toward carpet for your office or dinner out with a client. You can trade those credits in for an out-of-town hotel stay--just for the fun of it!