Strapped for Cash? Try Bartering

Lisa DiCarlo -- Expert Business Source, 3/1/2007 9:00:00 AM

The late, famed businessman and author Mark H. McCormack knew a thing or two about getting what he wanted. Before he died in 2003, the multimillionaire gave away one of the secrets of his success when he said: “In business you never get something for nothing, but barter arrangements come close enough.”

Large national and multinational retailers have used bartering to unload excess inventory and improve cash flow for decades, but small retailers and even micro-businesses should consider bartering to acquire the goods, services and equipment they need to run their business.

According to the International Reciprocal Trade Association (IRTA), more than $10 billion worth of goods and services were traded on a non-cash basis in 2004, the latest year for which figures are available. That might sound like a hefty sum, but it’s an infinitesimal slice of the roughly $35 trillion global economy.

“We live in a cash world, so therefore it’s hard to think you can get what you need without the use of cash,” says Krista Vardabash, executive director of IRTA. “But the industry is starting to recognize there are other forms of currency.”

Vardabash says it’s time for small business owners to “break the [cash] habit and look at their goods and services as a type of currency.”

Bartering makes sense because trading goods (rather than laying out cash) preserves precious capital and reduces expenses. It also helps retailers offload unsold inventory, either to other retailers or to potential customers and partners with whom you can trade for something you need. Bartering also helps ease some of the pain for seasonal businesses, where you can swap goods and services during slow months.

To get started:

Determine your leverage. What do you have that someone else might want?

Consider joining a barter exchange group. If you are having trouble identifying targets for your merchandise, or if your services are not in demand at the right time, consider joining one of the hundreds of exchanges that exist in the United States. These are typically for-profit groups that help link small and medium-sized companies to a much wider variety of trading partners, even if the connection might not be immediately apparent. For example, a clothing retailer might swap goods with an auto parts store for trade credits. The auto parts store can then swap those credits with another exchange member’s goods or services.

The benefits of joining an exchange:

• Because exchanges use trade credits rather than hard currency, traders need not seek out a partner swapping merchandise of equal value.
• Many exchanges also will help you maintain transaction records and provide basic record-keeping services. That’s important at tax-time, as retailers must report bartering income to the IRS.
• An exchange gives you access to a new universe of trading partners.

Before you join an exchange, Vardabash recommends vetting its credibility with an organization such as the IRTA. American Express provides additional resources for small businesses on key bartering issues including how barter and a barter exchange work, how barter is done online, and tips on getting the most of out a trade.

Lisa DiCarlo is a freelance writer in Newton, Mass.