Will Barter Work for You?

Written by, Samuel K. Burlum, Investigative Reporter
and author of The Green Lane, a syndicated column

Are you a local or regional business looking for a competitive edge? Or maybe you are a business located on Main Street that has a limited budget set aside for marketing your business however you know you need to enhance and increase your marketing efforts. You tried getting a small loan to grow your business, however like many small business owners you find out that the banks are not lending money to entrepreneurs like they once did. You also find out that yes, you can use your credit cards but they come with a price of steep interest rates.
So how do you, as a small business how do you get the things you need without the consequences of racking up debt? The wonderful thing about your situation is that your business is not alone. Many businesses find this situation frustrating, during a time when cash is limited and competition is fierce.

“Badger Barter is a wonderful way for our nonprofit to stretch our limited resources. We are able to offer more services to members, because of products and services offered on Badger Barter. The customer service from the Badger Barter Staff is top notch. They are always responsive and find a solution to my questions.” ~Colin Murray, Executive Director, Dane Buy Local

Barter is Smarter

Well, take a moment to consider barter. Yes, barter, which offers significant purchasing power for a local and regional business which has limited cash flow, yet desires to grow its business and acquire its business needs. By joining a barter platform, that is already established with a large number of participants, your business can take advantage of an existing business network of other businesses that utilities barter to fulfill their growth needs.

Businesses within a barter platform can trade services to fit their growth needs, reserving their cash for necessities such as rent, utilities, and inventory. If one thinks about all of the items a local business needs, there are many items which are common to all new start-ups. Business cards, a sign for the business location, marketing materials, legal and consulting services, and equipment repair, can all some of the products and services that can be exchanged for using a barter system.

If your business has a mark-up of at least 30% margin on your products and/or services; and are in need of expanding your business, yet lack the cash to do so, then barter may be an excellent choice for you. If you’re a business who appreciates a financial model to limit debt and wishes to leverage your skill sets to create value, the barter is a great way in achieving this goal.
Barter also offers lead generation and brand loyalty. When a business is engaged in, and implements barter as part of its ongoing business strategy, it will usually remain doing business with fellow bartering businesses due to the benefits of the barter. This gives new businesses an advantage to build its B-2-B clientele, while also accumulating barter credits it can spend on its growth needs.

So if you are a local or regional business owner whose business is a sole proprietorship, an limited liability company (LLC), or a family owned business, you could also pass along the barter credits to your personal use for at home needs. Barter can be used for other types of purchases such as meals and entertainment at participating restaurants; or for general lifestyle services such as salons and spas, or even for a home renovation.
Statistics show a recent rise in the use of barter by small to medium businesses. The latest study conducted by International Reciprocal Trade Association, or IRTA, estimate over 400,000 businesses worldwide transacted in barter that was equivalent to $12 billion dollars, worth the products and serviced exchanged, in 2010, and expects that number to increase by 5% to 10% in next coming years.
“A barter exchange acts as a third party record keeper for its participating business clients. These member businesses buy and sell products and services on a barter basis using credits to account for each transaction. Barter exchanges practice third party bartering, meaning the seller does not have to buy from whom he or she sold to, rather, the seller’s account is credited the value of the sale in trade dollars. This modern trade and barter method is different than the ancient “direct trade” when people swapped one thing for another. Modern trade and barter has evolved into a sophisticated alternative way for business owners to increase sales and revenue conserving cash, move inventory, maximize their excess or unused capacity to improve their financial bottom line” according to the IRTA.

Some examples of barter platforms are that of Badger Barter, located in Sauk Prairie, Wisconsin which hosts over 600 businesses in their barter exchange. The largest exchange is operated by the IRTA itself, called Universal Currency, the largest of its kind in the world. Since 1982, such barter exchanges were formally recognized by the Internal Revenue Service, where one must declare the value of the goods/services they obtain via barter. This action by the US IRS has aided in legitimizing the value of a barter system.