How businesses are using barter to save cash

How businesses are using barter to save cash

Businesses are constantly looking for new ways to attract more customers and improve sales. Ironically, more and more businesses are realizing that the best way to do this is by using an “old” form of business called barter. Before the invention of money, ancient civilizations thrived on the concept of bartering. “What is bartering?” you ask. Simply put, bartering is the trading of one product or service for another. There is no exchange of cash.

Any business owner or professional who has a product or service to offer can barter. The higher the demand for a product or service and the more limited the supply, the more opportunities you will have to trade for products or services you want or need. In this article, I will give answers to some commonly asked questions about barter and the benefits of barter to businesses. Get ready. Get set. Let’s trade!

Is bartering right for me?

Do I need to barter? How can I know if joining a barter exchange will help my business? These are just a few of the questions asked by business owners and professionals who are considering bartering their products and services. Barter is a smart option for businesses of all sizes, especially if the following traits apply.

  • Your business has excess inventory
  • You competitors have advantages or leverage over you
  • Your company’s a product/service profit margins are at least 25%
  • You can increase production without increased costs
  • You have accounts receivable collection difficulties

The first point is probably the most important. Bartering helps you get rid of excess inventory by trading it with someone else. This allows you to trade it for its full retail value instead of discounting it. You save money! Barter exchanges will assist you in taking inventory of your excess stock and finding suitable businesses to barter with.

What are exchanges, and how do they work?

Most businesses begin bartering by joining a Barter (or Trade) Exchange. The exchange acts as the “middle man” for every transaction you make. They also act as your sales promotion and marketing department. The exchange will target other members who need your product or service and direct them to you immediately. Most exchanges will also list you in their member directories, weekly fax updates, and other monthly publications.

This makes the process much simpler. For example, imagine how difficult and time consuming it would be to find a business that is willing to trade you printing services for the services you have available. The exchange does this for you. All you have to do is call them and tell them your business needs and what services or products you have available to barter.

Most exchanges limit the number of members that can offer a service. For example, it is not feasible for 10 dentists to join. This would create more supply than demand.

The exchange will set up an account for each member. Your “trade” dollars will be kept in this account. An initial membership fee is usually charged by the exchange. The fee may range from $100 to $400, depending on the exchange. In addition to the one time membership fee, the exchange charges a commission on each transition. The commission is usually a very small percentage of the cost of the transaction. The person “buying” the goods or services is usually the one that pays this commission charge.

What services or products can I barter?

Undoubtedly, many of you are asking about the services and products that can be bought and sold using a barter exchange. The list is very extensive, and, as the old saying goes, the sky is the limit. If you have a product or service that is of use to someone, then it can be bartered. The opposite also applies. If there is something you want, the exchange can usually find it for you. Some of the most popular items traded on exchanges include:

  • Vacations
  • Printing Services
  • Advertising
  • Web Site Design
  • Legal Services
  • Medical Services
  • Restaurants/Dinners

What should I look for in an exchange?

Unfortunately, as with all business ventures, there are some exchanges you want to stay clear of. Every business should thoroughly investigate an exchange before it joins. Listed below are some important points to consider before joining a barter exchange.

  • Can you get what you need? Make a list of your needs and see of the exchange has the resources to provide them.
  • Ask for a referral list of clients and check with them to see if the exchange is a good one.
  • Check the barter prices and see of products and services are priced fairly and competitively.
  • Check to see if the exchange is compliant with all US tax laws. They should report all barter income to the tax authorities. Remember that your “barter” income is taxable and must be reported on your annual income tax return.
  • Check to see if the exchange is reputable. Call your local Chamber of Commerce, Better Business Bureau, etc.
  • Check the professional associations of the barter exchange. Is it a member of a regulating agency?
  • Are all of its clients in the same geographic area? Are they close to you?

This article should set you on the right path to improving your cash flow and managing your inventory proficiently. Remember, with barter, your only limit is your imagination. Happy bartering!

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