BARTER: TEN TIPS FOR CHOSING THE RIGHT BARTER EXCHANGE - Barter as a system of trading goods and services with others for their goods and services has been around for over 11,000 years, and that's only what has been documented. The concept of bartering has most likely been around since the beginnings of civilization. As with all good things that work, barter continues to evolve and improve with time and technology.
With the recession growing in America, more and more businesses are looking towards barter via organized and reputable companies (barter exchanges) as an alternative to costly and often ineffective marketing and advertising, and as a fun and fruitful way to expand their business operations. This article has been written as a quick reference guide for the things to watch out for and the MUST HAVES that barter companies need to offer you before you consider parting with any cash and joining their realms.
The following list is not based on any particular order of priority or importance.
1) BIGGER ISN'T ALWAYS BETTER. Although in other matters size can sometimes count, when it comes to barter companies this depends entirely on your personal needs and preference. Local barter companies - like Business Barter Exchange of Cary, North Carolina (www.ncbarter.com) - obviously only have availability in their geographic area and are hindered by that fact, whereas national companies with centralized brokering - like Merchants Barter Exchange based in New Jersey (www.merchantsbarter.com) - are obviously larger and offer goods and services wherever they have local offices. National companies usually have many more resources available to provide better service to their clients, but this isn't always the case. The bottom line: if your needs are small and local, stay local, if your needs are larger and you can handle more business, go with a national company.
WARNING: Be very wary of any barter company that offers a directory of their members. Although this looks like an obvious way to gouge their size, this is rarely the case. Once your company name is on a listing, you have very little control over your current cash clients switching to barter. A company offering a directory may look as though they have many members and items to trade for, but this can be very deceptive and does not represent a true picture of clients that are actually willing to trade or have quit.
2) CREDIT UP FRONT? A very positive signal that you are dealing with a barter company that is on the up and up is whether they are prepared to offer you a credit line to spend first. Any company that lets you buy goods and services before you have offered out yours definitely knows the value of its currency and is willing to prove that any barter revenue they generate for you has true value and that you'll be able to spend it on THINGS YOU WANT AND NEED.
3) INTERNET-BASED OR NOT? Some barter companies are nothing more than a web-based "swap exchange" and offer very little value to the business owner. Although a company can benefit from the added exposure being listed on a website may bring, it is another form of passive advertising rather than pro-active. The most effective and reputable barter companies have their own brokers that initiate and locate trades. Using an exchange that has human brokers also saves time - you simply call up with things you need and they call back with people for you to trade with. When it comes to something as simple as bartering, high-tech is not always the best option, but again this is a matter of personal preference.
4) DON'T LOSE CONTROL. Bartering can become addictive as it feels as though you are getting stuff for free. Never forget that almost every trade has a certain cost of goods when your turn comes to offer back your goods or services. Barter companies that don't offer the ability to put caps on how much barter revenue comes in to your business or you spend out per month SHOULD BE AVOIDED AT ALL COST. Some businesses have had to close due to overbuying via barter and then not had the cash on hand to cover the barter jobs they needed to do in return. Most barter companies with a proper brokerage mechanism can set realistic parameters for trading until you become more comfortable and proficient.
5) WHAT'S AVAILABLE? More important than how many members is the diversity of goods and services available and the willingness of the barter exchange to constantly find tailored trading partners for you. International Monetary Systems (www.imsbarter.com) and Merchants Barter Exchange (www.merchantsbarter.com) are a couple of companies that have full time sales people to find specific and new businesses for their members to trade with.
6) 100% TRADES, OR CASH-BARTER BLENDS? Believe it or not, most barter companies out there (especially the older ones) do not insist on 100% barter, 100% of the time. Probably over 90% of the barter companies out there allow their members to incorporate cash as part of the barter transaction. This practice is called a cash-barter blend and is not true barter. An example of a blend for most exchanges is when a client goes to get vehicle repairs. The client has to pay cash for the parts but is able to use barter dollars for the labor. This does not seem to make much sense, but has been the norm set back when BXI (one of the very first barter companies in America) first began many decades ago. Although most barter companies say they do everything 100% trade, do your research very thoroughly, as I've so far only found ONE that truly does it and that is Merchants Barter Exchange. They actually expel members that do cash-barter blends, or cash 'under the table' deals.
7) ZERO SUM ECONOMY? If you are unfamiliar with what that means, simply put it is an economy that is in balance, i.e., no inflation (all of the credits are exactly balanced by the debits). This is a VITAL criteria for a barter company to have. If they do not have a zero sum exchange and mechanisms to keep it that way, DO NOT JOIN. Many exchanges are not balanced and have a higher percentage of clients that have positive balances - this is an immediate sign that there are not enough things on the exchange for clients to trade for.
An exchange that is out of balance usually means that the barter company itself is shopping too heavily in its network and possibly liquidating inventory outside of the network for cash (usually for pennies on the dollar) to improve their own liquidity. Obviously any company that is doing this is not interested in the long-term stability of their economy and are destined for a rather rocky finish. Only an exchange that is balanced shows that clients are happily trading back and forth and that the company is not liquidating assets out of the system. A good, balanced economy also ensures that a barter dollar equals a cash dollar.
8) PRICE GOUGING. Usually as a knock-on effect of points 6 and 7, when barter is diluted with cash blends and a barter company is liquidating assets out of its economy inflation is inevitable. Some exchanges I have researched had a dollar value in their system that was worth less than 25 cents in real terms. Now that's inflation! When cash-barter blends are allowed, it is very difficult to keep track of pricing and very easy for less reputable clients to abuse the system and charge higher prices for things.
If most clients have a positive balance and need to spend their dollars down, they are initially less worried about goods and services costing more than true retail since they just want to buy something with their barter bucks. However in practical terms once one customer inflated their prices it is only a matter of time before they all do to keep pace with what they are purchasing. Before long inflation is out of control and the barter company usually goes out of business, or at best stops growing and adding clients.
9) WHAT ARE THE FEES? "You get what you pay for," so the saying goes. When it comes to barter companies this isn't always true, but most fees are roughly the same. The better barter companies charge a membership fee to join (usually less than $1000). Some of the newer, Internet-based companies are free to join, but always be wary of what you are getting into (always read the fine print - there is no such thing as a free lunch). Almost all exchanges have to charge handling fees and monthly fees in order to make money themselves and stay in business. Favor the company that only charges fees on purchases, that way you know their major focus is on you being able to spend your barter dollars (i.e., they will work harder to find you more and more people to trade with).
10) GUARANTEES? Does the barter company you are about to join offer any guarantees that they can help you? If not you should question why. If they have a zero-sum efficient exchange with happy members they should be able to stand behind what they offer, as most businesses do these days. Avoid companies that are - in my opinion - time wasters and do not back up or stand behind their exchanges. If they aren't prepared to guarantee they can get you goods and services to trade for, don't join.
To sum up, these are just general points to consider when choosing a barter company. There are many out there to chose from, my personal preference has to be Merchants Barter Exchange simply because they hit the most criteria needed for a good trading company, however the only negative at this time with them is that they are not geographically in all fifty states. They are a strong, privately owned and secure economy and I personally know many of their clients that are very happy with all the benefits they receive from being a member. Don't take my word for it, do your research and chose the barter company that suits you best.
0 Comments