As small business owners continue to look for ways to grow during tough economic times, many are taking a fresh look at barter as an opportunity to unload excess inventory, use downtime, fulfill operational needs, expand their reach and make the investments necessary to sustain and grow their businesses—all while conserving cash flow.
In economic downturns, entrepreneurs have less cash to spend—making barter’s cashless system of trading goods and services especially appealing. And it’s easy to get started. A business lists a good or service for trade through a professional barter exchange. In return, the business receives a trade credit based on the dollar value of the good or service offered. It can then use those trade dollars to “purchase” goods or services offered by other members. It’s a simple exchange, but as a result, businesses access a rich, varied network of actively bartering members.
Trade dollars can be used for an endless number of goods and services, including advertising, accounting, office supplies and equipment, renovations, printing, employee and corporate gifts, gift certificates and more.
Barter’s benefits extend beyond conserving cash; it’s also a valuable business strategy for increasing sales. In fact, companies are generating thousands of dollars in sales annually through barter networks today. Barter exchanges bring new buyers and sellers together, creating a potential new customer base for business owners. By heightening the visibility of their products or services to potential customers, many companies in turn see an increase in their cash-paying customers.
Companies using barter also turn what otherwise would be worthless capacity into a tool they can use to their advantage. After all, most businesses have excess capacity. A professional person has empty time slots. Hotels or airlines have empty rooms or seats. Restaurants have empty tables they can’t fill. Retail stores have unsold seasonal or discontinued merchandise. Time-critical situations are a great use of trade dollars. As time passes, excess capacity too often evaporates into thin air. But businesses in barter networks can barter away that capacity and generate trade dollars they can use for other needs.
Plus, purchasing power created through “barter leverage” creates value in the barter network and is one of the reasons bartering actually thrives when the economy is struggling. For example, if companies sell any products that have a keystone markup—a pricing structure in which their wholesale cost is half of the retail selling price—they acquire each of their trade dollars for a cash outlay of just 50 cents. Then, when they make a purchase using trade dollars, they essentially pay half price for everything they buy.
Barter leverage allows companies to generate new business, conserve cash and convert excess inventory and capacity into needed goods and services—providing companies with a distinct advantage, particularly in a sluggish economy. Bartering may sound like a different way of doing business, but business owners are embracing it as a valuable addition to their business models.
John Strabley is president of New Berlin, Wisconsin-based IMS-International Monetary Systems, one of the country’s leading barter organizations. www.imsbarter.com.
Joanna is the founder and the publishing editor of Small Biz Resources.com. Joanna started her first company, which she still runs, in high school. Since then she has founded several other companies, which allowed her to develop a rich background in small business start-up, venture funding, branding, marketing, public relations, staffing and management. Her expertise in marketing and technology has helped her clients get acquired by Oracle, Force10, Cisco, Parker Hannifin and Juniper Networks.