Bartering | Money Sense, Jan. 2012

Barter Smarter

Secrets to navigating this evolving ‘underground’ economy

Money Sense
Money SenseSince ancient times, people have been bartering. Many of us bartered in our childhood –– trading cookies for a Twinkie or baseball cards for football cards.

But bartering is more than child’s play. Some savvy barterers make big-ticket trades involving cars, boats, vacations, health care services and even homes.

“Bartering has evolved into a whole new economic genre that is more diverse and accessible since Congress passed the TEFRA Act in 1982,” says John Strabley, CEO of International Monetary Systems. “This banking act included the recognition of barter as legal tender, making it the advent of the modern barter industry.”

IMS is a trade exchange that caters to 16,000 businesses across the country including local businesses such as Asphalt Sealing & Marking Company in Noblesville and Forniss Optometric and Detail Window Cleaning, both in Indianapolis.

In these economic times, people may be looking for more ways to stretch their dollars or to make their businesses more viable. Bartering may be one way to improve your personal economy.

Bartering trades can take place between individuals or through a trade or bartering exchange association, many of which are easily accessed online.

Stained-glass artisan Jim Higgins, a semi-retired Home Depot employee who also sells and services time clocks for Beech Grove-based Hiram J. Hash & Sons, conducted a personal barter that exchanged talent for talent.

“A friend of ours makes wedding cakes, so I talked to her about a cake for our daughter Kimberly’s wedding,” he says. “And it so happened that she wanted a stained glass lamp as a gift for her mother for Christmas. It saved us both a lot of money.”

Barter better
For more frequent bartering, business owners and individuals may seek out online options that are overseen by a bartering “broker.” Some of these require membership fees and collect barter transaction commissions. There are also free bartering websites as well.

The National Trade Association reports there are a multitude of benefits for businesses from bartering, including conserving cash flow, increasing exposure in the community and around the globe, expanding purchasing power and assisting in moving slow or overstocked inventory.

Barter or trade associations are the vehicles that steer those transactions so that the involved parties can receive the most beneficial result.

“Businesses join a barter business to create new sales,” Strabley explains. “A trade exchange’s job is to put downtime and excess inventory to work.”

Transactions can be for services such as dental work, catering, health club memberships, accounting, air time with radio stations or attorney consultations. Or they can be made to “purchase” goods, such as tools, hot tubs, clothing and other products –– kind of like a barter eBay.

IMS created a currency called trade dollars, Strabley says. “The trade dollars are equivalent to cash. The exchange of those trade dollars takes place through a broker that facilitates and directs trade transactions.”

Because it’s not a direct trade, the money moves among the membership entities. Each time the dollar moves, a commission fee is charged for that transaction on top of an initial membership fee.

Jerry Howell, author of The Complete Idiot’s Guide to Barter and Trade Exchanges and president and founder of Midwest Business Exchange, says it’s important to get referrals before bartering.

“Find out if associated members’ bartering experiences have been successful and beneficial,” he says. “Know who you are trading with. Don’t be satisfied with a generic list of members that belong to an association. Look over the membership list to see if it’s a good fit for your needs.”

He suggests asking yourself if you’re willing to invest in making trades work. It’s also important that you have excess capacity to take on additional business required in a barter exchange, are at least somewhat profitable so you can “afford” to barter, and know your margins, Howell says.

5 Tips for Better Bartering

Here are tips from planetgreen.com to cut your cost of living by bartering for goods and services:
1. Review how bartering works. Get to know what bartering entails and all the pros and cons so you’re aware of what to expect.

2. Be detailed. Get specific about what it is you’re looking for and what it is you have to offer so that you can make a good trade.

3. Consider the value of the trade. Determine the market value of what you have to offer or what you’re seeking if it were being sold for money. You’ll want the trade to even out.

4. Don’t get stuck on things. Think about bartering as the primary solution to your needs, not as an alternative, which can open up more possibilities.

5. Be aware. In addition to being specific about the terms of the trade, you might even want to consider drawing up a contract for larger trades or service trades.

Bartering Resources

Craigslist has a bartering section for goods and services. There is also a section for free stuff. Log on craigslist.org.

U-Exchange is a large free-swap site with a lot of possibilities for trades. Log on u-exchange.com.

International Monetary System provides commercial barter solutions to small- and medium-sized businesses, as well as barter solutions for corporations. Log on imsbarter.com.

Trashbank is a free service that allows users to sell or barter. Log on trashbank.com.

CareToTrade has sections for swapping items, bartering services and exchanging real estate. Log on caretotrade.com.

The Internet Barter Exchange requires a membership fee. You can search for items before signing up to check if they fit your needs. Log on theinternetbarterexchange.com.

Learn the basics with The Complete Idiot’s Guide to Barter and Trade Exchanges by Jerry Howell. Log on amazon.com.

The National Association of Trade Exchanges lets you find a trade exchange or association member near you. Log on natebarter.com.

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