Barter

Barter History

In the old days before the Internet, skilled business owners performed barter exchanges mostly by word-of-mouth, choosing to approach others in other trades based in a large part on the recommendations of business owners they knew and trusted. Reputations were gold and jealously guarded, because a bad report from a dissatisfied barterer could tarnish a reputation and prevent future exchanges, especially if the report was based on one barter partner being shortchanged by another, offering substandard materials or semi-skilled labor, instead of prime-grade materials and “A” labor teams.

Back in the 1980s, barter emerged and swept the white collar business professional community normally not associated with trade activities, using a credit system. This system allowed a trade partner to easily buy or sell products or services from another. Networks sprang up quickly, offering centralized barter exchange programs, linked by inexpensively printed membership lists mailed to association members, or networking at monthly meetings where new members got the opportunity to introduce themselves to other members.

Advantages of Exchange

To some barter association members, exchange was seen as a method of obtaining needed goods and services without paying income taxes on the exchange. An IRS crackdown soon changed this view.

For most business owners, this type of trade is viewed as method of obtaining needed products and services when cash flow is low. Manufacturers who misread the needs of their markets, often have a supply of products they can’t sell and found barter a more efficient and profitable way of moving these products instead of the usual method of selling excess inventories for pennies on the dollar. Successful service providers sometimes have a surplus number of B-Grade clients they offer in exchange to similar startup services that need to build their client base, in exchange for providing assistance when called upon to handle extra work flow. Printers often have press downtime which they offer to retailers in exchange for printing exchange member retailers need, in exchange for office supplies. Restaurant owners trade catering for needed plumbing or electrical work and so on.

Services

While barter is an excellent way of optaining needs for no cash. To be effective, ongoing exchange requires a clearinghouse for exchange to be truly effective. Exchanges provide just that. By charging a membership fee in exchange for their services, the exchange banks and tracks member traded credits, banked “funds” that can be used to purchase any product or service quickly without the time required to arrange one-on-one barter exchanges. Record keeping as required by the IRS is provided, which views barter as cash trade subject to taxation. Exchange members are protected through screening of applicants. Arbitration or mediation is also offered to settle disputes between members, and sanctions rendered against members who violate the rules. In this way, all members of the exchangce are protected and the process can flourish.

Types Of Barter Exchanges

There are about 500-600 active exchanges in the United States today. Exchanges vary in the types of members they accept. Some work only with large companies. Others target small home-based businesses or smaller merchants. Still others concentrate on white collar professionals. There are hybrids that offer combinations of all of these.

More Information

Contact your

• Local chamber of commerce
• Local business or professional association listed in yellow pages, or in online directory Superpages.com

• Associations:

International Reciprocal Trade Association

National Association of Trade Exchanges