Save your cash by bartering goods and services instead -- corporate swap meets are getting bigger and better.
by Karen Cheney			February 15, 2002

Looking for relief from a cash crunch? To acquire the goods and services you need without depleting your cash reserves, consider a method of business that's as old as the hills -- bartering. Yes, it's still acceptable for businesses to essentially swap their products and services for things they need.

In the past, such transactions took place between individuals. But more and more, deals are brokered through barter exchanges. Last year, the total value of products and services bartered by businesses through barter companies rose 12% to $7.87 billion, according to estimates by the International Reciprocal Trade Association.

Why bartering is better

Barter has some advantages over cash. First, it acts as a marketing branch of your operation. Businesses that might not have had exposure to you outside the exchange are now doing business with you. It's also a low-cost way for you to acquire goods and services. If you have excess inventory, you can get rid of it at little or no cost. Then you can finance your purchases out of those additional sales.

Businesses have come up with some other creative uses for barter too. For instance, Ron Maier, president of Kenron Industrial Airconditioning Inc in Rochester, New York has used it for collections. "I've had clients who run out of funding, but I get my payment through trade dollars," he says. Lois Dale, president of Barter Advantage in New York City, says that members of her exchange use barter to beat the high cost of health care. "We put together programs where employers can give their employees doctors and chiropractors and dentists in the barter network," says Dale.

Using an exchange, rather than negotiating your own deals, makes the whole process relatively painless. Businesses sign up to sell anything from apple carts to whistles, and buyers contact sellers directly or through a broker employed by the exchange. All sales are executed in trade dollars, which you accumulate by selling your own service or product via the exchange. "Media companies end up buying billboards or printing. The printer may buy a new roof and the roofer buys a trip or a cruise," says Stephen Webster, president and CEO of RTE Corporate Barter Group in Rochester, NY.

Before you start swapping...

If all this sounds intriguing to you, don't simply run out and join the first exchange you stumble across in the yellow pages. It pays to ask these questions first:

• Does the exchange have a good track record?
  During the past couple of years, a number or online exchanges have come -- and gone. To avoid joining an exchange that goes belly up, check with the Better Business Bureau and make sure that the exchange's credit rating is solid. Finally, talk to current members and learn about their experiences.

• Does it have the products and services you want?
  Make a list of the products and services you are likely to buy and decide if the exchange has the membership you need to deliver those items. You don't want to end up with too many trade dollars. "Right now, our balance is up $40,000," says Rob Turner of his exchange status. However, the owner of Mercury Print Products in Rochester, N.Y. points out that he has also been in the hole by as much as $20,000 in the past.

• Do you have something that other businesses want?
  Likewise, you must have a product or service others will want. Printing, office products, limo, air travel, resort, hotels and restaurants are always popular, notes Dale.

• Does the exchange charge a fair price?
  Traditional exchanges charge a membership fee of around $100 to $500, a monthly maintenance fee of $10 to $20 and a commission of 10% to 15%, which is usually split evenly between the buyer and seller.

• Can I handle the paperwork?
  Dealing with a barter exchange adds an extra layer of paperwork to your business. You have to keep track of your trade dollars, which the IRS considers equivalent to real dollars. If you don't mind the effort, it could pay off handsomely for your business.

Columnist Karen Cheney is a veteran financial and business reporter who has written extensively for many national magazines, including Money and Business Week, and is co-author of the book, How to Start a Successful Home Business. She invites your questions and input on topics you'd like to see covered in future columns. E-mail her at editors@quicken.com.