Resources - Chapter 14 Supplement
Barter Exchange Tips
Most barter organizations act as a broker or agent. In addition to providing account management services, barter companies provide advertising and sales support to expand your clientele base. The main tool to accomplish this is the barter directory. Your company name and a brief description of your services get published in the barter exchange's directory. Many exchanges also send members weekly faxes with announcements, special offers and addresses of new members. Other methods exchanges employ to help promote their members are: inserting fliers and brochures into directory mailings; profiling members in the directory; publishing members' articles in the directory; hosting fairs; and displaying members' products in the exchange office.
Most barter exchanges require an initialization fee of up to $600 and charge an annual fee ranging from $100 to $600 (usually a portion in cash and the rest in trade); some have a single lifetime fee of approximately $1,000. Another fixed cost is a monthly maintenance charge ranging from $5 to $35 (usually in trade dollars).
Successful barterers embrace the trade concept and utilize the barter system before resorting to cash. The downside to barter is that you can't always get the items you want according to your desired specifications or time frame. You need to be creative, flexible and patient. Your broker can assist in getting your needs met. The following are some tips to help you achieve optimal results when bartering.
Closely Track Your Account Balance
Maintain good records so you don't allow your account balance to get too high (unless you're saving up for a large purchase). If you notice that you've accumulated too many trade dollars, you can always go on "standby." Notify the barter organization that you're temporarily not accepting new trades. The organization then notifies the other members. You tell the organization when you want to resume active trade status.
Treat Barter as Cash
Treat barter as cash; after all, it's taxable income. The trade dollars you spend on business expenses are deductible; the personal expenditures are usually considered draw. The barter exchange organization reports each member's income to the IRS via the 1099-B form.
Limited Gift Certificates or Scrip
To keep control over the amount of trade revenue generated, you can issue a limited number of gift certificates or scrip to the barter organization. Members buy the certificates directly from the organization and your account gets credited. Although some people prefer this method to standby, it isn't the best technique for wellness providers. You may lose potential clients because many won't want to be bothered going through extra steps before scheduling an appointment.
Carefully Evaluate Barter Prices
Don't pay more for an item through barter than you would pay in cash. Before making a purchase, check prices with other vendors. Most barter members are ethical, but some charge higher prices to trade customers than cash customers.
Build a Strong Relationship with Your Broker
Take the time to build a strong relationship with your broker. Explain your anticipated purchases and when you'll need them. Also discuss ways to expand your clientele.
Realistically Assess Your Barter Commitments
Don't accept bartering transactions that you can't fulfill. For example, a barter member wants you to provide ongoing chair massage to 50 employees. At first this seems great, but then you realize that this would take between 16-20 hours per week of your time. This would not allow you much time for cash clients. This transaction becomes more feasible if you know another therapist who could work with you.
Choosing an Exchange
Contact the National Association of Trade Exchanges and the International Reciprocal Trade Association for listings of trade exchanges in your area. Request information from the local exchanges and compare the services. Ask what the total membership is, the specific types of member businesses and the number of members on standby. Ask the exchange to send you a copy of its directory. Find out whether the organizations you're considering have members that offer items on your lists of business and personal needs. Talk with some of the members about their success with the particular exchange. Also do a random survey of service providers in the organization to ascertain whether their fees are within the average range. Once you've done your research, compare the different exchanges in terms of contract requirements, fees, membership and support services.