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Barter & Trade Programs

Barter & Trade Programs

Bartering - Cash-Preserving Exchanges Take Off. Today an interesting new twist on the internet is reinventing the ancient trading technique (bartering) for modern day use. Bartering can give your small business the power to compete more effectively and provide a great outlet for doing business while preserving precious cash flow. Barter has become a huge business-to-business hit, to the tune of $600 billion world-wide. The International Reciprocal Trade Association, claims upwards of $7-9 billion in goods and services are exchanged annually in North America alone. This figure is expected to grow by more than 10% per year. Interested? Bartering makes your goods or services available to other members of the "bartering community". If another member wants to trade with you, they exchange credits or "barter dollars." So today's barter system uses the advantages of a currency-based exchange without using real money. All barter trades are considered taxable income. Bartering, or the trading of commodities without using money, has probably been around since the dawn of time.

Business bartering is one of the most effective ways to preserve cash and working capital for the companies that know how to effectively execute this strategy. Bartering is by far the oldest form of commercial transaction in the world, and still remains one of the most effective. In barter arrangements, products and services are exchanged with other parties for their products and services. And everybody gets to keep their money.

Using barter in your business

1. Advertising And Media

Barter arrangements can be very useful for gaining placement in newspapers, trade publications, and other media advertising outlets. The founder of $100 million dollar newsletter publisher, Boardroom Inc, talks about how he started his early marketing outreach by negotiating with publications to place his ads in exchange for shares of stock (for each subscriber brought in by his ads).

Auto dealers can negotiate radio, TV and newspaper ad time in exchange for vehicle leases. Service professionals can negotiate a certain amount of billable hours or project work in exchange for advertising placement.

2. Liquidate Excess Inventory Or Monetize Capacity

Hotels with extra rooms to spare often will swap these in exchange for needed services. Product manufacturers can often arrange for direct swaps with other companies, or even take part in "triangulation" arrangements which feature a three way trade of goods and services.

Even if you're a service professional selling your own time and effort, there are ways to barter your services. In my business coaching practice, I have shown professionals how to turn their expertise into tradable product (directly and indirectly) that gives them access to the power of bartering.

3. Manage or Improve Cash flow

Bartering can be a great way to meet the needs of your business while maintaining a positive cash flow. For example, it's a great way for businesses with highly seasonal revenue or income variability to maintain operations without resorting to fairly expensive financing measures like asset-based borrowing or account receivables factoring.

It can also be a way to systematically reduce costs of materials and services from your suppliers. Make a list of your suppliers, and see if there are ways that you can barter with them directly or arrange a triangulation. This is especially worth it for products and service suppliers that you use regularly.

Potential Mistakes In Bartering

1. Inefficient matching

It may take quite a bit of time and effort to find the perfect partner to accomplish a barter arrangement with. If you do this wrong, you may find that your barter arrangement is not worth the time or the services that you put into it. Take the time to think about what you would want in exchange for what you are prepared to offer.

2. IRS trouble

Do not make the mistake of thinking that bartering offers you a tax loophole. According to the IRS, it does not. Consult with a competent CPA or tax attorney when you are ready to use bartering as a strategic part of your sourcing or cost management system.

3. Barter Networks and Exchanges

The biggest mistake you can make here is to overlook barter exchanges. The next biggest mistake is to choose the wrong one. Make sure that you choose your barter exchange very carefully according to the size of their network, the number of members and even their level of activity.

Gogo Erekosima, The Small Business Digital Coach is the CEO and Lead strategist at Idea Age Consulting - a Colorado Business Consulting firm that promises to grow your small business by 24% or more in 24 weeks or less using their customized Business Growth Action MAPS.

Sign up today for a Growth Opportunity Analysis. This consulting module uncovers strategic marketing and business growth opportunities. This Consulting Package is valued at over $1500 dollars.

Article Source:

Gogo Erekosima - EzineArticles Expert Author

According to Suzanne Ridgway a freelance writer and regular columnist/contributor for Working World and Working Nurse magazines, "bartering can be done with people you know, but the Internet has greatly expanded the possibilities of finding potential trading partners. Of course, as with all interactions with strangers and on the Internet, caution must be exercised to avoid getting scammed. Sadly, there are always people who will neglect to hold up their end of a bargain through either malice or flakiness, so be aware of the pitfalls of this system and be careful who you deal with."

Suzanne also states, "Among friends and neighbors and local merchants there are countless kinds of deals that can be made. Whether you trade tax preparation for taxidermy, or peaches for pedicures, the possibilities are endless. It’s even been utilized among healthcare professionals and their clients. American Medical News reported in their January 2009 issue that two family practice physicians opening a new office in Jenks, Okla., traded medical services for supplies, plumbing work and other goods and services while they were getting started in their business."

The New Age Of Bartering

Barter is the very origin of commerce when early humans traded things like food and water for sleeping space in a cave. It has survived the invention of coins, the stock market and online banking to prosper again during the Great Recession.

"When recession is looming, barter is booming," said Ron Unger, co-founder of the Sarasota-based International Barter Exchange.

The IBE negotiates several million dollars in trades in the Southwest Florida every year and its volume is up 25 percent from this point last year, with expectations of greater gains in 2011.

Few things cannot be bartered.

Dental work, attorney's fees and air-conditioning services are some of the most common items, but vacant land, motorcycles, hotel rooms, concert tickets, advertising space and retail products and services of all sorts are also part of the IBE's everyday mix.

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