At least 600 businesses utilize B2B bartering
Members examine the merchandise up for trade at Atlantic Barter’s last annual trade show.
Jeff Eastburn was a little leery when a bartering group cold-called him nearly 12 years ago.
That was before he bartered his way to a Key Largo vacation, a new bathroom at his Newark home and new floors for his offices at Hoopes Fire Prevention. His son recently bartered for a fence. His daughter is having new pavers installed in her back yard, thanks to barter.
Barter, perennial second banana to cash, may be Delaware business’ best-kept secret.
At least 670 business owners have joined Atlantic Barter or IMS Barter. Others trade informally or on a New Jersey barter exchange. Nationally, nearly 400,000 businesses barter on some level, according to the International Reciprocal Trade Association.
Here’s how modern barter works: If Jack sells his $100 cow to another barter client, he won’t have to settle for magic beans. Instead, 100 trade dollars will be credited to his barter exchange account, with no giants involved. Jack can use those barter dollars to buy anything offered on the exchange – computers, concert tickets, office cleaning or a nice dinner out with his mother. No haggling required.
Another plus for Jack: It’s great exposure. Barter clients may spot his cows on the exchange and offer to buy more.
One caveat: All transactions are reported to the IRS, and the exchange will tap Jack for a monthly fee, a transaction fee, a yearly renewal or a one-time joiner fee.
“Clients do it to get more business above and beyond what they’re currently doing in the pure cash world,” said Ron Whitney, president of the International Reciprocal Trade Association. “If you look at Wilmington, Delaware, how many restaurants turn people away every night? There might be one or two, but everybody else certainly can use the additional business.”
Patrick Keane, owner of the Rockwood Map Gallery in Wilmington, thinks barter should be taught in schools. “It’s a good way to generate sales and preserve cash. Over the years, it’s helped me quite a bit during slow times. A lot of people don’t grasp it, but barter works. Barter is smarter,” he said. “I think people who don’t grasp it think you have to do a trade directly with a person, but that’s not the case. You create these dollars, and then you go spend them any way you want. Once you’ve had a taste of it, you become addicted to it.”
Barter helps business owners preserve their cash by allowing them to exchange their excess inventory for the goods and services they need.
“The engine that drives the entire industry is the unused capacity every business has – the empty seat in the restaurant, the unused hotel,” Whitney said.
If a dentist earns full retail for trading a root-canal procedure, he’s earning more than he would have from dental insurance and he can use that purchasing power instead of pulling out his checkbook to buy a copy machine or hire a tax consultant.
Also, barter gives clients statewide or national exposure for their products. “The biggest benefit of being a member is you get exposure that doesn’t cost you anything,” Eastburn of Hoopes Fire Prevention said.
Bartering went mainstream in 1982 when the Tax Equity and Fiscal Responsibility Act formally recognized barter dollars as a legit form of commerce. The recession that began in 2007 drew new disciples, and many of them stuck around as the economy improved. But the bulk of businesses have never dabbled in organized barter.
“Our biggest challenge is that people are not aware of organized trade. You’re not taught this in the public school systems. You’re not even taught this in college,” said Atlantic Barter President Christine Radovich, who bartered for her home- inspection report, her pest-control report and her real estate attorney when she closed on her Wilmington home in 2001.
Atlantic has nearly 500 members in Delaware and reaches 350,000 through reciprocal partnerships, she said.
“I think a lot more business owners trade, but a lot of them try to do it on their own,” Radovich said. “When businesses try to facilitate a trade on their own, oftentimes somebody feels shortchanged on the trade. A barter deal gone bad puts a bad taste in their mouths for barter. Then, when we come along, people have a preconceived idea that barter doesn’t work for them.”
Radovich tells businesspeople they have three ways to grow – increase their customer bases, decrease their expenditures or sell off excess inventory. She said barter helps them do all three because it brings new customers through their doors, saves them money and helps them sell off excess inventory.
These services are all commonly listed on exchanges.
“¢ Dog grooming
“¢ Moon bounces
“¢ Car repair
“¢ Lawn mowing
“¢ Resort vacations
“¢ Office cleaning
“¢ Tree trimming
“¢ Metal polishing
“¢ Tax prep
“¢ Grant writing
“¢ Eye examinations
“¢ Full-page ads
“¢ Medical equipment
“¢ Ministers for your wedding
Atlantic lists a medical marijuana doctor and wedding cakes by Dana Herbert, winner of TV’s Next Great Baker competition. They recently brokered a deal for a home.
“I can do an entire wedding on trade, and we’ve done many of them,” Radovich said. “Everything from the rings to the cake to the honeymoon.”
Atlantic, with about half of their nearly 1,000 customers residing in Delaware, charges a one-time membership fee of $495 in cash and 100 trade dollars, a yearly renewal fee of $50 cash and 10 trade dollars, and a 12.5 percent fee on purchases only.
Members are invited to a holiday trade show with $500,000 worth of merchandise available for trade.
Matt Hepworth, who owns the IMS franchise that covers Delaware, said 93 percent of his current clients do $10,000 in trade sales and $10,000 in purchases each year – from small appliances to fishing trips to Alaska.
Hepworth said having a national exchange eliminates one of the biggest problems in the barter industry – price puffing. If one client posts inflated prices, clients ready to buy can check what others are charging in the region.
He said barter doesn’t just save money for users; it gets their name out to other business owners for B-to-B sales. “We’re going to be a salesperson for your company and bring you business that you never had and you’re going to use that revenue to replace your printing costs or your attorney costs or use it to go out to dinner with your wife,” Hepworth said.
IMS, with 168 members in Delaware and thousands more through a national network, usually charges a $595 joiner fee, but Hepworth, as a new franchise owner, has waived the fee temporarily. Clients pay a 6 percent fee when they buy and when they sell, and they also pay $12 in cash and 12 trade dollars each month.
Barter companies are looking for clients who will use their trade dollars to keep the merchandise churning.
Radovich says she has some clients who let their trade dollars sit until she has to remind them they aren’t accruing interest, and she has others who all her three, four, five times a day to see whether she has what
“One of our little slogans is “˜build bartering into your business plan’,” she said. “Trade is great. I think once a business owner gets involved with us and they make their first sale, and, more importantly, their first purchase, the advantage becomes clear.”
IMS’ Hepworth hopes all his clients think “barter” before they buy paper clips or call a plumber. To make certain they do, he hands out stickers to put on office phones: “Be smarter. Use barter.”
Not everyone who barters joins an exchange. Craigslist is dotted with ads from Delawareans.
Ed Quinn, a retired heavy equipment operator from Middletown, is one.
“I had an old generator I got at a yard sale for $25, and I put it on the internet,” Quinn said. “A guy over in Newport called. I went over to see what he had. It was a 12-foot-long enclosed trailer. He wanted the generator. I gave him the generator, which I paid $25 for, and I got the trailer, which I sold for $1,000.”