Bartering: What is it and how can your business use it?
How trading services could help your cash flow and utilise excess inventory
There are many preconceptions about corporate bartering – they often involve images of dodgy dealers who are out to make a fast buck at your expense. But the reality is quite different.
What is bartering? Corporate bartering is a simple concept. If you are a printer, for example, and you are not getting enough work to use your presses five days per week, you are losing money. So instead of wasting capacity you can use a business exchange scheme to offer your service to other members who have something that you need.
For example, if a mechanic needs to get some literature printed, he could trade so many man hours of his time for your printing capacity. This allows him to get his leaflets printed and you to get your car fixed. In effect both businesses are able to selling on excess capacity instead of losing money. Anything can be bartered, from hairdressing to taxi rides to computer chips.
In this way companies build up an account, just like a bank account, with so many ‘trade’ pounds that can be exchanged for goods and services. It is not intended to replace cash business, but to create more opportunities for trade.
What’s in it for me? One major advantage for small businesses is the opportunity to utilise excess inventory or spare capacity. From under-utilised manufacturing facilities to surplus goods, bartering gives you the chance to convert previously tied up capital into an expense item.
Another key benefit for a startup business is the ability to overcome cash flow problems. When you first start your business and you need to spend money on stationery, office furniture or a vehicle, it can be a considerable outgoing when money is not yet coming in. But if you trade your offering, you can keep cash outlay to a minimum.
“It helped me enormously,” says Mike Moss, who owns his own air-conditioning company, Controlled Air, in Hampshire. “When I first started the company I used Bartercard trade pounds to have my signs printed up, buy stationery and have some graphic design done. It meant I didn’t have a cash flow problem because I found everything I needed on barter.” Since starting up in May 2001, Moss estimates that he has generated the equivalent of £30,000 of work through Bartercard, and even turned work down.
In addition to helping startups with cashflow, membership of a business exchange or bartering community means access to a ready-made pool of potential customers. The barter company takes some commission on each sale and/or purchase that covers its fee for actively marketing your company to its member base.
Steve Wall, owner of Bold Sound and Light, a themed event specialist, has generated the equivalent of an extra £10,000 in business in 2001 alone, thanks to the bartering system. In return he has spent 4,000 trade pounds installing security, such as cameras, in his premises, as well as adding neon signs. “I paid £750 to join and I’ve been using Bartercard for three years. It really helps to generate more business, makes cash flow management easier and gives me access to lots of networking events.”
The networking events take the form of Ferrari racing days, golf tournaments and dinner dances. They provide an opportunity to mix with potential customers and source cost-effective suppliers.
Most exchanges will print a directory of member companies that you can search, or will have an online search facility. Because companies are checked by the barter company and recommended by other members there is minimal risk involved.