When you hear the word “barter,” you may conjure up images of ancient primitive societies where the only means of exchanging goods and services was through direct trade. But now, barter represents an interesting business opportunity for modern entrepreneurs.
The most basic form of barter is when you make a direct trade of goods or services with another party. But today, there’s a more sophisticated way to do it that greatly expands your options: Join a barter club (some of which are very large and function on a national level) and turn your excess inventory into other things that you can use.
Right about now you might be thinking, “Barter might be OK for some people, but I want cold, hard cash for my valuable widgets/time.” Not a problem. With the right attitude and strategy, you can turn a barter exchange into direct cash flow.
Let me give you a real-life example from my own experience. Back a few years ago, I had a microbusiness where I produced my own television show and ran it on local cable for a profit. The basics of that kind of business are simple enough. I leased airtime from the cable company and produced, at my expense, a 30-minute program. In that case, it was an entertaining program that featured local people engaged in ballroom dancing. (You may remember that I used to be a dance instructor.) How did I make money on this?
By selling advertising spots to local businesses and airing their commercials during my show.
Although I was making a small profit, I was spending too much cash on production costs. Just to pay a professional video company to produce the show and the commercials was sucking up a lot of money. At that time, I was selling a small package of 30-second commercials to local businesses for $600. I got many takers — but not without expending a lot of my time and knocking myself out to bring in enough revenue to pay for the high production costs. And, frankly, I started to feel that the meager profits I was getting were barely worth the trouble.
Then, one day, a friend told me about an organization he belonged to. It was a group of businesspeople who exchanged goods and services with “barter dollars.” He gave me a sample of the kinds of businesses that belonged and I was amazed to see how many and varied they were.
But even more exciting to me was discovering that a professional video production company was amongst the members. That was my first important discovery. The second one was that after I joined (without paying any fees up front and getting an instant $750 barter-dollar credit line), I learned that other barter exchange members were much quicker to part with their barter dollars than with their cash.
It seems that barter dollars feel almost free to many people — sort of like going to a casino and playing with chips instead of physical money. When I started selling my television commercials to other barter members using barter dollars, I sold out my excess inventory with ease!
But, most importantly to me, I was able to use these barter dollars to pay for all kinds of goods and services — including my video production costs. I instantly added thousands of dollars to my bank account! In fact, I actually got my original production company to join the barter club — and, by doing that, I earned a commission of barter dollars.
Barter clubs have many different business and professional members. Here’s just a sampling of the products and services your microbusiness can take advantage of with barter dollars:
* accounting services
* legal services
* doctors and dentists
* party planners
* printing services
* computer and Web services
Let’s say you’re the owner of a restaurant. You could sell other barter club members certificates for $100 that they can use at your restaurant on weeknights when business is slow. If 18 people were to purchase a $100 certificate from you, your barter account would be credited with $1,800 in barter dollars that you could then perhaps use by paying $1,300 for some print work and another $500 for a Web designer.
For the above services, you’d normally pay $1,800 cash. But your actual cost would be just what it would cost you to produce $1,800 in meals at your restaurant — probably 25% of that $1,800. So you’ve basically traded $450 for $1,800!
One additional note: The IRS treats earned and spent barter dollars like regular dollars, so make sure you include your barter transactions when you do your taxes.
(Ed Note: Paul Lawrence is an entrepreneur and the creator of ETR’s exciting new “Microbusiness” program.)