Barter Up: Where to Take a Swing at Cashless Trading
Signing up with a formal exchange finds partners who'll pay up
If you're low on cash and up for new business, bartering for goods and
services can be a shrewd business move. But how do you go about it? A first
step is to join a trade exchange, an organization that introduces barter-friendly
businesses and allows them to trade using "barter dollars"--the currency
of trade exchanges. Historically, exchanges have been geographically based
for the most part, hooking up buyers and sellers locally. But the Internet
is expanding the reach of the exchange, and now businesses can barter across
the country or around the world. "The Internet is a tool that will create
more trading, and eliminate geographic barriers," says Robin Maini, executive
director of the International Reciprocal Trade Association.
Most off-line exchanges charge an annual fee of anywhere from $200 to
$700. Higher fees should indicate greater spending on marketing efforts
to alert members to what's on the block. Other fees normally include a
monthly account maintenance charge of $10 to $20 and cash commissions to
the exchange (usually split between the buyer and the seller) of about
10 to 12 percent of a transaction.
To find one of the 500 trade exchanges in North America, check with
two industry associations: the National Association of Trade Exchanges
(www.nate.org) and International Reciprocal Trade Association (www.irta.net).
You can also look in the yellow pages under "trade exchange" or "barter
Two exchanges have recently migrated to the Web: Los Angeles-based
Lassopower (www.lassopower.com) and Seattle-based Ubarter (www.ubarter.com).
More exchanges would be on the Web if it weren't for the authentication
challenge -- making sure trading parties are legitimate. With traders potentially
spread around the world, it's difficult to verify that sellers actually
have the goods and that their merchandise is in the shape it's supposed
Timothy Fong, founder and CEO of Lassopower, says he has an answer.
Lassopower.com, which opened for trading in April, has about 600 members
and does about 400 on-line trades per month, generating $10,000 in monthly
To reduce the potential for fraud, businesses that join Lassopower.com
become part of "trading circles," communities within the exchange formed
by companies that have experience bartering with one another. Sally Ju,
a Los Angeles-based graphic designer, belongs to a community that also
includes a lawyer, a restaurant, an accountant, and a computer technician.
"Everyone has some sort of link to each other -- they're all friends of
friends." The size of these circles range from a six-pack of trading buddies
to trade association and chamber of commerce communities. The idea is that
when people have some connection, they're less likely to try to pull a
fast one, says Fong.
But as in any sales situation, don't enter a deal blindly. Do a credit
check. Though most exchange members are small businesses --many too small
to have a Dun and Bradstreet credit rating -- Lassopower asks members for
a credit card number to at least determine that they are credit-worthy.
At Ubarter.com, members help police barter deals by participating in
on-line discussion forums. Members are reviewed and rated as trading partners.
Any trading nightmares are revealed here.
An on-line barter transaction is a fairly simple process. At Ubarter.com,
a business registers at the site and then posts an item for sale -- complete
with description of goods, units available, and price. Next, an interested
party clicks to indicate that he or she would like to buy. An email goes
out to the seller and Ubarter. (If the customer doesn't have enough barter
credits available, the purchase offer doesn't go through.) When a purchase
offer is accepted, the seller sends both Ubarter and the customer an e-mail
confirming the sale. It's that easy.
Yet, despite the promise of the Internet, online trading is still in
its infancy; the vast majority of trades are currently executed off-line
in local exchanges. "It's a community thing," says Tom McDowell, executive
director of the National Association of Trade Exchanges. "People want to
see, feel, and touch what they're buying."
Robert Benson, business manager at Ubarter, sees things a bit differently
saying that only some trading partners, like landscapers and cleaning services,
have to be local. Those dealing in commodity goods and technology-based
services like web design need not be constrained by geography and can pay
more attention to price.
But regardless of whether you're looking for an exchange on- or off-line,
local or national, selecting a barter firm that's well run is really what
you're after. Some guidelines:
- Look at the numbers. Your barter dollars are only as good as the
exchange itself, so figure out whether it will be around for a while. "We
encourage people to check with the Better Business Bureau, and to pull
a Dun & Bradstreet [credit report] on us," says Debbie Lombardi, president
of Barter Business Unlimited, Inc., a 2,000-member exchange in Farmington,
- Check out your new trading buddies. Do they have products or services that
you can use in your business? Say you're a printer -- can you get ink or
paper through the exchange? "When you can eliminate cash expenses for [barter
dollars], it makes sense," says Kurt Kluznik, president of Yardmaster Inc.,
a Cleveland, OH-based landscape architecture firm. Yardmaster trades about
$10,000 in goods and services each month through the American Trade Exchange
- Find out how the exchange promotes what's on sale. After all, if
no one knows what you're selling, how can you unload it? Many exchanges
broadcast faxes each week and send out monthly newsletters highlighting
their members' wares. Others list sale items on web sites. Some even have
regular networking events for members.
- Ask how the exchange deals with businesses that play dirty. Many
offending companies like to jack up prices, figuring they can get away
with price gouging in the non-cash market. If this behavior goes unchecked,
the cost of doing business on the exchange is grossly inflated. So be sure
that your exchange provides references or at least access to companies
that have traded with your new barter buddies before you start forking
over your hard-won trade dollars (And just to be on the safe side, get
several bids inside and outside the exchange to see whether prices in your
trading community are competitive). If one of your new trading pals turns
out to be a louse, the exchange should remove the unscrupulous vendor.
"Most exchanges have a 'three strikes and you're out' policy," says the
National Association of Trade Exchanges' McDowell.
- Be sure the exchange is on the level. The last thing a cash-starved
company needs is to join a trade group bent on converting its members'
hard-currency customers into barter customers, says Lombardi of Barter
Business Unlimited, Inc. And what will surly undo the benefits of barter
is a trade exchange that plays fast and loose with its credit. Yardmaster's
Kluznik, for example, left an exchange that allowed members to make purchases
before they had enough barter credits to cover the deal. The problem? Inflation
-- too many barter credits, and not enough goods to meet demand.
- Talk with members. Ask them how long they have been in the exchange, how
active they are, and are they satisfied with the exchange. If your trading
buddies are satisfied with the exchange, chances are you will be, too.
By Karen M. Kroll
TABLE: Ten Barter Industry Leaders