Barter Club Entrepreneur The Buzz


Think cash and plastic are the only methods of payment you can use to obtain your wants and needs? Think again. These days, everything from accountants to zippers to office workstations are changing hands through the use of barter clubs.

Bartering refers to the practice of exchanging goods without using money. The entire concept predates recorded history. But commercial barter in its modern form emerged in the 1960s and has experienced steady growth ever since.

Modern trade exchanges have turned bartering into a sophisticated, computer-controlled business practice. It generates new business, conserves cash, provides alternative financing and increases word-of-mouth promotion.

According to Active International, a New York-based barter company, the commercial barter industry today is an $8.5-billion per year business in North America alone. Of that, corporate barter comprises $7.2 billion. The barter exchanges (retail- and consumer-oriented trading groups) make up the rest.

Proof of Success

Active International is proof of the success of barter. Founded in 1984, the company has grown from a staff of five with annual sales of $2 million to an organization with over 450 employees and a gross trading volume of nearly $1 billion. It boasts a growth rate of over 70 percent a year.

Bartering works when businesses trade their goods and services with other members of a barter club. That transforms excess inventory into trade dollars that can be used for anything from computers to printing to medical services for employees.

If a business is looking for goods or services not available through other members, the barter club will seek out alternative sources on the business's behalf.

The process becomes profitable for a business only when it involves excess inventory or plant capacity. But an added value for businesses is increased exposure and networking opportunities. That, in turn, frequently leads to more cash business.

According to the International Reciprocal Trade Association, eight out of ten corporation use some form of bartering.

As a barter club entrepreneur, your "cut" comes from the difference between what you pay to provide the recipient with the goods and what you get for the product.

Part of your job also includes sitting down with business owners to help them assess whether they have the capacity to handle the business they will get through barter -- without disturbing their cash flow.

New Yet Old

Though barter in its modern form is a relatively new industry, the method is tied to old-time business traditions. Much of the barter industry grew around the media business, where there was always extra radio or television time to swap.

A large portion of the barter market's growth is derived from international markets, where emerging economies hve gluts of many goods and services as well as strong demand for others. In the developing world, every business has something to swap in exchange for something it desperately needs.

It's estimated that 3,000 companies in the U.S., Canada and Mexico participate in barter.

Barter is, by nature, an entrepreneurial venture. It relies heavily on motivated individuals to make the transactions happen.

In order to succeed as a barter club entrepreneur, you and your staff will need a good mix of financial, merchandizing and media-related experience.

Because you will be working closely with companies that need local or regional marketing responsiveness, you'll need the skills to perform large transactions -- often under pressure -- with precision and timeliness.

The Canadian Barter System represents a variety of businesses. "We deal with anything and everything," says Dale Luciow, a partner with Canadian Barter System. "Businesses look at us like a bank of sorts."

For a yearly membership fee, businesses benefit from information packages, promotions, trade shows and meetings. Luciow says the market for barter clubs is still expanding. "I view the barter system as the business of the future. There is an unlimited market."

Because there are barter companies located throughout North America, the first step in your entrepreneurial venture will be to investigate those other companies to see how they work. Find out what fees they're charging and what their membership base is like.

Barter clubs, based on an age-old concept that fits perfectly in the '90s business arena, represent a growing, international industry that will provide a great business opportunity for the right person.

Links

Trade Exchange of America
This site includes information on how the barter business functions

The Barter Company
Helps companies barter excess inventory

Barter Business Exchange, Inc.
A full-service barter company