“Evolving from one-to-one trades among businesses, bartering now mainly takes place through large exchanges in which businesses receive trade credits instead of cash that they can spend on a multitude of items from other firms. Even large corporations increasingly are using barter networks rather than handling excess products over to liquidators.” – Chicago Tribune.
Dan Vitalo has paid for an $8,800 heating and air-conditioning unit, a $6,200 brick patio, a $5,700 fence and most of his own wedding -- without spending any cash, swiping any cards or writing any checks. He did, however, crunch a few tax returns.
Vitalo’s Wilmington accounting firm, Vitalo & Associates, is one of about 1,200 businesses in the region that participate in a trade marketplace run by the Greenville firm Barter Network Inc.
Companies -- everything from restaurants to marketing firms to landscaping companies to auto-repair shops -- offer their goods and services at retail rates to others in the network; they spend the “trade dollars” they earn from the work at other businesses.
“You can probably get 90 percent of what you wanted to get done on barter,” Vitalo said.
Barter Network, or BNI, was founded in 1993 in Wilmington. Matt Hepworth, the 33-year-old president of BNI, joined the firm in 1998, fresh out of the University of Delaware. Last October, he and a silent investor bought the company from its founders.
The four-employee company is looking to hire another four sales workers to bolster BNI’s network of businesses. The firm also is preparing to change its name to Atlantic Barter Corp., which Hepworth said will better reflect its regional aspirations -- it has members in Delaware, Pennsylvania, New Jersey and Maryland.
Hepworth said BNI is part ad agency, part financial consultant and part concierge as it looks to promote and match up companies in a cashless marketplace.
“We’re more or less brokering their business trade dollars for them,” Hepworth said.
Companies pay an entry fee of $250 to $750 to join BNI, depending on the size of the business. New members have an initial trade fee of $100, meaning they agree to provide $100 worth of goods and services to other members. There’s a monthly administrative charge of $10 cash and $10 in trade. Finally, BNI charges a 12.5 percent cash commission on items purchased through barter.
But supporters of the barter system point to a number of benefits that help offset the costs. Hepworth said member companies get new customers from participating in the barter network, and they can tap into excess capacity -- an auto-repair shop with empty bays, or a hotel with unoccupied rooms, for example.
The system also helps companies preserve cash, a selling point for BNI’s mostly small companies.
“It’s a great way to market your business and not have to go into your cash account,” said Barrett Ersek, chief executive of HappyLawn, a Glen Mills, Pa.-based lawn-service company with eight offices from Virginia to New Jersey.
Ersek said HappyLawn has picked up new cash customers thanks to support from its barter customers. On the spending side, the company has used barter dollars to buy advertising and gifts and prizes for its employees.
When HappyLawn’s headquarters burned down a few months ago, Ersek said, the company was able to get up and running quickly by paying for office furniture and other items through barter, rather than waiting for money from its insurance company. HappyLawn also does collision work on its fleet of trucks through barter, helping keep its insurance rates low.
Contact Andrew Eder at 324-2789 or aeder@delawareonline.com.
BNI has partnerships with other barter exchanges across the country, but Hepworth and others say the key to the barter industry is a regional focus.
During the dot-com boom in the late 1990s, some venture capital-funded companies looked to marry the barter industry with the Internet in eBay-style auction sites. But those companies flopped because they ignored the importance of local customer service, said Ron Whitney, executive director of the barter industry group International Reciprocal Trade Association.
“If you’re living in Wilmington, you can’t get your hair cut in Nebraska and you can’t go to dinner in Nebraska,” Whitney said. “You want to go to dinner on Union Street.”
Whitney, a Wilmington native, was one of BNI’s founders who sold his interest in the company last year and moved on to the trade association. He said the shaky U.S. economy actually boosts the barter industry as businesses look to find new customers.
“Certainly, membership bases of barter exchanges increase during down times like this,” Whitney said.
Whitney said barter is about an $8 billion industry worldwide and about $2.5 billion to $3 billion in the United States. The transactions are taxable; BNI sends an IRS Form 1099-B to member companies listing their barter sales at the end of each year.
Hepworth would not disclose BNI’s annual sales, but he said the company facilitates 500 to 750 transactions each month, with an average trade value from $300 to $500.
Sam Waltz, owner of the marketing consulting firm Sam Waltz & Associates Counsel, said barter trades represent 5 percent to 10 percent of his company’s revenues. He said many small businesses, pinched for operating capital, like to pay for marketing with the “sweat equity” of a barter transaction.
Waltz said taking on new projects on barter generally doesn’t increase his company’s costs, and it tends to drum up more cash business.
“In case after case after case, it really generates incremental revenue,” Waltz said.
Besides, it’s easier to splurge when you’re paying with trade dollars rather than real ones, said Vitalo, the Wilmington accountant.
“I call it, I don’t want to say frivolous dollars,” he said, “but I wouldn’t spend $5,700 for a fence.”
Contact Andrew Eder at 324-2789 or
aeder@delawareonline.com
“Barter gives clients a competitive edge. Barter network members tend to shop within the system first, and satisfied barter customers make referrals to cash customers.” – Kiplinger’s.
“More and more women are bartering for everything from pet-sitting services to airline tickets. To get the most out of barter, you must have a talent or product that other people want. Services can make even better swaps than products because they’re a renewable source.” – Family Circle magazine.
“Barter exchanges help cash-strapped entrepreneurs stimulate sales, develop new clients, convert excess capacity or inventory into revenue, and acquire goods and services needed to conduct a business. The most important benefit of barter is cash conservation: keeping cash in the bank while using barter revenue to offset normal operating costs.” – Nation’s Restaurant News.
Small firms barter to keep costs down