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Tricks Of The Trade

Cash for goods? Cash for services? You're throwing too much cash around. Listen up.

In the past three years, Jerry Kelly, owner of All Engagements Photo/Video/DJ, has obtained new equipment for his business, taken his family on a cruise to Mexico, had repairs made to his home, and entertained friends and business associates--all without paying a cent. How does he do it? The Irvine, California, entrepreneur is among a growing number of small-business owners who have joined barter exchange networks.

For a modest fee--in Kelly's case, 10 percent of the value of goods and services acquired through the barter club--members are eligible to trade their services for everything from auto repairs to accounting services.

"Barter clubs are a great way to hook up with other business owners to trade goods and services you need to run your business effectively but can't necessarily afford," says Kelly, 38, who is now a member of three barter clubs. "I recently provided disc jockey music and wireless microphones for a hotel hosting a murder mystery event. I used the trade credits I acquired to pay for the large quantity of printing and Xeroxing my business requires--[and I took] my family out to dinner."

Although barter exchanges started as a financial strategy for companies short on cash and long on inventory, the industry has blossomed into a way for savvy individuals to swap professional services and retail goods. The International Reciprocal Trade Association (IRTA) estimates the value of goods and services bartered in North America has jumped from $895 million in 1974 to more than $9 billion in 1996.

"In the past decade, people have started to realize how easy and cost-effective it is to barter," says Ray Bastarache, president and CEO of Milford, Connecticut-based Barter Network Inc., one of 600-plus barter exchange clubs the IRTA estimates operate worldwide. "It doesn't take a lot of extra time to participate, because the exchange keeps track of each member's transactions and trade credits in an account similar to a bank account for cash."

Here's how barter networks operate: Purchases are made in "trade credits," which have a cash value of one dollar per credit and are earned through making sales to other exchange members. (All items are priced at retail value.) While you don't accumulate interest on your account, neither do you have to pay any interest on your line of credit dollars. In effect, bartering can function as a no-interest loan you can use to purchase everything from business supplies to real estate.

The range of goods and services offered by barter exchanges runs the gamut from professional services--such as legal and accounting services--to big-ticket items, such as jewelry, appliances and vacations. Steven White, president and CEO of Inc. in Seattle, went on a ski trip where he bartered for his clothes, equipment, lodging, lift tickets and more.

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This article was originally published in the December 1999 print edition of Entrepreneur with the headline: Tricks Of The Trade.

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