Sweat Rewards

Bartering

Wanna trade? Bartering among corporate giants has been around for years, but small business is diving into the action in great numbers-creating a booming opportunity for the entrepreneurs who broker their deals.

In recent years, bartering among companies has grown by 15 percent annually, translating into more than $9 billion in sales in North America for 2001. And the International Reciprocal Trade Association expects the industry to grow by more than 300 percent by the time the decade closes, increasing from roughly 300,000 participating companies today to 1.2 million.

Bartering is a good business in good times, and a great business in bad. "Bartering always booms in times of recession," says Debbie Arcabascio, a bartering consultant in Lafayette, Colorado. People barter when they're trying to hold on to their cash, she says. Indeed, in 1990, smack in the middle of a recession, bartering saw 13 percent growth over the previous year.

Informal barter between businesses happens all the time-for instance, a landscaper may do some free work for a dentist in exchange for a root canal. Barter exchanges formalize this system. Every time they provide free products or services to other members, barter exchange members earn points they can exchange for products or services from someone else later.

The buyer and seller determine the fair market value for each service or product-but that doesn't mean it's a cushy ride for you or your staff. You (or your brokers) are busy bringing in new members as well as collecting membership fees and commissions-usually 5 to 6 percent of the transaction amount. You also keep track of bartering purchases and provide your clients with Form 1099-B for tax record-keeping purposes. And you have to be quick to kick out the dishonest barterers and make sure your cheated barterers come out of bad transactions happy.

If you can manage all that, there's money to be made: Arcabascio used to run a bartering exchange that made $750,000 annually-and that was considered a small operation.

-Geoff Williams


What Do You Think?
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This article was originally published in the December 2001 print edition of Entrepreneur with the headline: Sweat Rewards.

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