Brian Scudamore, 29, doesn't mind when even his friends tell him he has a junky company. His business, 1-800-GOT-JUNK?, in Vancouver, British Columbia, hauls away what those who are moving leave behind--for a price.
All those truckloads of trash are adding up: Scudamore expects to do $1.8 million in sales this year. And $60,000 of that will be barter, the oldest form of doing business, but with a modern twist. Scudamore belongs to Barter Business Exchange, Canada's largest commercial barter organization, which acts as a clearinghouse for whatever members want. Instead of traditional barter, which requires each business to want what the other has, members use the exchange like a bank. They are paid with "trade dollars" deposited within the organization and can write checks for whatever they want on their own accounts.
"I've used barter credits to have my logo designed, get office supplies, buy computers and have them networked, and hold parties for the staff," says Scudamore. "Whenever I need to spend, I see if I can use barter first because if you do it right, it's just like cash."
But the advantages to barter extend far beyond a cash substitute: "You get business you might not otherwise have, because [members] come to you specifically because you're on the exchange," Scudamore explains.
The cost of joining a barter system is well worth it, say barter fans. Trade exchanges charge an annual cash fee to belong, typically $100 to $300, or a monthly charge of $10 to $20 (half cash), plus a 10 to 12 percent fee (in cash) per completed transaction, paid by the seller. Just keep in mind the IRS treats barter as regular income. When tax time comes, use Form 1099B to report your barter income.
In North America this year, about $1 billion in trade transactions will be generated through 500 retail trade exchanges that represent approximately 50,000 small and midsized businesses, says Robin Maini, executive director of the International Reciprocal Trade Association. In fact, the volume of barter is growing by more than 20 percent every year.
If barter's so great, why doesn't everyone do it? "Even otherwise intelligent people have a mental block," claims Maini. "They don't understand that barter saves cash and can fill excess capacity."
Last year, Tigre Entertainment Corp., a television and film production company in Fairfield, Connecticut, was caught in a cash squeeze as it was expanding when a seasonal slowdown hit. "Barter saved my business," contends owner and president Barry Greene, 33, a member of the International Trade Exchange of New York City. "I could even [pay for personal expenses like] groceries with trade dollars instead of taking a cash salary." Fortunately, Greene already had his employee benefits package funded with barter credits. He expects to spend more than $250,000 in the system this year.
Greene also knows barter attracts more business: "I use the exchange's Web site to reach its 150 offices, effectively making them an outside sales force to market to potential customers I probably would otherwise never reach."
Hit The Clubs
There are two associations through which you can find a local barter system. (Also check the Yellow Pages under "Barter.") The International Reciprocal Trade Association (http://www.irta.net, 312-461-0236) represents 130 organizations, including those with offices in multiple cities and countries. The National Association of Trade Exchanges (http://www.nate.org, 216-732-7171) has 80 member organizations with single-city offices in North America.
Before you join an exchange, read its rules carefully and survey half a dozen members you might want to use from its catalog to see how satisfied they are. No system is perfect, so expect some complaints about lack of available items or incoming trade. (Being aggressive in marketing your business to other members definitely makes a difference, barter enthusiasts note.) Be sure to ask:
- Do trade brokers put in an effort to make matches in a timely manner?
- How many members have notified the exchange they have taken in too much barter to accept any more at the moment? Make sure the businesses you're interested in aren't temporarily out of the system.
- What kinds of businesses are allowed to take in a percentage of a transaction in cash because of low profit margins?
- Does the system expel members who inflate prices for barter?
- How many competitors are near you?
- How often is the catalog published? Not everyone will notice a mention in a newsletter that you've joined.
Tigre Entertainment Corp., (203) 330-8800, http://www.tigretv.com