A recently published
story in the Huffington Post under �Small Business, suggests
bartering as a way to save cash. The following is from that article.
Launching a business
demands a lot from you � especially the need for start-up cash, a
big hurdle for many entrepreneurs. But you can slow the drain on
your start-up budget by trading goods and services with other
businesses. There are over 400,000 companies dealing in $12 billion
worth of barter worldwide, according to the International Reciprocal
Trade Association (IRTA).
�Sometimes being
undercapitalized forces you to be more creative,� says Michael
Houlihan, a consultant to entrepreneurs. He used barter when he and
his partner, Bonnie Harvey, founded the winery Barefoot Cellars in a
laundry-room back in 1986. (They sold the company to E&J Gallo in
2005.) For one, they initially bartered for a printer�s work, then
later switched to paying in cash.
�In this way, bartering
is not only a good way to balance your books, but it also helps
build relationships with other businesses,� explains Houlihan.
�Trading with other businesses can show them your start-up can
deliver, so your partners can eventually become cash customers or
suppliers willing to give you credit.�
�You're more likely to
stay loyal with them because you established that relationship with
barter first,� notes Houlihan, author of upcoming book The
Barefoot Spirit: How Hardship, Hustle, and Heart Built a Bestselling
Wine.�
There are generally two
ways to do barter: one-on-one (think of an accountant trading tax
preparation with a contractor who will paint her office) or via
barter exchanges. The exchanges work as a clearinghouse where
participants trade their goods and services for credits they can
redeem for other members� goods and services. The IRTA, a trade
association for exchanges, keeps a member directory online.
Exchanges can be a
networking tool, as well. Houlihan points out, �We found the people
involved in barter exchanges were like us. Many were new and
starting out, too.�
Here are a few tips from
the experts, if you're thinking of bartering for your business:
Check the details.
Exchanges are useful if
you can�t find a one-on-one local partner, but the Better Business
Bureau recommends you read the fine print before you join a barter
network. Find out what administrative fees or charges are included.
The BBB has an explainer on its web-site with the basics on
bartering for small businesses.
The BBB also recommends
you evaluate what you need and see how it matches with what the
exchange has available. And if you�re doing one-on-one barter, make
sure it�s a business you trust.
Check the laws.
Houlihan says he�s not
sure that the barters with wine he did while launching Barefoot
Cellars in the �80s are even legal anymore. But he has a point: Keep
an eye out for laws and changing regulations. �You want to check
with your state laws to make sure you�re in compliance. You have to
remember it�s considered currency, as far as the tax people are
concerned.�
Check your records.
Uncle Sam considers
bartering to be a business transaction. You will have to account for
it in your taxes.
The Internal Revenue
Service has a Bartering Tax Center page, with information on the tax
issues around bartering for small businesses. It has explanations of
what forms you will need to file with your return, and what records
you should keep. And to make things simpler, the IRS also has a
video explaining the basics of bartering.
Is Your Trade Exchange Missing Out On
Valuable New Business?
If
your barter company�s listing on BarterNews.com isn�t current, you
are definitely missing out on new business. The web site
BarterNews.com receives heavy traffic � with over 150,000 page-views
every month. Entrepreneurs and corporate executives check the
thousands of articles, the weekly �Tuesday
Report,� and the �Contacts
Section� of our site. They use the latter to find barter
companies with which to do business.
Is
your barter company�s listing up-to-date?
To
keep your listing current is very easy. See the links below to (A)
update any changes to your company�s listing, such as new location,
phone number, web site or other information, and (B) if your company
has not been listed.
Here�s how to get on board:
To
make changes to your listing
click here.
For
new listings
click here.
A number of signs point
to an inconvenient truth for many businesses � traditional marketing
is on its way out. In place of this broken model, America�s most
innovative companies are implementing new, more authentic techniques
based on peer influence and community building. Bill Lee, the author
of The Hidden Wealth of Customers: Realizing the Untapped Value
of Your Most Important Asset, explains how you can join them.
Consider for a moment
the annoying, interruptive, often obnoxious nature of traditional
marketing. Dinnertime phone calls from strangers in noisy call
centers. Glossy pictures of the latest fashions worn by models that
barely look human. Crowded store shelves with head-spinning arrays
of options arranged in no discernable order (I just need some
toothpaste!). Company web-sites that give us no clue what the
business actually does. Hype. Spin. Pushy salespeople.
It�s hard to believe
these are the methods and tools of a profession designed to attract
and persuade us to become customers, according to Lee. Especially
when �we the buyers� increasingly ignore them.
�A number of studies are
showing that people no longer pay much attention to traditional
marketing, as they progress through the buyer�s decision journey,�
reports Lee. �Instead, buyers are checking out product and service
information in their own way, often through the Internet, their
social network, customer reviews or just plain word-of-mouth. It
seems clear that marketing, as we currently practice the discipline,
is on its way out.�
The inability of
traditional marketing to engage buyers hasn�t escaped the notice of
CEOs, the ones who approve company ad budgets. A pair of
wake-up-call studies, by the London-based Fournaise Marketing Group
in 2011 and 2012, found that more than 70% of CEOs believe their
chief marketing officers lack business credibility, lack the ability
to generate acceptable growth, and lack the ability to explain how
their programs will lead to increased business. Nearly four in five
CEOs complained that CMOs cannot explain how brand equity can be
linked to recognized financial measures, such as firm equity.
A bitter pill for
mainstream marketing executives, perhaps, but Lee claims you can
hardly blame the disgruntled CEOs when you consider the logic behind
traditional marketing in light of today�s world.
Think about it:
�Companies hire people who come from outside the buyer�s world, and
don�t necessarily share the same interests � employees, agencies,
consultants, and the like, expecting them to persuade buyers to hand
over their money,� Lee confirms. �Yeah, right! There is no respected
research on group behavior suggesting that such an approach is
conducive to influencing people to either take action or to change.�
Of course, not everyone
in the marketing world clings to worn-out methods. In fact, Lee
works with a pioneering group of forward-thinking marketing
executives who are successfully replacing this increasingly dated
model with something that customers actually welcome and respond to.
For those who�d like to join them, Lee offers the following advice:
1) Go retro.
Cultivate a local buying experience. It�s a myth that social
networks and their technologies are creating new approaches to
marketing. At their most effective, they�re doing the opposite �
allowing customers to re-create the experience of shopping and
buying in their local communities.
2) Think about it this
way. How do
buyers prefer to purchase a lawnmower, a haircut, a good dining
experience, a movie, a car, the services of a good assistant, or a
good doctor? Do they pick up the phone and call a salesperson or
read through a bunch of business web-sites? No, they�re much more
likely to talk to neighbors, friends, work colleagues, and others in
their peer networks and ask what they�ve used.
�Marc Benioff understood
this when he was building Salesforce.com to compete against much
bigger, entrenched competitors,� says Lee. �He was building a better
enterprise software product, and to get the word out he organized
City Tour events and neighborhood street teams. The City Tour events
would bring his customers together with prospects and a few other
interesting people for presentations and group discussion.
�Benioff found that
buyers were much less interested in hearing from him than they were
in talking to his customers � their peers, other software
programmers like themselves. When studing the numbers, he found that
80% of the prospects who attended such events wound up becoming
customers themselves � in effect, an 80% close rate.�
3) Cultivate customer
sales and marketing people.
Business spends billions of dollars training salespeople to build
relationships with prospects and customers. But no one has to spend
a dime training a customer to build a trusting relationship with
your prospects. Since they�re peers, they pretty much already have
one.
Microsoft builds on this
aspect of human nature when it penetrates new markets, usually in
foreign countries where they don�t speak the language or understand
the culture. In such cases, the firm will engage with local software
users � whom they call MVPs (most valuable professionals) � many of
which have built substantial followings of their own through
blogging and social networks.
�One is known as �Mr.
Excel� to his followers, and on some days his web-site gets more
visits than Microsoft�s own Excel page on its corporate web-site,�
Lee points out. �Many companies, when faced with the same situation,
threaten lawsuits. Microsoft embraced Mr. Excel. In fact, they
support his activities with �insider knowledge� and the opportunity
to get a sneak preview and to test new releases. In return, Mr.
Excel, and thousands of other Microsoft MVPs, wind up providing
invaluable input as the firm develops new releases. They also
produce its most effective marketing communications, as buyers
realize that it comes from a peer they know and trust.
�In such ways, the MVPs
are helping Microsoft penetrate and grow markets more effectively
and cost affordably than the corporation could do using traditional
marketing approaches staffed by hired outsiders,� he adds.
4) Build strong customer
communities.
Consider Harley-Davidson�s success in creating a sense of community
around its bikes. Three decades ago, the public associated Harleys
with gangs and outlaws, which turned off consumers. The company
worked hard to change its image � first by getting police
departments to start using their motorcycles, and then by working
assiduously to build a customer community of middle-class
(law-abiding) customers that morphed into today�s famous
million-person HOGs (Harley Owners Group). Today, Harley-Davidson
HOGs, far from being outlaws, position themselves as extended
family: the brothers (and now sisters) you never had.
It�s not just sexy
products like Harleys (and iPads) that can create large communities
of customers � which in turn attract large numbers of buyers. One of
the most successful customer communities is Procter & Gamble�s
BeingGirl. Interestingly enough, it consists of teenage girls and is
formed around feminine care products.
�The key to forming
customer communities is not to try to build them around your brand �
a common and obvious mistake marketing departments make,� affirms
Lee. �Rather, ask what your product or service means to the
customers. Or, what could it mean. P&G realized that its feminine
care products could symbolize the difficult, scary, exciting
transition that teenagers are making into becoming young women.�
5) Get customers
involved in the solution.
A few years ago when toy maker LEGO launched Mindstorms, its
robotics building-block kits, hackers almost immediately started
altering the code to allow the robots to do more. In circumstances
like this, most firms call their legal departments and start issuing
cease and desist demands. Indeed, faced with a similar response when
it issued a comparable line of toys, Sony did just that. But
according to Lee, LEGO took a smarter approach.
�Basically, LEGO
executives did the math. One thousand or so hackers � or more to the
point, enthused and technically advanced customers � were coming up
with robots that could do amazing things, which the seven internal
developers had never thought of. One of the hacker-created robots
could solve a Rubik�s cube. As the company (and their other
customers) realized the value the hackers were creating, LEGO
further embraced them. Now its customer community numbers in the
tens-of-thousands, and continues to develop amazing arrays of
robotic toys. Ones that are far beyond anything the company might
have developed on its own.�
Meanwhile, 3M and other
companies are systematizing customer-led innovation. Rather than
wait passively for customers to begin altering or hacking their
products, they�ve learned how to proactively pursue and find
customers, or users, who would be most likely to unearth
breakthrough innovations. MIT professor Eric von Hippel has coined
the term �lead users� to describe them, and works with 3M�s
healthcare business to develop a system for finding them. The result
was an eightfold improvement in revenues from innovations developed
with the help of such customers, versus innovations developed by
3M�s internally developed process.
�What makes this
particularly significant, of course, is that 3M�s product developers
are among the most innovative in the world,� says Lee.
6) Help customers build
social capital.
Why do customers engage so enthusiastically in helping companies
develop, market, and sell their products � in effect, growing their
businesses? While many pundits think you need an incredibly sexy
product, like an iAnything developed by a once-in-a-century genius
like Steve Jobs, that misses the point. All it takes is a business
that changes customers� lives for the better, which is something far
more replicable, even if you�re making feminine hygiene products.
What all these
companies, and others featured in Lee�s book, do is facilitate the
building of social capital by helping their customers affiliate with
their peers in customer communities. They thus build their own
status and reputation, and learn and grow in the process. Often,
they also include service to a larger purpose.
Enterprise
software-maker SAS Canada, according to Lee, addressed an unexpected
decline in its customer retention rates by engaging some of its
leading customers, termed Customer Champions, in an effort to
retain customers and bring the defectors back. �The Customer
Champions organized live forums in more than 20 major markets around
the country, presented and brought in local speakers, contributed to
an e-newsletter that SAS started, and more. The result was to
completely restore the firm�s retention rates to its previous high
levels.
�Why,� he queries, �did
the Customer Champions put forth such an effort? Because it gave
them a chance to affiliate more deeply with their peers � other
software managers and engineers � enabling them to play a leadership
role in their peer community. It gave them substantial status and
recognition, as well. Plus it increased their knowledge and
expertise by better understanding how to address the needs of other
SAS customers.�
If you think all of this
sounds more appealing than the old manipulate-them-into-buying
techniques, according to Lee, you�re not alone. �When companies
commit to depending on authentic customer advocacy to grow their
firms, it not only improves their marketing results, it also
improves their organizations. That�s because it�s hard to mask
substandard performance, and customer discontent, with your products
and services if they�re the ones you rely on to tell the world how
great you are.�
