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01/04/2016

Bartering Can Increase Our Sales Volume

By James Stout, Former Writer For BarterNews

Bartering helps us to sell more goods and services. It does this in various ways:

  1. It attracts customers. Whether we use a barter club or one-to-one deals, we might get these types of customers:
    • Customers who could not afford our goods or services if they had to pay cash.
    • Customers who could afford our goods or services, but they would rather barter, so they come to us instead of going to our competitors who do not barter.
  2. It allows us to do more advertising.
    • We can barter for advertising. In the segment  regarding "bartering for advertising," we see that we can acquire ads from many sources without cash.
    • With the money we save by bartering for our other needs, we can afford to pay advertisers who must be paid in cash. In the early 1980s, the Mattel toy company had $12 million worth of electronic games which were stagnating in its warehouses. When Mattel asked Deerfield Communications Corporation to take the games, Deerfield paid $5.5 million in cash plus $6.3 million in barter-units. Those units would be spent to advertise Mattel's other products.
  3. We can use the special programs which are offered by some barter clubs.
    • National or international territories. If we join a nationwide or worldwide barter club, we can receive orders from any city which has a franchise of that club. When members from those other cities visit our city, they will know about us because we are listed in the club's directory.
    • Affiliations. Usually, we can spend units only within our own club. But some clubs create affiliations with other clubs, so that we can spend our units in the businesses of those other clubs.
    • "Trade fairs." Some barter clubs conduct trade fairs, where members can exhibit their wares. Trade fairs are particularly popular among non-profit barter clubs.
  4. We can use barter brokers. These brokers will find the goods and services which we need -- and then either (1) arrange a one-to-one deal between us and another company, or (2) trade directly with us from their own inventory.

Many businesspeople say that bartering attracts customers.  

  1. The co-owner of a health club said, "We get people who probably wouldn't spend the money to join for cash. We've had some real big- ticket items -- memberships, pro shop purchases, and restaurant bills -- on barter." (Irvine World News. "This Orange County Resident Runs a Different Kind of Trade School.'' by Debbie Whistler.)
  2. Charles and Diana Marr got $5,000 worth of orthodontics for their son by earning units through Charles' appliance store and Diana's telephone-answering service. "We drove all the way from North Hollywood to Santa Monica to deal with the orthodontist," Ms. Marr said. "We wouldn't have driven that far normally, but he was a member. The same thing happens to us; you've got people outside your own community who'll do business with you." (Moneysworth, Feb. 14, 1977. "Work-Swap Firm Swings.")
  3. When Hanson Galleries, a wood-specialities store in Houston, was getting $1,000 worth of barter business each month, it opened a second store, using $12,000 worth of the club's units to pay for the office furnishings and supplies.
  4. In one of its ads, Business Exchange lists its "Century Club" members, who have had over $100,000 worth of trades. The list includes a jeweler, dentist, attorney, a tire store, a few clothing stores, and other businesses. Some of the Business Exchange members reported their successes:
    • "Thanks for the new profits. As we work on about a 40 percent margin, the $70,000 in new sales has meant $30,000 in new profits. We recommend it highly."
    • A towing service reported: "I notice that it has been just four years since we signed up with you people. And we just passed the $10,000 mark. That's a lot of extra income for any small business."
    • "Business Exchange helps fill vacancies," said Gamma News (the official publication of the California Apartment and Motel Management Association).
    • In the San Francisco Chronicle, a member said that his membership "has really helped me. I get business from people who never heard of me before, because they checked the [barter-club] directory ..."

We might attract too many customers who want to barter. Bartering will not pay for all of our expenses. If we know how much cash we need each month, we can set a limit on the amount of bartering so that we are still receiving enough cash. (Refer to the section regarding "controlling our balance of cash and barter" in the chapter regarding business expenses.)

  1. We can have a variable policy. Depending upon our cash situation at any moment, we might have to say: "Sorry, I'm low on cash right now, so I can't barter with you." We might be less willing to barter during our peak season, when we have plenty of cash-paying customers.
  2. We can set a limit based on a percentage of gross. Some experts say that we should limit our barter-income to about 10% to 15% of gross -- but this would depend on our ability to barter for the goods and services which we require (so that we don't need as much cash).
  3. We can set a limit based on the number of barter-club units. For example, we might decide that we do not want to have more than $1,000 worth of units in our account at any one time. When we reach that limit, we can refuse to make further sales to other members until we have spent enough of those units to reduce our account to less than $1,000.
  4. We can convert our excess units into cash.
    • We can sell some of the units to the club's management. Some clubs will not buy units from their members; others will buy them -- but at a reduced price (perhaps 70 cents on the dollar, which would still be profitable if we acquire our merchandise at less than 70 cents on the dollar, or if we provide a service rather than merchandise).
    • We can sell some of the units to other members. Again, we might have to sell them at a reduced price -- perhaps 70 cents on the dollar.
    • We can spend the units on goods and services which we can re-sell. For example, if a friend needs a new lawnmower, we would use our surplus units to buy it from a club member, and then we would sell it to our friend for cash.

Some barterers do not attract new customers. Some of the possible reasons:

  1. Problems with the barter club.
    • Not enough members. For example, if there are only 20 members, we might not have enough barter-income to justify the fixed expenses, e.g., our annual dues.
    • Too many other members who offer the same goods and services which we offer. Many clubs limit the number of members within any field, e.g., computer sales.
    • No publicity for the members. The club might not have a directory or any other easy way by which the other members can find us.
  2. Lack of negotiating skills. If we are conducting one-to-one deals, we need to know how to bargain.