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01/04/2016

Bartering Comes To Life In Business

By James Harvey Stout, Former Writer For BarterNews

Bartering offers various benefits for businesspeople. Those benefits are explored in later chapters.

  1. It allows us to pay for many expenses without spending cash. We will see how we can barter for specific needs, e.g., advertising and employee benefits.
  2. It attracts customers who do not have cash (or would hesitate to spend it) but who can give us something which we can use: goods or services or barter-club units. Store owners -- who might not have a spare nickel -- finds that bartering makes each item on their shelves as good as gold, because they can barter them away in a tight-money economy. After all, money is a lousy lubricant within an economy: it can run short in the midst of plentiful goods (i.e., shelves and warehouses full of goods), and in the center of eager, would-be workers (who cannot find a moneyed employer). Our money system is worse than a failure; it is a liar, because it makes paupers out of inventory-rich businesspeople, and it makes lazy losers out of empty-scheduled people who want to supply services.

Barter is popular among big businesses.

  1. Bartering has been done by many corporations, including Xerox, Shell Oil, Hilton, Ramada Inns, Chrysler, National Semiconductor, Pan Am, Continental Air Lines, General Motors, General Electric, Remington Rand, Union Carbide, Westinghouse, McDonnell Douglas, Pepsico, Dow Chemical.
  2. "Sixty percent of all companies on the New York Stock Exchange who manufacture consumer goods use barter." (Moreton Binn, president of Atwood Richards, quoted for the first edition of this book, in the early 1980s)
  3. Ten billion dollars in corporate deals were bartered in 1980.
  4. "At least one-half of all the large companies in America have set up a barter division within their own company to help them move merchandise more effectively," said M.J. McConnell, president of Business Exchange, in 1982.
  5. Many deals are handled by professional barter brokers, such as Robert J. Murley, president of Full Circle Marketing Corporation, who described some of the trades which he has managed:
    • M.J.M. owns a restaurant, a motel, apartment houses, a ranch, a farm, hundreds of acres of land and a multi-million dollar business -- all of which were acquired within a few years by barter.
    • D.G. owns a dozen different publications, a large pharmaceutical firm, a large mail order firm, two printing plants, and several other multi-million dollar businesses. All were secured through barter.
    • M.B. acquired five of the world's largest cruise ships. The entire company, which now grosses $6 million per year, was originally built through barter.
  6. Bartering allows small companies to trade with large corporations. Some members of barter clubs are using the clubs to band themselves together so that they have enough assets to catch the attention of large companies; then those large companies can pass along some of their surplus inventories through the clubs. For example, Xerox joined a barter club (Barter Systems) to sell $2 million worth of difficult-to-sell equipment; Xerox had tried to barter the copiers on its own, but then found that Barter Systems could do the job more effectively to get goods and services in return.

Barter is popular in international commerce.

  1. In the early 1980s, experts were estimating that 40 percent of all international trade was being done on a barter basis. General Motor has its own Motors Trading Corp., a subsidiary which negotiates countertrades in foreign countries and then markets the received goods, such as metals, machine tools, agricultural products, etc. General Electric and Sears also have their own trading companies.
  2. It avoids the problems of currency exchange. M.J. McConnell, president of Business Exchange, says, "Countries are bartering as a routine way of doing business today because of currency problems. The dollar used to mean something in world currency markets, but it's become less valuable. So have other currencies. The trend is for countries to accept goods and products instead of money in international trades." (Passages. September, 1978. 'Bartering: A Bird in Hand ... Is Just the Beginning," by Arthur Garcia.)
  3. It can be used for many goods. U.S. companies have traded rice, tobacco, rye, cotton, wheat, barley, corn, and grain sorghums for materials like aluminum, tin, asbestos, bauxite, magnesium, and oil from other countries. One of the most frequently bartered items is oil; for example, Iran has traded its oil for aircraft (including U.S. F-16 fighters while the Shah was still in power), other military equipment, entire industrial products -- and the construction of a $2.1 billion naval base at Chah Bahar.

There are many ways in which we can profit from bartering. In other chapters, this book explains how to set up our own trades, or start a barter club. We can also consider these possibilities for profiting from barter:

  1. Specialization. For example, some real-estate brokers specialize in real-estate trades.
  2. Employment with a barter club. Barter clubs need people who are skilled in management, sales, public relations, secretarial work, etc. A salesperson might earn 50 percent commission on the membership fee of each new member; at some clubs, the membership fee is about $300. At one barter club, the management positions included General Manager, Franchise Director, National Sales Manager, Corporate Manager, and Vice President (Marketing).
  3. Consulting.
    • A consultant for new barter clubs. If we have had experience in operating a barter club, we can explain the process to people who are starting their own club.
    • A consultant for people who want to barter. Some people don't know how to do it; we can explain the ideas from this book and from our experience.
    • A consultant for businesses. In 1982, Robert C. Newman was charging $1,500 for a one-day, one-time consultation. When the actual exchange took place, he would charge a fee equaling the value of 15 percent of the bartered goods or services. Newman said, "In addition to showing you how to increase your sales, we'll show you how to operate your expanding business at a fraction of your current costs. We'll show you how to buy advertising in national and regional media (television, radio, and publications) at little or no cost. Buy printing, art, office supplies, transportation, medical and legal services, employee benefits, and whatever your particular business requirements demand, again at little or no cost. Personal requirements including vacations, cruises, dining in the finest restaurants, entertainment, etc., are also satisfied by the same means. Build your personal estate and enhance your investment program in real estate, business, precious stones, precious metals, etc. Reduce your accounts payable and personal debt. Reduce your unwanted or excess inventory by bartering them at full value -- or more. We'll help you pyramid your corporate and personal wealth and reduce your debt to little or nil -- and you'll vastly improve your standard of living in the process."
  4. Public speaking. As an expert on bartering, we can sell our knowledge through seminars, after-dinner speeches, workshops, or college classes.
  5. Multiple memberships. If we join two or more clubs, we will have to pay for the extra initiation fees and yearly dues. But we can use the multiple memberships for a profit; we would stay alert for any shortages or needs within one club or another. For example, if Jack needs some tires for his tractor and he can't get them from Club A, we would use our units from Club B to buy them from a Club B member; then we would sell them to Jack for his Club A units (and we would charge a commission).
  6. Brokering. As a broker, we would set up one-to-one deals between other people or other companies. For example, a hotel owner might call us to trade some rooms for advertising; we would contact a newspaper or radio station which could use the rooms for its out-of-town visitors. Then we would set up the trade, and take a 15% commission from both parties. One broker offers this option: instead of receiving a 15% commission in cash, he will accept a 30% commission in the company's goods or services, with which he can set up his own deals; for example, instead of taking $1,500 in cash, he would take $3,000 worth of hotel rooms.
  7. General contracting. As a general contractor, we would create a large project, and then find individual contractors who would perform aspects of the job; we would be paid in cash, but we would pay our contractors by bartering (plus cash to cover their cash-only expenses). This type of contracting is possible in any project which requires more than one type of skill; for example, home-building, home-restoring, ad campaigns, and public events (such as a seminar series, an art or music festival, etc.).