Ingenious Barter Arrangement Can Cement Strategic Tie With Valued Clients Or Suppliers

By Bob Meyer

Do you receive a �reward� or some form of compensation when you buy from your suppliers? Probably not. But here�s an example of what�s being done in some sectors of the marketplace. (And this technique doesn�t have to be limited to super huge deals.)

Sun Microsystems had worked out a barter agreement with Ancor Communications, a supplier of Internet storage switches. Ancor says the equity relationship was designed to cement a strategic tie and generate $100 million in additional sales, in return Sun would receive up to 1.5 million warrants.

Here�s how the deal was structured. For every $67 in purchase revenue Ancor received from Sun, one warrant share (exercisable at $7.30) was vested. To be vested for the full 1.5 million shares, Sun had to buy $100 million in switches from Ancor.

Under this relationship both companies benefited. Sun received an ownership stake in Ancor and earned a nice paper gain on the warrants, and Anchor boosted sales as a result of the deal plus realized an appreciable gain in the price of their stock.

(When the agreement was announced Ancor was selling at $10-1/4. The stock price hit a high of $38-1/2 and Ancor was able to sell a follow-up offering of 2.5 million shares at $27, far more than they could have done without the Sun deal.)

Here�s How To Use The Same Strategy In Your Business

Of course, if you�re not a public company, the use of stock options is out of the question. So develop some strategic relationships with critical suppliers. Consider another form of incentive such as supplying them with your company�s scrip (gift certificates) for your products or services.

If that�s not feasible, then look at structuring one through your trade exchange, to accomplish your goal. This strategy is easy because of its simplicity.

Begin by offering your supplier a set amount of �purchasing power per sale� in the form of trade dollars. Then open up a sub-account in the supplier�s name, and deposit trade dollars at various intervals into that account for your supplier. They can access the account at any time to use the trade dollars for whatever purchases they desire through the exchange�s network. (Contact your barter company for details on a sub-account.)

How A Successful Family-Owned Restaurant Chain Creates Strategic Ties With Their Valued Customers

An extremely successful family-owned restaurant chain is Lawry�s Restaurant. (Some customers refer to the company as Lawry�s Prime Rib.) They�ve been around for eight decades with locations in Beverly Hills, Chicago, Dallas and Las Vegas. Overseas sites include Singapore, Taipei, Tokyo and, soon, Hong Kong.

They also own Five Crowns in Orange Country (CA) and the Tam O�Shanter Inn in Los Angeles.

In addition to their longevity they�ve been creative. Back in 1938, Lawry�s became the first company to introduce valet parking at restaurants, and they�re also credited with being the first to offer the �doggie bag.�

At www.lawrysonline.com you can see how the company cements strategic ties with their valued customers through their VIP Rewards�a reward points system.

One point is earned for every $1 spent at any of their restaurants. When a total of 250 points is reached the customer receives a $25 gift certificate, which can be used at any of their establishments.

Lawry�s also uses its VIP Rewards program to drive traffic to their locations when more business is desired, by offering double points during early dinner hours. Double points are also earned when dining on Monday�s, the slowest day of the week for the restaurant chain.

Facebook Structures Barter Deal With Interpublic Group To Drive Ad Revenue In Win-Win Arrangement

How much is friendship worth? That�s an open-ended question, certainly. However, to the likes of social networking sites like MySpace and Facebook, the figures these days are truly staggering.

And for Facebook, according to some analysts, the company is approaching a possible $2 billion valuation, after capitalizing the numbers on their recent transaction with the Interpublic Group an ad agency, marketing and public relations firm.

Facebook, which focuses on the college crowd (with 8 million registered members listing their favorite bands, books and hobbies, on the site), has just traded one-half of 1% of its equity stake to the Interpublic Group for a commitment by IPG to place $10 million in advertising on its web site.

The Facebook barter agreement, in essence, says, �Generate $10 million in ad revenue for us and we�ll provide you with equity in our company.� Plus the link up with IPG should further Facebook�s development of an ad model.

The partnership is also a brilliant move for IPG, for not only do they obtain an equity position in a hot social networking site (the second most popular and one of the top ten most trafficked sites on the Net), but they will receive preferential access to prime ad space on Facebook. And, IPG also acquired the exclusive access to Facebook�s user data for research purposes.

Mark Zuckerberg, the former Harvard college student who started Facebook in February 2004, is grinning from ear to ear. According to Business Week, he reportedly turned down an offer of $750 million for Facebook prior to this arrangement.