Save Some Hard-earned Cash By Bartering

Sun Herald

Sunday April 27, 2003

In this special six-page Your Business feature, Investor shows how you can operate more profitably.

BARTERING is booming, with hundreds of small businesses signing up each month to exchange goods with fellow businesses instead of using vital cash flow.

About 35,000 businesses are part of barter schemes with monthly transactions reaching $50 million.

Cathie Perkins of women's boutique Clozart in Seaforth , a member of Bartercard for almost a year, has bought $200 worth of meat from a local butcher, had the carpets in her home cleaned, and paid for business cards to be printed without using currency.

In return, a number of customers have come into her shop who would not ordinarily have done business with her. And when they come, she says, they spend big. Her customers are not the people from whom she has bought products.

Bartercard, the largest barter company, claims 20,000 members in Australia and 40,000 worldwide.

The other major player is Barter Business Exchange (BBX), which, following its recent merger with Tradebanc Exchange, has 11,000 members with a total turnover of about $120 million a year. Together it is estimated these two firms have about 90 per cent of the market.

Michael Touma , founder and managing director of BBX, said reciprocal trading gave a business the opportunity to increase sales and generate additional profits.

``We expect most businesses to increase their turnover by 10 to 15 per cent in the year after they join BBX," Touma said.

The cost of joining a barter scheme can vary, but is about $500 initially, plus a monthly administration fee and a percentage in cash paid on each transaction. At BBX, for instance, you pay $695 upfront, then $20 cash and $20 in BBX dollars a month and 11 per cent per trade.

Perkins says bartering works best for people in the services business.

``People providing services are providing their time, so they can factor in extra business much more easily," she said.

``But if you have a retail business like mine, it's important that you don't sell more than 20 per cent of your stock through barter.

``I heard of a butcher on the northern beaches who sold the bulk of his meat through barter and then went bankrupt when he couldn't pay his suppliers."

Touma agreed, saying that in most cases you should trade no more than 10 to 15 per cent of your stock through barter.

Your barter trade should be supplementary to your existing cash business. The net effect is that, while your cash expenditure is reduced, your cash income is not. As a result, you earn more profit.

HOW IT WORKS

1 You sell $1000 worth of your product to a fellow barter trader.

2 That $1000 in produce had cost you $400 to buy from the wholesaler or to make yourself.

3 You get 1000 barter dollars.

4 You can then buy yourself $1000 worth of goods or services from the other members of the barter scheme.

5 So what you buy with those 1000 barter dollars has cost you only $400 and you have saved $600.