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CHAPTER 4

TRADING IN THE FAST LANE

If I had my life to live all over again, I would elect to be a trader of goods rather than a student of science. I think barter is a noble thing.

—Albert Einstein



If you want to speed up the whole barter-transaction dating dance (or avoid it entirely), you should enroll in a trade exchange. Commercial barter exchanges have been around in the United States since 1954 and are dedicated solely to making barter happen efficiently. See the Resources section for more listings of barter exchanges, or visit the Web sites of the International Reciprocal Trade Association (www.irta.com) and the National Association of Trade Exchanges (www.natebarter.com).

Barter exchanges are membership-based, for-profit companies that broker trades between a wide range of small, medium, and large businesses. While exchanges are primarily focused on serving companies, many welcome individuals with one caveat: They have to be able to trade a steady stream of goods or services or make a one-time trade that is lucrative enough to make up for the fees required with membership. If you have one item that you want to trade and don’t expect to barter any others for quite some time, a barter exchange isn’t right for you, with a couple of exceptions we discuss below. Every exchange charges monthly fees, and if you aren’t trading fairly frequently, the fee will make the membership too costly for you. In those cases, trading on free Web sites like U-Exchange and BarterQuest is a better choice than using a commercial exchange.

Now, having noted that you’ll need to have a steady stream of trades on an exchange, there can be exceptions to this rule. If you have an item that is worth big bucks, then it’s time to chat with an exchange broker or owner to see what you can work out. A piece of land, a vintage automobile, or high-end jewelry might be enough to earn you a short-term entry to an exchange. Some exchanges will sign up a member who has a seasonal or limited-availability item because it’s appealing to the members and helps the exchange owner provide a special treat that enhances the value of the exchange to the members.

During the summer, Maurya Lane, owner of Barter Business Exchange in Cary, North Carolina, allows an area farmer to offer his blueberries to her members. The farmer pays the exchange’s monthly fee during the period in which he participates, which makes being a member affordable for him. The lesson here is that if you’ve got a hot item or one in limited supply, ask the exchange owner or the broker for a break on the monthly fee. You’ll have more luck with this strategy if the exchange is locally owned rather than one of the large national chains, such as ITEX. National exchanges may allow for individual traders, and it never hurts to ask. The best time to do this is a month before you anticipate that people will want your product or service if there is any seasonality to it. You might have several cords of firewood ready to go right before summer, but hardly anyone is going to be interested in burning a fire just ahead of the hottest time of the year. But by early September, you’ll be in a much better position to negotiate a limited-exchange membership as the weather cools and the first autumn leaves begin drifting toward the ground.

Keep in mind the value of what you have to swap, as you’ll need to factor that into your finances as well. In addition to the sign-up and monthly maintenance fees, barter exchanges also charge their members a percentage of the value of each transaction they make. The one-time sign-up fee ranges from zero to $500 and is often a combination of cash and trade credits. For example, you might pay $250 in cash and $250 in a barter debit to start out. The monthly maintenance fee is typically $10 to $15 cash and an equal amount of trade debits. Generally speaking, the percentage charged for each transaction ranges between 10 percent and 15 percent of the value of the deal. The transaction fee is paid in cash, and who pays it depends on the exchange. Some charge each partner an equal percentage of the deal; others charge just the buyer of the good or service. If you pay cash for a portion of the item’s price, you won’t have to pay a transaction fee on that part.

The most important thing is to ask about all the fees the exchange charges before you sign up. You should have a clear picture of how much cash you’ll need to do business. Barter won’t be your friend if you go into the red trying to trade your stuff. You’ll need to consider those costs and whether you think you can recoup them over time or whether you simply don’t have enough cash to get started. Since so many exchanges accept the membership fee in cash and trade credits, that helps to reduce your cash outlay. Of course, for locally owned exchanges, it never hurts to ask that the fee be waived or paid entirely in barter since you’re an individual rather than a business. Ask to pay for your monthly maintenance fee in barter as well, since you’re not a large business and don’t have the cash flow businesses have.

When you are evaluating an exchange, you must do some essential research before you sign on the dotted line. Your first call or Web site visit should be to your local Better Business Bureau to check out the exchange’s standing. It also helps to see if the exchange is in good standing with one of two associations that exchanges typically belong to: the International Reciprocal Trade Association (IRTA) or the National Association of Trade Exchanges (NATE). If the exchange isn’t a member of these two associations, we make a policy of not doing business with them. We also recommend that you deal with exchanges (or brokerages) that are well established and have a good reputation in the community. That isn’t to say a newcomer won’t be a good bet; everyone has to get started somewhere. But some exchanges start and fold quickly if there is too much competition, their policies are too restrictive, or they are trying to cover a geographic area that is too broad. If an exchange folds while you have credits outstanding, you will have lost the trade dollars as well as the fees you’ve paid in cash and trade. Sadly, there are disreputable businesspeople everywhere, but you can protect yourself just by doing a bit of research ahead of time.

After you’ve gotten a thorough understanding of the brokerage’s fees, ask to see a list of its members. Evaluate the list to see if there are enough businesses to offer you the products and services that you want. If you don’t find enough of what you want, that particular exchange probably isn’t going to be worth the fees required. If you find a satisfying number of potential trading partners, consider whether you’ll be able to use those goods or services often enough to make the exchange a benefit for you. Building up trade credits won’t do you much good if you can’t find partners to spend them with. You also won’t have maximized your membership and may have to put it on hold until more and varied members join. An on-hold membership will still cost you monthly fees without bringing any goodies into your household. Ask how many members have accounts on hold. Their names may appear on the membership list, but if their account is on hold, you won’t be able to barter for their goods or services. If the number seems high—say, 30 percent or more—that’s another red flag.

Take down the names and phone numbers of three or four members who haven’t provided testimonials to the exchange. Make a quick call to them and ask if they are happy with their experience. Ask the following questions:

If they respond negatively to any of these questions, and their explanations seem credible and raise concerns, this is probably not a good choice. Just be sure you don’t rule out an exchange based on a single comment or one disgruntled member. If you do decide against a particular brokerage, many towns have more than one, and you may have a better choice available.

If the exchange representative won’t show you a membership list, or they have only a limited list that seems skimpy, head for the exit. This is a sign that the exchange doesn’t have a wide roster of companies to trade with or that many have left, dissatisfied. You should also be suspicious if the majority of the members are located in another state. Your chances of executing a successful deal are poor with so few trading partners at hand.

Check out the physical surroundings when you visit with the exchange representative. Are his or her offices dingy, disorganized, or lifeless? If the phones aren’t ringing or all you see is a desk and chair, you may have wandered into a business that isn’t really a going concern. You should expect to see activity, hear the phone ringing with members conducting business, and see computers running barter software to track trades. Minus those elements, alarm bells should sound.

The broker—the individual who will help you execute deals and serve as your primary contact for the exchange—is a key contact for you. Start by asking the broker a few pertinent questions. Ask how your broker is going to drum up business for you within the exchange. And don’t just ask what your exchange can do for you; be active in promoting your brokerage so that more people will join the exchange and provide you with additional trading opportunities.

Find out how many brokers the exchange has versus the number of members. A good rule of thumb is one broker for every 200 to 300 members. If there aren’t enough brokers, you’ll have a hard time connecting to make trades. Good exchanges have active brokers who are constantly looking to connect members with one another. Also ask if he or she has been certified as a trade broker by either the NATE or the IRTA see the Resources section for more information).

The exchange should also be publicizing what you and other members have to offer on a regular, easily accessible basis; that means a weekly (or more often) e-mail blast. Some exchanges will send out a regular “new member” announcement to churn up offers right away for the newbies. Even if you’ve been on the rolls for a while, make it a standard practice to call your broker regularly to see what’s available. Brokers will have the most current information on what sort of barter inventory is at hand, including special one-time or limited-number items that many members will want. If you’ve built up a relationship with your broker, that special product or service might fall into your lap more often than if your broker can’t quite seem to remember your name.

When Karen owned an exchange, she would regularly get limited offers like tickets to performances, vacation rentals, or a car. If the member was in good standing and had a strong barter history with her exchange, she would offer it to him or her first. Good standing equals being current on all cash fees that are owed to the exchange and having an excellent reputation for dealing well with your trading partners. In most cases, brokers will seek out those in good standing—their best customers—for special deals. These are typically members who have trade credits (rather than debts) on the books, keep in frequent contact with the broker, have no or few complaints against them, and are easy to do business with.

The other way to ensure that you get what you really want is to add your name to a waiting list for the specific items you need. When they become available, your broker will let you know. We’ve said it before, but it bears repeating: Barter is about building relationships.

To be really successful, don’t leave all the promotion to your broker. You should take an active role in marketing yourself on the exchange. Attend membership events so that you can connect personally with others and—here’s that phrase again—build relationships. Ask your broker if you can include a flyer about your goods or services in the exchange’s next mailing. (Some exchanges will charge you for that service in barter dollars—any type of currency traded only through a barter organization.) The best part of that option is that you have to supply only the flyer; the exchange will take care of the stuffing and mailing. Or, if it’s through e-mail, the exchange will handle sending the information to the entire membership.

Make sure you mention that you’re a member of the exchange and looking for barter opportunities. Send out mass e-mails to the exchange’s membership or call members individually to add that personal touch. Although you are a lone trader, you need to start seeing barter as a marketing tool for what you have to offer. Just remember to explain the benefits to the buyer rather than list the attributes of your product or service. Here’s an example of a successful promo:

Keep your home’s air clean with our eco-friendly soy candles. Buy one, get one free sale going on now!

As opposed to this one:

Our candles use grade-A soy, the latest manufacturing technology, and extra-heavy-duty packaging that withstands U.S. Postal Service punishment.

Which promo makes you want to buy those candles? See the difference?

Occasionally, you’ll find that the item or service you need isn’t offered by any members on the exchange. That doesn’t mean you’re out of luck and you have to break out your wallet. It’s time to do a little legwork on your own. Call two or three companies or individuals who offer what you want. Get bids from them as if you were a cash prospect. Then contact your broker and tell him you’d like to make a “trade purchase request.” That’s a form (see the Resources section for an example) that the broker will fill out that indicates what you’re interested in and how much you would be willing to pay in barter credits for it.

Also, give the broker the names and contact information of the businesses you’ve already gotten bids from and the value of those bids. Tell him which one you would prefer and ask him to contact that business on your behalf about joining the exchange to make the deal on trade. You might think the broker would be aggravated to make a special effort for just one trade, but brokers are happy to do this sort of recruiting for you. After all, they get a big advantage when new members come aboard: Their existing member (you) is happy at finding a trading partner, the exchange gets its membership and monthly transaction fees from your deal and the future ones from the new member, and the rest of the membership gets access to the new company’s products/ services. Everyone is happy.

When you trade, it’s critical that your partner is ultimately satisfied with the deal. The truth is, you are conducting a business transaction. Just as in the cash world, if your partners aren’t content with how you handled their deals, word will spread. Poor transactions will hurt your reputation, and you could find yourself with few or perhaps no trades while still having to pay your monthly fee. In the worst-case scenario, you could be kicked out of the exchange. On top of that, you’ll have to contend with bad word of mouth spilling out of the exchange to the general community, especially if you live in a small town. Bottom line: Practice the Golden Rule and treat people the way you want to be treated.

A wonderful side benefit of giving good customer service to your barter partners is that they will refer you to nonbarter customers; that means cash coming your way just from doing a great job at bartering. As we’ve said before, cash is king, and barter can lead you to more cash.

Another great advantage of being a member of an exchange is that you can get a barter loan to make purchases from members. The trick with using a barter line of credit is making sure you can do enough trades to “pay back” your credit line. Ask your broker to give you a report on your monthly trade credits so you can see what your trade flow is. Also be aware that some brokerages will charge you interest on the line, typically 0.5 percent to 1 percent a month (depending on the policy of the exchange). That’s a high rate of interest that has to be repaid in trade and should not be ignored.

TRADING LIGHTLY

If you don’t have a regular stream of products or services to sell on an exchange, there is still another option open to you—the subaccount. A full member of an exchange can add a secondary, or “subaccount,” to his or her membership. The subaccount can sell to the main account. The main account will pay for the joining fee, which is reduced because of being a subaccount, and will be responsible for the transaction fees on the sub’s trades. The difference is that the subaccount can’t earn barter credits for selling items to other members. You can earn credits only by selling to the main account. As a sub you’ll be able to spend the credits you earned with anyone else on the exchange.

Suppose you do upholstery as a hobby, and a restaurant owner wants you to repair her seats. You can become a subaccount of the restaurant, perform the work, and receive the barter credits. Then you can spend those credits for anything another member is offering: dentistry, lawn care, tools, and so on.

Subaccounts are best suited to one-time trades (bartering a boat, plane, car, or home) or when you are a repeat supplier to a main account, such as a janitorial service. To get started as a subaccount, you’ll need to contact an exchange member and propose the deal. The member will then work out the details with the exchange.

OFF-THE-GRID TRADING

While trade exchanges are great, we recognize they aren’t for everyone. If you have a low-volume trading capacity or ability or don’t want to put yourself at risk of the cash and tax burden involved in exchange trades, there are other options.

In some communities, grassroots groups have started their own barter exchanges that have very low or no fees attached. These are homegrown efforts that are aimed at helping individuals trade to relieve their financial pressures. They can be very informal groups that have something in common, such as stay-at-home moms or guys who love choppers. Barter is just one of the benefits of belonging to the group. In other instances, these are mini exchanges devoted to enabling trade among individuals or microbusinesses.

Sometimes these exchanges are limited to one city; in other cases they cover an entire state. This is a great way to get started doing direct trades. You won’t have the fees associated with commercial barter brokerages or the pressure to trade at a high volume to make those fees worthwhile. You’ll still be able to build community. Just make sure to get a handle on whether there are a sufficient number of traders in your area to justify joining the group. That’s especially true if you have a large number of items that would be too heavy or bulky to mail affordably. If the group is just getting started, talk to the organizer about what his or her plans are to promote it so that the exchange will attract more traders. Having a Web site without any plan to get the word out about the brokerage could mean that expansion will be slow, and you might have fewer items to choose from during that period of growing pains.

So how do you find grassroots barter exchanges? Search for them on the Internet and see the Resources section in this book for a listing. Look for postings on community bulletin boards. Search Meetup.com, which has a large number of formal and informal bartering groups. You might even call your local commercial barter exchange and explain that you’re not ready to join yet. Ask if it can recommend a local group where you can learn the ways of trading. Wise brokers will recognize that as you develop a better understanding of barter, you might one day reach a level at which it would make sense to join their brokerage.

TIME BANKS

One of the most exciting barter options available is the “time bank.” Community groups, nonprofit organizations, governments, and others have created time banks, particularly to help low-income or cash-poor residents in their towns. As part of the social justice or poverty eradication movement, Dr. Edgar S. Cahn, cofounder of the National Legal Services Program, conceived the concept of time banks in 1980. He was searching for a solution to drastic cuts in government social services.

A time bank is a system that allows each member to provide a good or service to earn a credit. Often these credits are called “hours,” and most often, they are equal to an hour of the member’s labor providing a service such as plumbing, sewing, child care, or volunteer work. But an hour can also equal the value of a good the bank’s store has in stock or the number of hours a member required to produce a good. Each time bank determines the value of its own currency. So, for example, if you drove a neighbor to and from the doctor, you would earn an hour from the time bank you are both members of. The member who receives the service reports the credit to the time bank, where an account for both is maintained and tracked.

Members of the bank work for an hour, providing whatever skill or talent they have. It could be as elaborate as electrical work or as informal as babysitting or driving a disabled person to the grocery store. Sometimes the time dollar is earned just by going to a movie with an elderly person. The trades aren’t necessarily direct, since time dollars earned can be spent with any other member.

Time banks are especially good at helping low-income individuals who need access to more resources than they have the cash for, but they are also meant to help people who may be lonely and want companionship, as well as the opportunity to be involved in their communities, such as seniors or the disabled. Time banks are often an altruistic system that helps even the playing field for anyone who is a member. If you are a plumber, an hour of your time is equal to an hour of time ironing clothes for someone. Besides services, some community organizations have also created “time dollar stores,” in which people can spend their time dollars on essential goods such as toothpaste, toilet paper, diapers, and so on.

Organizations set up time banks as a way of providing resources to a community that has few. These groups, often social service organizations, also hope to strengthen communities so they can tackle issues that affect them, as well as encourage relationships in which people will help one another rather than remain uninvolved strangers. Time banks are particularly helpful when there is a recession, there are few jobs, or economic difficulty is beating down the community.

Formal time banks typically require grants or cash infusions to pay for software and other supplies to manage the system. They also need an administrator to keep up with hours worked and redeemed as well as any problems that arise. If you are considering starting a small-scale time bank, it certainly can be managed with a home computer and a few hours of time each week. To find out more about how to operate a time bank, visit www.timebanks.org.

Another flexible system has developed around barter systems. Pioneered by community organizer Paul Glover, people in Ithaca, New York, created their own barter system. Members of Ithaca Hours, as it’s called, earn one Ithaca Hour for every $10 in value for goods they sell or services they provide to other members of the exchange. The exchange issues its own perfectly legal currency, or scrip, in increments of one hour or fractions of hours. The system, which started in 1991, had hundreds of business members and thousands of individual members at its peak. People trade conventional goods and services such as handicrafts, electrical work, acupuncture, and tax preparation with individuals and businesses. Businesses sell a wide range of items, often for a combination of cash and scrip. Members can trade freely with anyone else in the system just as they would spend or receive cash.

But members were quite creative as well. One gentleman sold meteorites he discovered to other meteorite collectors. Another member earned Ithaca Hours for removing a television set for a family who wanted to limit the amount of TV their kids were watching. Some parents pay their children’s allowance in Ithaca Hours currency.

If your town doesn’t have a barter community like this, you could be bold and start one yourself. The key is to have a paid facilitator manage the system so that it runs smoothly. Here are some other things to consider:

The results of time banks and community barter networks are impressive. Not only do people keep more of their scarce cash, but they also build stronger ties to one another that help them solve problems, get along more congenially, reduce political fighting, enhance compassion and understanding, and generally strengthen the community. Glover witnessed better relations emerge between normally combative groups and individuals because they had interacted with Ithaca Hours.

If a time bank or barter network doesn’t exist in your town and seems too daunting an endeavor to launch, look for specialized networks. Many neighborhoods have swap meets, babysitting co-ops, cookie exchanges (especially around the Christmas holiday), dinner exchanges, seed swaps, clothing swaps, livestock swaps, and more. Let necessity be your inspiration. If there is something you need, chances are there is a fair number of other people in your community who need it as well and would be willing to work together to set up a barter network. You are limited only by the time you are willing to invest and your own imagination.

GREAT *TRADE!

As college student, Jonathan Marsh walked into the Tucson office of BXI, a national barter exchange, with an enticing proposal: He offered to barter stereo systems. Co-owners Terry and Lee Brandfass were surprised that someone so young was approaching them to barter such a desirable item. They decided to take Jon on as a barter member because they thought it would be fun to have a young student in the exchange. Besides, they didn’t have a stereo system dealer at that time and felt like the membership would be a good real-world learning opportunity for the business major.

The Brandfasses provided Jon with a $600 credit for stereos he purchased and then sold on the exchange. With those in hand, he started trading right away. He used some of his credits at restaurants near the University of Arizona and then expanded his business to include office supplies and printing, which earned him even more barter credits. As the enterprising student approached graduation, this experience helped him open his first business—selling stereo equipment. He joined the exchange as a business member and traded for many years in Tucson.

Later Jon moved to Phoenix and started MistAMERICA, a company that creates mist and fog systems for outdoor pools and other areas. He joined BXI in Phoenix as well and has bartered repeatedly for his business and personal use. Besides giving his company an edge over his competition, Jon has also enriched his personal life by bartering through BXI.

TRADING TIP

If you don’t expect to do enough trades to join a barter exchange, look for businesses that display a trade exchange emblem (such as ITEX) on their doors or in their sales materials. This tells you that the owners and managers are quite familiar with barter and might be willing to consider a direct trade with you.