Why Exchanges Won't Accept Some Businesses

A big part of successful bartering is your ability to recruit new barter partners.  If I only traded with existing members of my barter exchanges I would be bartering a lot less (more about barter exchanges).  I decide what product/service I need, then go check out my existing exchanges.  If they don’t have what I want, then I strike out on my own starting out with CraigsList and expanding my search from there.  Often times when I find a new potential barter partner, I try to recruit them into one of my barter exchanges.  I have no problem with trading direct, but there are a lot of limiting factors with direct trade that barter exchanges can remove.  It came to my attention a while back that there are simply some industries that my exchanges have no interest in.  This post is to help you understand why some businesses are more attractive than others to exchanges and what you can do about it.

There are a couple different spins on why an exchange may not want a new member but they all come back to money.  Specifically it has to do with the exchange’s estimate as to how much volume they will most likely be able to trade.  An exchange has to put resources into adding new members so it simply is not profitable for them to sign up a lot of members that aren’t trading.  I spoke to an exchange recently that told me they really try to avoid signing anyone up that they don’t think can earn/spend a minimum of $3,000 to $4,000 annually.  I’m in California so that number may be lower in some less expensive parts of the country.

Here are some common reasons for not signing up a potential member:

  1. Based on past experience, an exchange may simply close particular industries because they have been low volume in the past.  They may have tried multiple times with this industry and found it unprofitable.
  2. The exchange may already have another member in the same industry as the potential member and the exchange may not feel that there is enough business to support multiple members in the same category.
  3. An exchange may think that some industries are simply more trouble than they are worth.  This could mean that there are industries that generate a lot of complaints and are big eaters of time and resources for the exchange.   A perfectly legal industry that I’ve noticed exchanges shy away from is firearms.  I’ve bartered for firearms directly many times without a hitch but (especially out here in California) I think it’s viewed as an industry that will create paperwork/legal headaches for exchanges.  I’ll come back and post another article later about why this is totally wrong and exchanges should allow barter for firearms.

So….as an exchange member who has a new potential barter partner that you want to join your exchange, what can you do about this?  Here is my advice:

  1. Check with your exchange before you put a lot of resources into recruiting a new member.  If you know you are going to have to barter direct with with this new partner, it’s better to know that earlier rather than after you’ve told them how wonderful your exchange is.
  2. You’re more likely to talk your exchange into accepting the new member if they sell a product/service that can be provided/shipped nation wide.  That way you can explain that it’s not a problem that they have another local vendor in the same industry.
  3. The best way to talk your exchange into accepting a new member that they feel is borderline is to tell them that you will be using the vendor a lot.  A while back I recruited my kid’s martial arts dojo into my exchange.  They already had another dojo in the exchange and I think they were unsure as to how much business the new member might get.  When I told the exchange that I’d be paying for all three of  my kids to go on an ongoing basis, that made all the difference.

Bottom line here is that sometimes you have to exercise some salesmanship, not only on a vendor that you’d like to barter with but also your exchange.  You won’t win every time but the more you understand the dynamics the better chance you have.

The ultimate barter birthday

My twin sons just turned 9.  Although my wife normally plans birthday parties this one was my responsibility as she is recovering from neck surgery.  My challenge was to come up with the coolest all-barter party I could.  Here’s what we did:

  1. We picked up my sons and their friends from school in a limo.  Finding a 100% barter for the limo was a challenge.  I ended up finding a company owned by someone I knew a little and traded him for gift certificates to a local gym.
  2. We had the limo drive us to a local bakery that specializes in cupcakes.  There each kid was able to decorate and eat their own cupcake.
  3. We then had the limo take us to a local amusement park where the I had prepaid “credit cards” for each of them that were good for mini-golf, bumper cars, video games, etc.  We hung out and played for a couple hours.
  4. Unfortunately we don’t have a pizza joint close to us that I can barter with so we had the limo stop by Costco for a couple pizzas.  That was quite an experience.  I never would have believed that I would shop at Costco via limousine.
  5. The kids then had a slumber party, but the next day we took them to a local gym where their favorite basketball coach gave the whole gang of kids a private lesson.
  6. Lastly the “goodie bag” for each kid was a $5 gift certificate from a local frozen yogurt shop.

Whew!  The only cash I spent was on tips (to the bakery lady and limo driver) and $20 worth of Costco pizza.

Mixing barter and cash – part II

In our last article we talked about many reasons mixing barter and cash can be a bad idea.  That being said, there are some situations where it makes sense to make hybrid barter/cash deals.  Here are some that make sense to me:

  1. Taxes/tips/shipping etc.
    This doesn’t need any explanation does it?
  2. Using barter to get a new cash client
    I’ve had a bunch of times where I’m cold calling a potential client and I use barter as a really good differentiator to win the project.  For example,  I may be calling on a potential client for cash business and as an added bonus I will say: “If you want I can accept some of the payment in trade for your product/service.”  This approach has worked successfully for me on multiple occasions.  The ultimate goal was to win a new cash client but taking part of the payment in trade in order to sweeten the deal made the difference.  I then do part of the job in trade and bill cash for the rest.  Of course, you can only do this when the product/service that the potential client deals in has value to you.  Obviously this only applies to potential clients that are not in your barter exchange.
  3. When a long-term cash client is a member of your barter exchange
    I have only had this happen once, but seeing that it happened to me, it could happen to you.  I had an existing cash client that I’d been doing business with for years.  When I joined a barter exchange I found out after the fact that this existing client was in the same exchange.  After a while he realized this also and approached me about switching from cash to barter.  Now as much as I like barter, I would ALWAYS rather have cash so the last thing I want to do is switch existing cash clients over to barter.  Seeing that he was a cash client of mine long before I ever even knew that barter exchanges even existed, I would have been well within my rights to refuse his request outright.  That being said, that approach would not have done much to encourage our ongoing relationship.  Honestly I felt a little trapped and even though I didn’t have to start bartering with him, I felt like I had to do something or else it would appear that I had no interest in my client’s best interests.  So…I struck a deal to switch him over to a 50/50 cash/barter deal.  That way I’m still getting a good chunk of cash, but I showed a lot of “good faith” to the client.
  4. On larger trades with barter currencies that are not in demand
    This last example is actually a deal I’m working on right now.  A potential client approached me through one of my barter exchanges.  I currently have more credits than I need with this particular exchange so I was politely turning this person  away.  In the course of the conversation, the prospect asked if I was interested in the job if he paid me 50% in cash.  Most exchanges do not allow this type of deal so without thinking I turned him down on this offer also.  After hanging up the phone I remembered that this particular exchange only requires that the first $3,000 of a trade be barter and after than it can be cash.  Seeing that the whole project was around $6,000 the exchange would allow for a 50/50 deal.  I immediately called him back and we’re working on putting together a deal now.  I don’t really need more credits with this exchange right now but if I’m getting 50% cash it’s a viable deal for me anyway.