Most folks in the barter world trade the entire cost of a product or service, including the cost of materials used in the production of the product/service.  Common examples of this would be the cost of goods sold for a bartering retailer, food cost for a restaurant, or labor cost for employees when a service is rendered.  That being said, there are a few industries that often charge cash for materials and only barter their labor.  Common examples of this would be contractors like painters or carpet layers.  They often want cash for paint or carpet.  Another example would be auto mechanics that barter for their labor but charge cash for parts.

So….what is one to do if they have much to barter and little to no cash?  How can you put together a trade in these industries that covers the materials?  Here are a couple angles that I’ve used successfully in the past.

Try CraigsList
Many industries have been trained by their barter exchanges to charge cash for materials.  In those cases you will pretty much never find someone who will conduct a 100% barter deal so don’t waste your time looking within the exchange.  Go strait to the barter section of CraigsList.org and make sure that you state in your post that you are looking for a trade that will include materials.  You can offer to exchange any products/services available in your barter exchange to the seller for their services including material costs.

Trade with your existing clients
I recently was looking for someone who would paint the interior of my home and include the paint in the trade.  It turns out that painters are very used to barter, but rarely include paint in their deals.  After looking unsuccessfully for quite a while I remembered that one of my existing clients that I hadn’t worked with in a while is a painter.  I called them up and they agreed to do the job 100% on trade.   Normally they would not have accepted an offer like this but because we already had a relationship in place they were more open to it.  It appears that the trade will revitalize our relationship and we should do more cash work down the road too.

Buy your own materials
A friend of mine is convinced that it is cheaper for him to go buy his own car parts when he needs a repair than buying the parts directly from the mechanic.  Personally I don’t do this.  Aside from unsettling his relationship with his mechanic, he has also sometimes purchased the wrong parts.

As usual, please post back other ideas that you’ve used to conduct trades that include materials.

Another great way to turn barter into cash is to buy products or services on barter that you can then sell to your regular clients for cash. You’ve probably always been told that your easiest sale is to your existing clients and that is true for cash conversion as well.

One way that I do this in my web development business is to hire top notch professional graphic designers on trade on projects where I can bill clients cash for that work. Everybody wins. The barter designer gets work he/she would not have gotten. I get to convert barter to cash. The client gets great design work and because I did it on barter I usually can give the client a few more options/revisions than I would have been able to if I was paying cash.

This technique can also ne used with hard goods. If you run a retail shop you can supliment your inventory with items purchased on barter that you then sell for cash.

A couple things to watch out for with this technique:

1. Of course watch out for price gauging. If you can’t purchase something at a price that leaves you with the margin you need, forget that item and look for something else.
2.  Stay in your area of expertise. It may be tempting to buy something on barter that you think you can sell for cash that is outside of your regular business practice. Keep in mind that the intent is to sell to your regular cash clients. The last thing you want to do is mess up that relationship with some product/service that you are not familiar with.

A great way to turn barter credits into cash is to “use” your friends.  For example:  I’m a Deacon at my church and we usually go out to dinner before our monthly Deacon meeting.  I usually  try to suggest a restaurant that I can barter with and offer to pay the tab.  Sometimes they let me and the meal is “on me” however often times they will insist on giving me some money so I’ll go home with cash in my pocket.  I do the same thing with movies.  If I’m going to see a movie with some buddies, I’ll make sure I can barter for the tickets and buy them ahead of time.  Then my friends pay me cash.  The best example of this sort of thing for my family is actually something my wife does.  My kids are involved in a bunch of after-school activities that we pay for on barter.  Often times she’ll let her friends that have kids the same age know that we’re participating and they will too.  We’ll then pay for everyone on barter and collect cash from our friends.  Usually when we do this, we cut our friends a discount on the price and often that makes the difference as to whether they could participate or not.

A friend of mine that is heavy into barter had a slightly modified version of this.  He had a friend with a very sick cat that couldn’t afford treatment and was going to have to put it down.  He offered to take the cat to a vet that he could barter with, and now the friend is making cash payments to him.  Talk about a win-win!  The vet got business he wouldn’t have gotten, my friend turned his barter into cash and the cat got to live!

A word of warning that this sort of exchange doesn’t always work.  Here’s two things that I’ve run into:

1. My parents needed their tree trimmed.  I tried to hire someone on barter then have them pay me cash.  It was a good idea, but in this particular situation, the two barter tree guys that I could find were both bad choices.  One was way to expensive and the other one wanted to do a half/cash deal that was against the policy of my exchange.   Since then we’ve got a new good tree guy in our exchange so I’ll try this again next time.
2. I barter with my kid’s karate dojo and over the years we’ve recruited a number of our friends’ kids into the dojo too.  Because our friends up to this point had the cash to pay the dojo and I know that the dojo could really use the cash, I’ve never paid for my friends on barter to get the cash personally.  I’m just happy that I can barter with the dojo for my own kids and I haven’t tried to use the situation to cash convert.

I just spotted this awesome article about debt within a barter exchange over at barternewsweekly.com (no affiliation with this website).  Please check it out:

http://www.barternewsweekly.com/2011/09/02/overcoming-a-deficit-in-your-exchange-3121/

As I mentioned in my earlier post, for the next month or so I’ll be looking at ways to turn your barter habit into cash.  The most basic form of cash conversion is simply to buy things on barter that you would have purchased with cash.  The cash that you would have spent on that product or service is your effective conversion from barter to cash.

This is simple enough to do in theory, however I’ve found in practice that the vast majority of traders are really bad at this.  Here are my tips to help make sure that you take advantage of every possible barter purchase possible so you can hang on to your cash:

• For EVERY purchase, product or service, business or personal, ALWAYS see if you can buy it on barter FIRST.
• Make sure that everyone in your family or office that has the authority to make purchases is fully informed about how and why to make purchases on barter.  I doesn’t do any good for you to know all the ins and outs of barter if someone else who doesn’t understand barter makes most of the buying decisions.
• Keep an up-to date wish list of products/services that you want to purchase on barter.  Make sure that your barter exchange broker has a copy of the list and keep an eye out on CraigsList.org for these items.  Approach vendors that sell the items on your list and ask them if they are interested in bartering.
• Stay informed about new members of your barter exchange.
• Stay informed about what is available for purchase through your exchange’s online marketplace

As much as I love barter, I’d always rather have cash.  Of course I’m not the only person that feels this way.  As such, the art and science of turning barter credit into hard cash represents the holy grail of success in the barter world.  Within the industry this alchemy is known as “cash conversion.”

In the coming weeks I’m planning on writing a number of articles about cash conversion using this post to over-view the topic and whet your appetite.  Here are a few of the many ways that you can turn barter credit into cash.  Of course some methods are better than others and some people are more suited to a particular method.

• Buy items on barter that you then sell (on ebay, craigslist, etc.) for cash.
• Purchase items on barter that you would have spent cash on, and keep the cash.
• Purchase items on barter that your friends/relatives would have paid cash for and have them pay you in cash.
• Purchase services/products on barter that you can sell to your regular clients for cash.
• Purchase items on barter that you anticipate will appreciate in cash value like real estate, collectibles, commodities, etc.
• Refunds or reimbursements in cash for purchases that were made on barter.
• Purchase marketing services through barter that will attract cash clients.

I’ll post my thoughts on these different approaches in coming weeks.  In the mean  time, I’m quite sure I’ve left some other approaches off my list here.  Please use the comment area below to share some other ideas.