Every likes to be liked but when it comes to barter there is extra incentive to be lovable.  As we’ve discussed in the past, everyone has a limit as to how much barter they should engage in.  That’s even true for us barter fanatics.  What I’ve learned however is that when folks have to cut back on barter, they will often times still trade with their “favorites.”  So my advice for you is to be one of those favorites.

Contrary to what you may think, being a “best customer” does NOT mean spending the most money with that vendor.  Usually it simply means that you have a relationship beyond a financial transaction.  It’s as easy as asking how somebody’s kids are doing.  Being a best customer means showing up for appointments.  It means not grinding vendors on price.  It means valuing and following the advice of consultants that you hire.  It means being flexible about the product/service you are interested in.  It means understanding that your deals need to be advantageous to both parties.

Of course it probably wouldn’t be a bad idea to live your life like this every day, however, as I mentioned earlier, there are extra perks in the barter world for being a favorite customer.

If you are one of those lucky businesses that have a low incremental costs for additional “units” sold then barter can be a gold mine for you!  There are some businesses where they have to outlay a certain amount of resources to keep their doors open and (for the most part) their expenses don’t vary greatly based on the volume of customers served.  Examples would include movie theaters, gyms, martial arts dojos, etc. etc.  For a yoga studio there is literally no additional cost to add a new barter customer to their class.  As such the barter earned is like free money!!!  To those people I say….BARTER MORE!  I’m am at a loss as to why I can’t barter to go to the movies right now.  Ug…but I digress…

Unfortunately many of the folks reading this right now are not in the lucky situation to be able to earn barter credits free.  That being said I would encourage you to take a look at what your real costs are to barter.  It’s probably lower than you think.  For example, I have a barter partner that operates a mini-golf/arcade/go-kart racing facility.  Other than a little gas for go-kart racing barter is pretty much pure profit for them.  They would still have to have the same number of employees, maintenance, electricity, etc. with or without their barter clients.  I ran into a frustrating negotiation with a laundromat a year or so back.  They already had a manned location where they would wash and fold your laundry for you if you want.  Their current staff had free time on their hands so they could have provided this service on barter and their only cost would have been soap and electricity.  And for all that they couldn’t see the value of barter.  PEOPLE… get a clue here.  Why would you not want to have a sale that’s 95% profit?

I would like to encourage you to look at your business and see how much of your expenses are “sunk” and can be allocated against your cash business.  I think you will find that if you do so your incremental costs will be low and your barter profit will be shockingly high.  Now go out there and make some trades!  Also remember…every barter client that you add will tell their friends about your service.  You WILL gain new cash clients because of your barter business.

First off I’d like to thank Tom Hood for sending me a copy of this book.  It’s a good fast read.  The 23 page self-published e-book was provided to me as a PDF document.  Tom has 30 years of experience in the barter industry and wrote the book originally to help ramp up new barter exchange members.  I have to say that I applaud his efforts in writing this book because I think the single weakest point in the professional barter industry is training new members.  It wouldn’t surprise me if trade volume from existing members could be doubled over-night if they were only more thoroughly trained.

The book is a good basic resource and hit all the main areas of interest for new traders but also did have a few reminders the experienced barter fanatics will want to pay attention to:

1. I like that he included a formal work-sheet to help people think both of what they have to trade and what they want to trade for.  This is usually done seat-of-the-pants and sitting down and doing the work of going through the form can help pry out some new ideas.
2. He spends some time on trading Due Bills (gift certificates).  I think too often this kind of trading is only done by advanced traders.  There is really nothing complicated about it.  Beginning traders should remember that they can trade gift certificates.  For example, this winter I bought a Christmas Tree from someone on CraigsList in exchange for  a gift certificate to a local mini-golf center.
3. I enjoyed his 10 rules for managing your barter balance.  In the same way that people fail to plan their cash flow, they also fail to plan their barter credit flow.
4. I personally was reminded that I need to purchase some Ad Specialty items on barter.  It’s a great way to get your name out in public w/o spending any cash.

I haven’t caused any trouble recently so now seems like a good time to jump into the fray again!  As you should all know I’m a big fan of barter exchanges and I actively recruit trading partners into my exchanges on a regular basis.  That being said there are times when it is not to your advantage to do so.

The most common reason to trade directly with someone is simply that they are not a good candidate for an exchange.  They may be skittish about barter in general and the baggage (explaining it, the commissions, etc.) that comes with exchanges just isn’t worth it.  In those cases I just keep it simple and trade directly.  If they want something that is available through my exchange I just buy it for them through the exchange.

A more controversial reason to keep a trader to yourself is that the deal is too good to share with your exchange.   I’ve never run into a  trade partner who didn’t have some kind of limit as to how much barter they wanted to do.  If you work out an ongoing trade with a vendor for something really juicy I have found it advantageous to trade with that vendor to their full capacity directly.  For example I trade with both a grocery store and a butcher shop.  These relationships are pure gold in the barter industry.   I will personally use the full capacity that both of these vendors want to trade so there is no way I want to open them up to trading with others.  Even if I didn’t want to use my credit with them myself , I could probably spend gift certificates for these vendors pretty much just like cash.

Additionally I should mention that if you have a vendor that you think would be in high demand and you are on the fence about recruiting them into your exchange, proceed with caution.  I personally had a issue where I recruited a vendor that I was pretty hot on into one of my exchanges.  Once they were in, the exchange informed me that they were rationing services from the vendor.  I was told that I could not necessarily buy as much as I wanted from this vendor even if it was under the vendor’s total barter capacity.   Never mind the fact that the only reason anybody in the exchange had a shot at trading with them is because I recruited them in.  I ended up sorting it all out but the experience definitely put a damper on my enthusiasm for recruiting for the exchange for a while.

Unfortunately I have yet to find a way to barter for insurance.  It’s not because it’s illegal to barter for insurance (don’t get me started).  I think it’s simply because insurance is sold by brokers that are paid on commission.  There isn’t enough of a margin for a broker to sell insurance on barter.

Anyway…regardless of that I have found a way to use barter to save on insurance.  What I do is quite simple:  I buy less insurance.  Now that I have auto mechanics and auto-body shops that I can barter with, I am not worried if I reduced the amount of auto insurance that I carry for repairs on my own car.  I know that if I get in an accident I can get my car fixed without having to pay for everything in cash out of my pocket.  This is true for my home appliances too.  A while back I bought my wife a nice front loading clothes washer and I was told that it’s smart to buy the extended warranty with those.  Well I did that for a while but then I realized…I can always barter to have the appliance repaired if it breaks.  I dropped the insurance, keeping my cash and if it breaks the barter appliance repair guy is just a call away.

Clearly there are risks in going this route.  If my car is totaled in an accident my barter repair shop doesn’t really help.  And of course you still need liability insurance on your car to cover everyone else on the road.  What this strategy does allow me to do though is reduce the amount of insurance that I’m paying for and still be able to sleep at night knowing that I still have a way to repair my cars if needed.

Of course one of the many luxuries of membership in a barter exchange is your broker.  Your broker is there to help you.  One of the main things they do is help you find the deals that you are looking for.  That being said I would like to caution you to not be overly dependant on your broker.

Don’t get me wrong.  I love my brokers and (I hope) they love me.  What I’m saying is that they are only human.  They usually have many members assigned to them and it’s very difficult for them to keep track of everyone.  Here are a couple tips to make sure that you get the most out of your exchange while helping to take a load off your broker:

1. There is nothing wrong with calling up your broker and seeing if they have a specific service available.  Before you do that though I would recommend that you look at your exchange’s online directory.  It’s very likely that that’s exactly what your broker was going to do anyway.
2. Call other members directly.  I’ve found on numerous occasions that a member has told the exchange that they are limiting their trade volume, but if you call them direct they are happy to make a deal beyond the limit they told the exchange.  Even if your broker says that a particular member isn’t doing much trade, give them a call.  I’ve found as a business owner that it’s very difficult to turn away a new potential client and there is a good chance the member you call will feel the same way.
3. Of course just because your broker says that they don’t have a particular service available doesn’t mean that you can’t still barter for that service.  Don’t just accept that “no.”  It doesn’t take much time to call or email 5 local vendors of that particular product/service and offer to make a trade.  Most won’t accept, but some will.  Some will be interested enough that they will join your exchange giving you a nice little commission.

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.