Paying your power bill on barter


Although I haven’t figured out a way to get my local utility company to accept payment in trade I’ve got the next best thing:  Use barter to reduce your power bill.

1) Get more efficient!  Last year I hired a plumber on barter to install a tankless water heater for me (that I obtained on barter).    The new water heater is more efficient than my old heater with the added benefit of never running out of hot water.

2)  Think outside of the box.  Instead of heating  my home with gas or electricity I use a wood stove most of the time.  I love a warm fire and because I barter for the wood I can keep my house a lot warmer than I could otherwise.   One of the down-sides of heating with wood is that you tend to have a toasty living room while your bedrooms remain icy.  That is why I’ve got a heating contractor out at my house this week working on barter.  He is installing a secondary ventilation system that pull warm air from above my wood-stove and blow it out vents in the bedrooms.

Because my home has an unusual roof I have not been able to put solar panels up there, but I think that’s a fantastic idea.  Even if you couldn’t trade for the panels, you should be able to trade for installation  Personally, if I had solar installed I would get an over-sized system and look at bartering for an electric vehicle as well.  That’s like bartering for gasoline!

How to post on Craigslist to find barter partners


Bartering on craigslist may seem very simple to you, but I’m hoping that I might have a few pointers here for you that will improve your performance regardless of your experience.

1)  Post in the barter section.  It may seem counter-intuitive, but as it stands right now, Craigslist has a barter section, but it’s buried inside the “for sale by owner” area of the website.

2)  Make it clear if you are buying or selling.  The title of your post is the most important part of the post. Make sure you not only state the object/service of interest but also if you are trading for the item or trading it away.  

3)  Ask about location.  It’s a big waste of time to work out a deal with folks that are further away than you are willing to drive.  Ask where they are up front in your ad and save yourself some time.

4)  Caveat emptor.  Use your brains.  Follow the same basic safety rules that you would with a cash transaction on Craigslist.

5)  Post on Thurs.  Craigslist gets to most visitors on Fri/Sat/Sun so posting Thursday night sets you up to have all those folks see your ad.  Also, mark your calendar to repost all your unanswered ads every Thursday evening.

6)  Be looking for something specific.  I saved the best for last.  This is really the most important thing I have to pass on to you here.  I suggest that you never post something like:  “I have a purple people eater.  Email me back and let me know what you’ve got.”  The problem is that you are inviting the entire world to waste your time offering you a bunch of worthless junk that you have no interest in.  The best way to post on Craigslist is to create ads that state exactly what you are looking for .  For example:  “Wanted:  dungeness crab on barter.”  I would also suggest that you be vague about what you have to trade. I say something like, “Barter is my hobby and I have thousands of new or used items to trade.  Please contact me so we can figure out what you’d like best.”  Don’t forget that you have access to everything available in your barter exchange to trade on craigslist.  The reason for being vague is that you never know what the person who is reading your ad may want.  If you post specifics about what you have to trade, you could just as easily give the reader a reason NOT to contact you as you could give them a reason to call.

Please feel free to post your own craigslist advice in the comment area.  Thanks!

"Bird-dogging" with barter


“Bird-dogging” is an old salesman term that refers to paying a commission to your own customers when they refer business to you.  I assume the term draws from the concept of a hunting dog pointing to a bird for you.  I recently ran into a barter version of this that I thought was interesting.   This vendor was being promoted within one of my barter exchanges saying that they would pay $100 in barter currency to any exchange members that refer clients to them that end up doing business.  Here’s the best part;  they are looking for BOTH barter clients as well as cash clients.  If the promotion worked, they would be pay $100 in barter for new cash clients!  How great would that be!!!

If you wanted to expand your bird dog program to your cash clients, what you would do is find a really good give-away that you could purchase on barter (like a restaurant gift certificate?) and then offer that to all your cash clients as an incentive for referring business.

I haven’t tried this technique myself yet but I can’t think of how you could lose in trying.  I’ll let you know how it goes when I give it a try.

The value of MSRP in barter


At the most basic level, barter is about making sure that two potential trade items/services are of relative equal value.  You want to make sure you are comparing “apples to apples” and not “apples and oranges.”  This not only means that both trade items should be the same price, but that they are both priced using the same methodology.  Common pricing methodologies would be wholesale pricing, retail pricing and sale pricing.  It would not work to trade your time at wholesale prices while trading for an item at retail prices.

Recently I had a gentleman unhappy with me because I was charging significantly more for an item on barter than I was for cash.  As you know I’ve repeatedly warned against price gauging in barter and that was what this trade partner thought I was doing.  There is (in my opinion) a very important exception to my general rule of barter/cash pricing being equivalent.  That exception is when your cash price for an item is discounted, which was the case for this trade.  Although I absolutely will stick to my guns that barter prices should never be above retail prices, we also need to agree that they really can’t go under them either.  It simply isn’t equitable to sell your products/services at wholesale prices, and turn around and use that credit to buy products/services at retail prices.

But what is the retail price?  That’s the rub isn’t it?  Anybody can make up a price and say that it’s their retail price.  In the case of the item that I was selling, it was easy because the manufacturer of the item has a lock on the market and everyone is selling the item for the same price (MSRP).  Another good source of MSRP is the manufacturer’s website.  Just as an aside, you cannot necessarily trust what says the retail price is for an item.  I recently found that often 3rd party Amazon sellers will make up higher-than-reality retail prices to offer fake discounts.

Bottom-line is that you should expect to always pay full price when you barter.  Conversely you should always charge full price when you barter.  That keeps everything fair for the buyer and seller.  If you want a discount go to Costco, pull out your wallet and pay cash.

Being fair to your Barter Exchange


Barter exchanges help you by acting as a broker hooking you up with potential barter partners.  They make their living by charging a commission on each transaction (usually around 5-6% per transaction).  Because there is a transaction when you earn barter credits and a second transaction when you spend them, you end up paying a total commission of 10%-12% in cash on your barter.  If you trade a lot (like I do) then your monthly bills from your exchange can be substantial.  That being said, I do not begrudge them their fees.  They earned them.  Honestly I look at my exchange like an outside salesman.  I will happily pay a salesman a 15% commission on any business that they bring to me so really my barter fees are a deal to me.

That being said, I have found that there are many barter members who REALLY don’t like paying their transaction fees.  Because of this they often look for ways to rationalize why it’s OK to cut out their exchange from transactions and steal their fees.  The most common excuse I hear is that members feel it’s fair to pay their exchange on an initial transaction when they first introduce a new barter partner, but if they continue to trade on an ongoing basis, they don’t feel that it’s fair for the exchange to earn fees for doing “nothing.”  I understand this point of view, but if you want to conduct business in an honest and moral way the decision is quite simple:  What does your agreement with your exchange say?  If it says that you are not to barter directly with members that were introduced to you through the exchange, then you should not.  If your agreement with your exchange does not include that stipulation then you are free to trade direct.  If you have an agreement that you do not like, then certainly feel free to renegotiate or cancel the contract you have with your exchange.

Bottom line:  Your barter exchange is a great asset to your barter business.  Treat them well and pay their bills happily.  Cutting corners to short their fees is the same thing as shorting your employees part of their wages.

Calculating the "real" percentage of business you conduct in barter


Honestly I think this is probably the most important article I’ve written to date.  Please check it out and post questions/comments below.

When you are conducting business, it’s important to know how your money comes and goes.  One of the things I keep my eye on is what percentage of my total business I do in barter.  Exactly what the ideal percentage is will vary and could be a good topic for another article.  What I want to concentrate on right now is how to put together an accurate calculation.  What really matters is your percentage of profit that is cash vs. barter, not what your percentage of sales is.

Unfortunately I’ve been operating on incorrect figures in this area for years.  In order to figure out how much cash profit and how much barter profit I made, I looked at the percentage of sales in the two areas first.  For the purposes of this article let’s say I did 90% of my sales in cash and 10% in barter.  I would then take my total profit and apply those same percentages to see how much cash profit I made and how much barter profit I made.  There are two things that are very wrong with that calculation:

  1. Your profit margin for cash and barter may be different.  Even when you are charging your clients the same either way (which is what you SHOULD ALWAYS DO) your margin could be different because (for example) it may be that you sell different products/services that have different profit margins to your cash and barter clients.
  2. As a general rule your expenses for both cash and barter sales are in cash.  If you spent 100% barter to earn barter then your barter sales would not effect your cash profits, BUT BECAUSE YOU SPEND CASH to earn barter, for an accurate calculation of your cash and barter profits you need to adjust your cash profits down and your barter profits up.

That second item on my list here was difficult for me to wrap my brain around.  Here are some numbers to help take this concept from abstract to concrete:

Cash sales = $900,000
Barter sales = $100,000
Total sales = $1,000,000

Just to keep this simple I’m going to keep the profit margin the same for cash and barter.

Total profit = $200,000
Profit margin (cash and barter) = $200,000/$1,000,000 = 20%

Unadjusted cash profit = $900,000 x 20% = $180,000
Unadjusted barter profit = $100,000 x 20% = $20,000

Again, just to keep things simple, let’s say that all expenses for cash and barter sales were paid in cash.

Cash expense for barter sales = $100,000 x 80% = $80,000

Next you adjust your cash and barter profit based on your freshly calculated cash expenses

Adjusted cash profit = $180,000 – $80,000 (cash expense for barter sales) = $100,000
Adjusted barter profit = $20,000 + $80,000 (cash expense for barter sales) = $100,000

Here’s the IMPORTANT PART…. although your sales were 90% cash and 10% barter your profits were 50% cash and 50% barter.

It takes time to barter


An important cost of barter that many people (including myself) forget to factor in is the time that I spend on it.  It takes a lot of time to put a deal together.  If you are like me, you’ve usually got 20 deals going at the same time so it really ads up.  Some of the things that I spend time on include:

  • Staying on top of what is available in my barter exchanges
  • Calling on folks in my barter network to put together deals
  • Posting to craigslist and following up on responses
  • Work to recruit new members into my barter exchanges
  • Work recruiting new direct barter partners
  • Time spent looking for good ways for my barter partners to spend credit they have with me
  • Extra book-keeping to keep the records straight
  • Ongoing help/training I give to everyone I ever talk to about barter

When recruiting a new barter partner I think it’s a good move to point out to the prospect that you are talking to that barter is not as simple as cash transactions.  They need to know that they will need to invest some time into barter in order to reap the rewards.  All of that being said, it truly is a labor of love for me.  <grin>  I’m a barter addict and it rare for me to resent the time I spend on it.

Don't demand your rights when you barter

Angry Brunette Through A Fisheye Lens

That sounds strange doesn’t it?  Why would I encourage you not to demand your rights?  This is America!  The land of rights and liberties!  Here’s where I am coming from:  Your goal with barter partners is to establish and maintain life-long relationships.  Generally speaking digging in your heals and demanding your rights is not a good way to encourage that.  I want to be my barter partner’s favorite business person.  Sometimes…that means overlooking where they may have fallen short of my expectations.  Don’t get me wrong here…I’m not advocating that you let yourself be used as a doormat.  What I’m saying is that I try to give my barter partners a little extra leeway with how they provide their services.  In the long run you more than make up for it simply because you are bartering with them instead of paying cash.  That being said, if you just plain get a bad deal, you can’t ignore that.  If a serious problem crops up talk to your barter partner and if you can’t work it out take it to your barter exchange (if you used one).  Your last resort is court, but I have to tell you that my experience has been that even when you win in court you lose when you consider your time and the chance that you won’t even collect what was awarded.  It’s much better to be a little flexible and get most of what you want than to fight tooth and nail for every scrap you deserve and ruin a relationship forever.


The power of a letter or reference


You know how EBay users can rate each other?  Folks can post notes about their experience doing business with you.  As a buyer when I see that 300 people have posted back feedback 99% of which was positive it greatly lowers my perceived risk in making a purchase.  I have never seen the equivalent in a barter situation, but I have started doing something that is almost as good:  Letters of Reference

In past years I’ve had a tough time bartering within a specific industry.  People just weren’t used to the concept and it made them nervous.  I finally broke in and made a couple good trades with some businesses within that industry but didn’t have luck with some specific players that I was originally interested in working with.  A year later I went back to my successful trade partners and asked for letters of reference.  Armed with those letters I went back to the original businesses that turned me down and low-and-behold….it worked!!  With one business in particular that turned me down flat a year earlier, with the help of my new letters I got a enthusiastic “yes” to my request to barter.

Helpful hints for letters of reference:

  1. You need to help your happy customers write letters of reference.   As happy as they are and as much as you believe them when they say they’ll write a letter for you, very few of them will actually follow through.  It’s nothing personal; they are busy running their own business.  So when I say that you will need to “help” them, what I really mean is that you will have to write it for them.  What I’ve done in the past is contact the happy client and ask them if it would be OK for me to write a rough draft of a reference letter for them, that they can then check and edit however they want.  They have always agreed and have pretty much always approved what I write w/o change.
  2. Within the letter, try to get across the message that the client was happy with the transaction and that it was a pleasant and profitable experience.   Put yourself in the shoes of a nervous prospective barter partner and include what you think they would want to hear to calm their fears.  Of course it goes without saying that anything in your letters should be 100% truthful.

Barter and fundraising for non-profits

I recently had a great experience doing some fundraising for my kid’s school that I wanted to share.  The school is putting together gift baskets that they are going to give away as prizes in a raffle.  I started calling my barter contacts to purchase items for the gift baskets.  I’d call and say something like: “I’d like to buy a gift certificate on barter for a school fund-raiser.”  The results were fantastic!  Not only did I get quite a few great items, but I also had folks offer to just donate the items outright.  I have to be honest;  as a small business person I don’t feel comfortable calling other small businesses and asking for donations.  To call and ask to purchase something and be offered a donation is tremendous.  If you have some credit in your barter account that you don’t already have earmarked, considering using it to help a non-profit this holiday season.