By Frank O’Hara
Bartering is not negotiating. Bartering is “trading” for a service, or for the goods you want. In essence, bartering is simply buying or paying for goods or services using something other than money (coins or government printed paper dollars).
Thus defined, bartering has been around much longer than money as we know it today.
Recent estimates indicate that at least 60 percent of companies on the New York Stock Exchange use the principles of bartering as a standard business practice. And congressmen barter daily to gain support for their pet projects. U.S. aircraft manufactures barter with foreign airlines in order to close sales on million dollar contracts. Perhaps you have experienced at one time or another in your life a friend saying, “Okay, that’s one you owe me…” Basically, that’s bartering.
The reason bartering enjoys renewed popularity in times of tight money is simply that it is the “bottom line” method of survival with little or no cash. In times of high interest rates, cash in anyone’s pocket is indeed a very precious commodity, and bartering is even more popular. Bartering affords both the individual and the established business a way to hold onto cash while continuing to get needed goods and services.
In addition to saving a business borrowing costs, bartering can improve its cash flow and liquidity. For anyone trying to operate a successful business, this is vitally important, and for individual families in these times, it makes possible the saving of cash funds for those purchases where cash is necessary.
Starting a Bartering Club
To start and successfully operate a bartering club, you must think in terms of a banker. After all, that’s precisely the reason for your business—to receive and keep track of people’s deposits while lending and bringing together other people wanting or needing these deposits. So your first task is to round up depositors. As a one-man operation, you can start from your own home with nothing more than your telephone and kitchen table, but until you get helpers you’ll either be very small or very busy (probably both).
You can run a small display ad in you local newspaper. A good ad would include the following ideas:
NEW BARTERING CLUB. Trade your expertise and/or time for the merchandise or services you need. We have the traders ready—merchandise, specialized skills, and buyers, too. Call now and register. ABC BARTERING; (123) 456-7890.
When respondents to this ad call, you handle them just as a banker handles someone opening a new account. You explain how your club works: Everyone pays a membership fee of $100 to $300, and annual dues of $50 to $100. The depositor tells you what he wants to deposit, perhaps $150 worth of printing services, and what he’s looking for in return—storage space for a boat over a three month period. If you have a depositor with garage space for rent and needing printing services, you have a transaction. Your service is to spend or line up those deposits to match the wants or needs of the club members.
Bartering Methods
Some of the larger bartering clubs (with several thousands members), simply list the deposits and wants or needs on a computer, and then invite their members to come in and check out the availabilities for themselves. Others maintain merchandise stores where the members come in to first look at the current listing, and then shop, using credit against their deposits. The smaller clubs usually publish a weekly “trader’s wanted” sheet and let it go at that.
These methods all work, but we’ve found that instead of leaving your members to fend for themselves or make their own trades, the most profitable bartering system is to hire commission sales people to solicit (recruit if you will) new members, specifically with deposits to match the wants and needs of your present members. These sales people should get 20% of the membership fee from each new member they sign, plus 3 to 5 percent of the total value of each trade they arrange and close. This percentage, of course, is to be paid in club credits, spendable merchandise, or services offered by the club.
You’ll need a club charter, a board of directors or officers in many areas, and a city or county license. Check with your city or county clerk for more information on these requirements. You should also have a membership contract — the original for your files and a duplicate for the member. In most cases, you can write your own, using any organization membership contract as a guide, or you can have your attorney draw one up for you. You’ll also need a membership booklet or at least an addenda sheet to your contract, explaining the rules and bylaws of your club.
Supply your bartering members with consecutively numbered “club membership identification cards” for their wallets or purses. Some clubs even give membership certificates suitable for framing. You can pick these up at a large stationary house or commercial print shop.
Two things are important to make up of the bartering membership package you exchange for membership fees:
1. It must be as impressive as you can make it.
2. It must be legal, while serving your needs almost exclusively.
Recruiting Bartering Members
You should have at least 100 bartering members before you begin concentrating on arranging trades. As stated earlier in this report, the easiest way to recruit new members is to run an ad in your newspapers, and perhaps even on your local radio stations as well.
Follow up one these inquiries with a direct mail package, which would typically consist of a brochure explaining the beauty and benefits of being a member of your bartering club, a sales letter, and a return reply order form. After you’ve sent out the direct mail piece, be sure to follow up by phone, and if necessary, make a call in person as any other sales person would do.
Another way of recruiting new members is via the Amway Introduction Party Program. Allow a certain number of club credits for each party a club member arranges for you. Insist on at least 10 couples for each party, and then as the “Attraction of the Evening,” you or one of your salespeople gives a motivation-benefits available recruiting talk. Be sure you get the names, addresses, and phone numbers of everyone attending, and be sure that everyone leaves with your literature.
If all those in attendance at these parties do not join, then follow up with them, first by phone and then with personal sales presentations. Once you’ve got them interested in your club, do not let go or give up on them until you have signed them as members. Another thing — take a page from the Party Plan Merchandiser’s Handbook, and look for those who would be most likely to want to promote a similar party for you. Offer them an item of merchandise that they might be particularly interested in, and club credits if they’ll not only join, but also stage a party for you.
A bit more expensive, but just as certain of success are free seminars. Rent a large meeting room, advertise in your local papers, and then put on a hard-sell recruiting show. Such a plan is very similar to the party idea, but on a larger scale.
Hiring Commission Salespeople
Ideally, you should have one salesman for every 50,000 people in your area. Run an ad in your local newspaper, and hire only commission salespeople. Give them a percentage of the membership fee for each new member they sign, plus a small commission on each trade deal they close.
Assign each of your people specific territories, and insist that they call on potential commercial accounts ranging from the “hole in the wall” rubber stamp shop to magazine publishers and commuter airlines. There’s plenty of business available in every city or metro area in the country. Encourage your sales people to be creative and imaginative when calling on prospects. Schedule “open discussion” sales meeting every morning before salespeople “hit the bricks.”
Start-Up Costs
Precisely how much are you going to need in actual start-up costs? You will need at least $500 for your printing and legal fees, unless you can trade charter memberships in your club for these services. Time wise, you’re going to be putting in 18-hour days, and 7-day weeks until you get those first 100 people signed. And there won’t be any money for salary or long-deserved vacations from these first 100 members you sign. You’ll need it all for advertising, membership packets, and office set-up. However, if you can really work at it, you should be home free in six weeks or less. Then you can set up your office, hire a couple of people to handle the paperwork, and take on a salesperson or two.
Reputation and success in matching offers to wants will be just as important as image, so give it your all. One source of ongoing help and knowledge about bartering is a quarterly publication entitled BARTERING NEWS. Write and ask for a sample copy. The address is: Bartering News, PO Box 3024, Mission Viejo, CA 92690. Good Luck.
Frank O’Hara is a freelance business writer and publisher. You can obtain a wide variety of online and offline marketing strategies and online business opportunities by visiting his web site at http://oharapublishing.tripod.com.
