Thursday, 19 July 2012
HOW TO INCREASE YOUR BUSINESS BY BARTERING
The art of Bartering has been around since time immemorial and it has been proven to be an acceptable and enjoyable way of doing business with other like-minded people. Bartering can also be a satisfying and advantageous way of obtaining essential goods and services especially when money is tight. Yet, while doing trade by barter has been common practice that is acceptable across much of the world, and frequently used by governments to trade commodities such as oil, in Britain there has been certain scepticism surrounding it despite the advantages it can bring.
As any small business knows, a lack of cash flowing in can often be a burden especially during these hard pressed times while the banks are refusing to extend lending and overdraft facilities to viable enterprises. During periods when cash sales are scarce, you still need to obtain essential raw materials or services from your suppliers in order for your business to survive. You might also be sitting on excess stock that is taking up valuable storage space and costing you money that you want to shift. Those in a service industry are also likely to have excess capacity that they need to fill to keep the business ticking over. This might include an hotel with empty rooms that need occupying, a graphic designer that has time on their hands or a publication with spare advertising space going begging. Restaurateurs will know that it creates a bad impression when a few paying customer are surrounded by an otherwise empty dining room. Customers prefer eating in vibrant establishments; empty premises create a bad ambience and can damage a reputation by suggesting the food is not good. It makes good sense to fill empty tables with diners even if these customers cannot currently afford to pay in cash but are willing to exchange something else your business may need?
When customers want to buy your products or services but do not have the cash in the bank to pay for them, it really can be advantageous to retain them as customers if they are able to offer some form of barter? Turning a customer away may resort in the loss of a long term business arrangement. Conversely, by retaining their custom often leads to recommendations to others who may be cash buyers. Turning away business is never a good idea and can cause things to stagnate. So how should you use barter to improve your business? The simplest way is to exchange your goods with somebody that has something of equivalent value that you need. This is okay in theory – but it does severely limit your options by throwing up a second problem; what happens if you have no need for the goods the customer is offering?
The solution can be found by joining a group of like-minded businesses that are willing to exchange their wares with each other in an organised way. This has been attempted by various communities and can work well if, for example a local gardener is able to exchange his freshly grown vegetables with his local pub for beer, but the system is very restrictive and is hardly likely to create any business growth for the participants. Unless this form of bartering is conducted on a formalised basis it is also likely to attract unwanted attention from the authorities.
What is needed is a nationwide system that allows members to exchange their goods and services by accessing a vast network of other businesses indirectly instead of just locally within a single small community. Such a nationwide organisation already exists; it is called Bartercard.
Realising that there is an ongoing need for a single, well organised structure capable of offering bartering opportunities to a wide number of different business types offering a vast variety of goods and services without the constraints of cash, Bartercard was formed in Australia in 1991 with one hundred members. Within two years it had expanded to New Zealand and by 1996 had set up in the UK. Bartercard International now has more than 35,000 active trading members spread across six countries; the UK, Australia, New Zealand, Cyprus, United Arab Emirates and Thailand but also has agreements with other barter networks worldwide. It is the world’s largest computerised Barter network and currently there are around 4,000 trading members in the United Kingdom.
Bartercard works by simplifying the trading process created by bartering by matching a member’s requirements to other appropriate members who can supply the products and services that they require. It is a business exchange that removes the restrictions imposed by having to exchange your goods in a straight one-to-one swap at a local community level. Instead, once you have concluded a sale, the value of it will be credited to your Bartercard account so that it can be ‘spent’ to obtain any goods or services from any other Bartercard member worldwide. This is achieved by conducting transactions in what are known as ‘Trade Pounds’, a form of invisible ‘currency’ that is used when one member trades with others. Thus, when you make a sale to another Bartercard member, the transaction is conducted in Trade Pounds for the value of the sale including VAT when applicable. When you decide to eat out, stay at a hotel, buy items or services you need etc from another Bartercard member you merely present your Bartercard (similar to a debit card) and pay using Trade Pounds instead of spending cash. The same thing happens in reverse when you sell items to a fellow member.
Bartercard is not intended to be used as a replacement to cash trading; but it does offer an alternative source of income, and will remove the need to reduce your vital cash flow when buying from other members. Bartercard membership also encourages members to trade with each other. This can be particularly beneficial during lean trading periods or when you have excess stock that you need to sell that another member may require. Bartercard also works by introducing new customers to your business that you might not otherwise have had. Bartercard is extremely flexible.
Although Bartercard has a joining fee, its income is derived by charging a small monthly administration charge and a transaction fee of 5.5% plus VAT on sales and purchases that pass through a member’s account. However, these charges are extremely small compared to the equivalent cash that is saved. It is a great way of doing business and is approved by HMRC and therefore completely legal – with members paying tax and charging VAT on transactions in the normal way. Members are also assigned an account handler who actively works to introduce additional business opportunities by matching the needs of other Bartercard members. Another advantage of Bartercard membership is that it fosters strong working and social relationships through regular networking events and other member services that include a quarterly magazine, online directory, auction site and the ‘Daily Trader’, information that is emailed to members giving details of any special offers or business opportunities that are available to them.