When business executive Jerry Sirt of Des Plaines went on vacation to Los Angeles last year, he took along the whole family: his wife, his two grown children and their spouses. Sirt arranged for the hotel, restaurants, limousines, a dinner cruise, the works. Except for airfare, the trip cost him almost nothing.
“I used barter for practically everything,” Sirt said. “Barter is a great way to get goods and services without using cash. To say that I like bartering is an understatement. I relish it, love it and nurture it.”
Sirt has such affection for bartering because of the personal perks he has received and the extra business it has generated at his Leathermakers and Route 66 stores, which sell leather goods and clothing in five states, including Illinois.
“I just bought 9,000 pairs of ladies shoes on barter,” Sirt said. “It’s a great way for a business to improve cash flow and turn dead inventory into money or other trade, such as advertising.”
Barter–the trading of one good or service for another–has been around since caveman days. Modern barter associations have carried the trading idea to a new level of sophistication.
The United States has about 500 barter associations whose members swap nearly $2 billion worth of goods and services annually, according to Michael Mercier, president of the Cleveland-based National Association of Trade Exchanges, the trade association of bartering groups. The Chicago area has two of the largest exchanges: the Illinois Trade Association in Glenview, which counts Sirt as one of its clients, and Barter Corp. in Oakbrook Terrace.
“Our organization helps people take something they have and leverage it into something they don’t have but want,” said Barter Corp. President Susan Groenwald. “Sometimes you may have what I want but I may not have what you want. So what we do is bring people together and set up a system that can be used to help them get what they want by earning `barter dollars.’ “
Trade exchanges came into being about 20 years ago. Barter Corp. got its start 17 years ago, and it now has about 3,500 clients served by offices in Cleveland, Milwaukee, Crown Point, Ind., and Oakbrook Terrace, with more than half of them in the Chicago area, Groenwald said. She expects those clients to trade $40 million worth of goods and services this year, “everything from advertising, printing and janitorial supplies to travel and entertainment,” she said.
Des Plaines dentist Alfred Roseroot, a six-year Illinois Trade Association client, uses barter to rent and pay for the care of the plants that decorate his office, as well as for weekly bouquets of flowers for his wife. It even helps cover the cost of most of his laboratory work.
“I’ve been largely able to cover my lab bills through barter,” Roseroot said. “Good use of barter is a great way to more efficiently run a business. Plants and flowers, accounting, new office upholstery . . . I’ve used it for many things. It’s not something to be used frivolously, because there are tax implications. Some people forget that.
“I know people who still don’t quite know how barter works. It’s a little quirky, but it’s not real hard to understand.”
Here’s how a barter exchange works: Pete the Plumber provides $2,000 worth of plumbing services to a hotel. Pete earns $2,000 of trade credit with the exchange. The hotel pays the exchange a commission based on a percentage of the value of Pete’s work.
Pete uses his barter credit for advertising on a local radio station. The station receives $2,000 of credit with the exchange, and Pete pays the exchange a commission.
And so it goes, round and round, with the exchange keeping track of barter transactions and collecting a commission each time a client uses barter dollars to buy a good or service.
Commissions and signup fees vary, depending on the barter exchange and the trading program a client buys. At Barter Corp., signup fees start at $295 and go to $1,400. Commissions range from 4 to 6 percent, with those who pay the highest signup fee paying the lowest transaction commission.
Barter Corp. client Nancy Bouton, owner of Elgin Super Print in Elgin, has been bartering since the early 1980s.
“Most of the business I do on barter I would not have otherwise,” she said. “My barter customers are usually people who would not come to me normally. But because I’m in the exchange and they want to use their barter dollars, I get the business.”
Bouton has become quite creative in how she uses her barter dollars. Some of her employees have accepted barter dollars in exchange for overtime pay, and several years ago she was able to skip paying rent by letting her landlord use her barter account to buy new furniture.
As much as she likes bartering, though, Bouton cautions that it can have drawbacks. First, people need to remember that they must pay state and federal taxes on the barter purchases. The exchanges help with this by keeping a record of their members’ purchases.
She also said some people tend to spend more on barter than they otherwise would.
“More than likely, you are going to pay the retail prices, which you know most stores are not charging,” she said. “I do not inflate my prices for barter business, but some other people do that. Also, cash customers are probably going to come first. Barter is really good for filling in the slow times and for helping to improve your cash flow.”
Those drawbacks are why Sandi Anderson, owner of Unicorn Publications in McHenry, pulled out of her barter exchange a few months ago.
“I had some positive experiences and some negative ones,” she said. “I used barter to pay for the labor to put a new roof on my home, and the man did a superb job. So that was a very good experience. But I often found that a lot of businesses had a big markup on barter business, and I didn’t like that.”
As a marketing tool, though, the barter exchange membership paid off for her in the form of several barter customers who are now cash customers of hers.
Jack Schacht, president of the Illinois Trade Association, said many small businesses join barter exchanges partly for the marketing benefits they receive.
“Because of bartering, people will go out of their way to make purchases from you,” Schacht said. “So businesses get more exposure to potential customers. And because trading conserves hard cash, it enables a business to keep cash for things that can’t be traded for.”
Sirt said he began bartering about 18 years ago. Even though he is an old hand at it, he said he believes barter’s greatest value lies in giving new businesses a boost.
“Look at how many businesses fail in the first six months,” he said. “I feel that if a small business pursues barter, its chances of survival would double — and I mean double — because it could get menus, signs, advertising, electrical work, plumbing, all kinds of things on barter instead of with cash. And cash flow is critical.”
Schacht said his trade association has 4,500 clients who do nearly $1 million worth of barter business each week, and not just with other members. The association has ties with 60 other barter associations across the country.
Schacht said the association assigns barter brokers to help clients set up trades. Because many business people use barter dollars for dinner, travel and entertainment, the exchange also has a fully staffed travel department for its members. And a media department also helps place advertising bought with barter dollars.
Membership fees run from $395 for small businesses to $695 for large ones. The exchange charges 10 percent of the amount of a client’s purchases. Schacht said most clients are privately owned businesses with revenue of several hundred thousand dollars to $10 million.
Not every business that wants to join a barter exchange gets accepted. Exchanges try to accept businesses that have products or services the membership wants.
For Steve Slamowitz of World Publishers, a Des Plaines company that sells reference books, dictionaries and related educational materials, joining the Illinois Trade Association five years ago has proved to be a good move.
“I went to a barter show, saw the products and services that were available, tried it and liked it,” he said. “It’s really helped me improve cash flow. Fax machines, phone service, restaurants, travel, car repairs, eye doctors. . . . There’s so much you can do on trade, it’s amazing.”
Where to go
Looking to make a trade? Here’s how to contact two of the larger barter associations:
– The Illinois Trade Association in Glenview: 847-390-6000.
– Barter Corp. in Oakbrook Terrace: 630-268-2820.
