By Warren Wise
Post and Courier - Charleston
Wayne Lee sees a chiropractor every week, but he’s found a way to pay for it without breaking his back or his bank account.
The owner of Complete Music and Video in Mount Pleasant estimates he saves about $2,000 a year just for his back through bartering, an age-old system of trading goods and services without money that is growing in popularity as the stingy economy makes cash more scarce.
If he needs his teeth cleaned or a crown installed, he barters for it with his dentist, also a barter member. Pressure washing his house? Getting the carpet cleaned? Same deal. He trades it out as a member of Barter Brokers International, a Mount Pleasant-based company with 600 members throughout North Carolina and South Carolina whose trade is up in a down economy.
A struggling economy is a barterer’s best friend, and right now business is booming, said Ron Whitney, executive director of the International Reciprocal Trade Association that is connected to about 350 barter groups worldwide.
“Due to the down economy, the modern trade-and-barter industry is capturing an enormous amount of business,” Whitney said. “Businesses are looking for alternative marketplaces to make up for the loss of revenue they are experiencing due to the economy.”
He added that barter groups “are tailor-made, pre-existing networks ready to
provide more business for businesses.”
In the past 12 months, most of the Portsmouth, Va.-based trade association’s members have reported transaction spikes in deals and new members from 15 percent to 35 percent, Whitney said.
Barter banks
A barter group acts not only as a trade expediter, but also like a bank. It is a third-party record keeper.
And while bartering doesn’t involve cash, it cannot escape the Internal Revenue Service. Members have to report earnings, just like anyone else, to the IRS.
For example, Whitney said a landscaper can have $18,000 in barter sales that is considered taxable income. If that same landscaper has a similar amount of barter buys, that could be an offsetting deduction.
“If managed correctly, they won’t get into a situation of tax liability,” Whitney said.
Firms such as Barter Brokers International keep up with the flurry of transactions for bookkeeping purposes and provide clients with the information they need to report to tax authorities.
“The government and IRS look at us just like a bank,” said Bill Bailey, who founded Barter Brokers International about 15 years ago. “We are our own currency. Because of the recession, people aren’t spending cash. They are looking for alternative ways to survive.”
Bailey said his business couldn’t be better.
“Sales have doubled,” Bailey said of market conditions during the past year. “We thrive in these economies. We are picking up new clients right and left now.”
Exchange rate
Bailey’s company works with about 250 other exchanges around the world, so business is not just confined to members in the Carolinas.
While membership fees and terms vary from one barter exchange to another, it costs a business a onetime fee of $595 to join Bailey’s barter group plus a 6.75 percent monthly transaction fee on total sales and purchases. Members are assigned a broker who connects them to a vendor for a product or service they need.
Transactions require a plastic card and an authorization number requested by the seller for deals over $75. And the system works with credits instead of cash.
For instance, if Lee’s Complete Music and Video provides services for another member, his account receives a credit, or a certain amount of barter dollars, for the value of the job. If he gets his carpet cleaned by another member, his account is charged for the work.
“You don’t have to do it one on one,” Lee said. “That’s what makes it good.”
He not only benefits through services he needs, but also wins new clients for his business.
“It gives us business that we ordinarily wouldn’t get,” Lee said.
Lee handles up to 350 events a year by providing music and video services for parties, weddings and corporate functions, but he saw a 15 percent decline in business last year. About half of his sales comes from weddings, and while he’s still busy, he is glad he’s part of the bartering group.
“It’s worth it to me,” he said. “I come out with more business than what I would have normally.”
Dr. Ted Melchers, a Mount Pleasant dentist, signed on to the Bailey’s barter system about 15 years ago to steer patients to his practice. He now uses his barter dollars mainly for family vacations or to acquire new fly-fishing rods, but he’s also used them for home improvements such as new cabinets, painting, and a heating and air-conditioning system.
“I usually save it for things I wouldn’t spend money on with my budget,” Melchers said. “It’s not a huge part of my practice, probably less than 5 percent. I try to limit it somewhat. I can’t handle a whole office full of barter. If I want to do something, I will call the Baileys and they will direct more patients my way.”
Bill Bailey, of Barter Brokers International in Mount Pleasant, has seen business pick up in the slowing down economy. Successful swap The University of Illinois Extension offers these recommendations for successful bartering.
-Know who will supply needed materials. Usually it is the receiver; but the provider, in some cases, may have the needed tools. When materials must be purchased, work together to determine specifics, cost limits, quality of materials, deadlines and other details that could become irritants.
-Assume nothing. Be sure to agree on the details of exactly what will be done. Be sure expectations are clear to all. In some cases, a contract or written agreement might be a good idea.
J. Ted Melchers, a dentist in Mount Pleasant has been working with Barter Brokers International for 15 years and trades his dentistry services for other goods and services.
“Barter can help you leverage to get things you want, with what you have. All we are is a different currency” - BILL BAILEY PRESIDENT OF CHARLESTON-BASED BARTER BROKERS
For more information on barter for your business call: 1-800-200-5531 or visit. www.barterbrokers.com