In an economic downturn the first priority of many businesses is to cut spending. And, given their druthers, they would prefer to keep all of their employees busy and on the payroll. One way to accomplish these potentially conflicting goals is a solution of antique vintage known as bartering.
The popularity of barter is usually inverse to the state of the economy, suggests Bryan Bruder, who has just opened Barter It, a barter exchange located at 4390 Route 1 that allows businesses to trade goods and services with barter dollars instead of real ones. Although barter generally booms when business is slow, it performs an important function even during a stronger economy.
“Every business, no matter how good, has times of underutilized capacity,” says Bruder. By using idle resources to provide services through barter, the business is earning barter dollars it can spend without adding to its fixed costs. “Hotels love us,” he says, because he can help them rent out excess rooms. “The moment in time is lost if they are not sold.”
Bartering is also a way to dispose of excess inventory at a fair price. “With barter, you don’t have to discount it into oblivion,” says Bruder.
Bruder himself has been using barter networks since the early 1990s for his telecommunication business, Advantage Voice and Data, founded in 1992 and also based at 4390 Route 1. When other companies in the networks use the company’s services — voice and data solutions for business that include telephone and Internet service as well as local area and wide area networks — they pay him in barter dollars that he banks and can later trade for services that his business needs or that he and his wife will enjoy.
But perhaps more important, bartering became a way to bring in new business. “I discovered that bartering was a great way to get new clients,” says Bruder, “and I was able to spend the barter dollars I earned enhancing my business as well as improving my lifestyle.”
The barter dollars Bruder earned might go for a plumber, exterminator, or electrician, or for advertising or print services. Or to take clients out to area restaurants or just grab a pizza with his wife and partner, Julie, and the kids. Or he can use the barter dollars to have a good time — as in the vacation he is planning for his family to Disney World, where he will be using barter dollars for his hotel, dining.
Barter It’s clients include Interactive Design Solutions, a web development firm owned by Andrew Wong’s, whom Bruder says barters for nearly everything — electrician, printer, even gets his rent, which Wong gets on barter from Bruder; Salt Creek Grille CanDo fitness club and Tres Piani restaurant in Forrestal Village; Mystique Hair and Skin at Princeton Marketfair; electrician Tom Wells; Ferry House; Massage Garden in Mercerville; and Specian Plumbing and Heating and Lioni Heating and Cooling in Branchburg.
Without an exchange like Barter It and the 500 or so exchanges like it, barter would be virtually impossible. For barter to work on a one-to-one basis, what one person needs must match what the other is willing to barter at the same moment. Supposes a dentist has a fender bender and wants to trade his dental services with the auto body shop down the street. If the auto mechanic is not immediately in need of $12,500 worth of dental work, barter is not a viable solution.
So what Barter It and other such exchanges do are to act as clearing houses to help their members trade with each other. But Bruder emphasizes that his business is more than just a website and that Barter It is hands on with its customers, creating sales opportunities and seeking out new members who offer services and products that existing members need. “We don’t consider ourselves an online company,” he says. “We have an online presence, but we can teach our members how to go in, use software to find what they need, and promote what they have. We are a real world company.”
The company might, for example, pair a uniform supply company with restaurants or dental offices.
Bartering can also bring in new cash business, through referrals from barter customers. As an example, Bruder points to his accountant, who recently told him she got five new barter clients this tax season, and two of them referred her to cash customers. Bruder notes that she has used her barter dollars to go to a spa in North Jersey and is going to use more to send her kids to camp this summer.
Bruder started the business last November and already has 100 members, whose services include information technology consulting, van services, heating and air conditioning, public relations, and marketing. But Barter It members are not limited only to other Barter It members when looking for potential barter opportunities. Through the company’s website members can trade with 30 other barter networks that use the same bartering software. Members who are not Internet savvy can do all their trades by phone.
Through the International Reciprocal Trade Association, Barter It has access to a total of 500 exchanges, which can be especially helpful when members are looking for travel opportunities in distant locales. To connect members with hotels, Barter It’s staff makes the connection by phone with other exchanges — for example, the brand-new barter network, the Aloha Barter, which was advertising rooms in Waikiki condos at $110 to $160 a night.
Members post all barter transactions on the Barter It website, which enables the company to keep all the records. For tax purposes, Barter It sends out 1099-B forms for all sales, and Bruder notes that any barter purchases for business purposes can be entered as expenses on Schedule C. Each month he sends out a statement detailing the amount of products and services sold and purchased.
To ensure the quality of products and services, Barter It relies primarily on member feedback. Every transaction generates three E-mails, to the buyer, the seller, and the exchange.
Then Barter It follows up to ensure that all went well. If the company suspects that someone is not trading fairly, it may mystery-shop that business.
The exchange also does some due diligence up front, for example, making sure that service people like electricians and plumbers are licensed and insured. But for the most part Barter It’s policy is buyer beware. “We tell customers to be diligent and do research just like with a cash transaction to make sure they are being treated fairly,” says Bruder.
If members do not follow the rules — for example, they try to combine cash and barter, which is a big no-no — they get one stern warning and then they have to leave the exchange if they violate the rules again.
Barter It earns income through a membership fee, which is normally $395, but for charter members is now $195, and through a 6 percent fee on each trade.
Bruder grew up in Edison, where his father owned Edison Tubular Products, a seller of large quantities of steel tubing to distributors; his mother also worked in the business. Bruder graduated from the University of Pittsburgh in 1992 with a bachelor’s in business.
After college, he started Advantage Voice and Data. Although he and his wife were active in barter networks from the beginning, he got tired of driving out of the way for his barter services and decided to launch a network local to Central Jersey.
For his two businesses he has five employees, with one broker devoted to Barter It, and the two technicians — Bruder, and his wife — all wearing two hats.
Although Bruder admits that barter does not work for everyone, he could only name a couple of industries for which it is probably out of the question, for legal reasons — real estate brokerages and insurance agents. “Almost everything else can be bartered,” he concludes.
Bruder’s members extend from an exterminator in Edison to an indoor water park in Cherry Hill. Although there are other barter networks in New Jersey, Bruder does not view them as competition, because they have less utility to local members, given travel distances required.
In fact, he adds, “I’m proud because we have reciprocity with them.” Through his association with these other nearby exchanges, for example, he can offer his own members access to bed and breakfasts in Cape May and Spring Lake.
To gain new members, Bruder does a lot of networking, attending chamber events and breakfast networking groups. But most of his new members come from referrals through existing members, who get a bonus of 200 barter dollars for each referral that becomes a member.
Bruder’s goal is to keep on growing to ensure that his barter dollar is strong and maintains its value. “If we are successful, people will be as stingy with barter dollars as they are with the U.S. dollar,” he says.
Barter It, 4390 Route 1 North, Suite 211, , Princeton 08540; 732-952-9000; fax, 866-399-5477. Bryan Bruder, president. www.ibarterit.com