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Long before Jack traded
his cow for a handful of magic beans, the system of barter was
already alive and well. Even after the ancient Greeks and Romans
spawned the first monetary systems, barter continued to flourish --
most notably for the Native Americans who traded the island of
Manhattan (but luckily not future bingo rights) for $22 worth of
beads and trinkets.
While most all mobiles
have at one time or another directly traded their DJ services with
other businesses, the process can be time-consuming and not always
successful. Enter the "barter exchange", an association of
businesses networked through a central office to trade goods and services.
Barter exchanges
initially charge a sign-up fee that can range from $100-$400, and an
annual renewal which is usually less. For that sum, your company is
included in a printed directory of businesses who are also looking to
trade. Some exchanges allow you to buy an additional directory ad to
stimulate interest in others trading with you.
The mechanics are simple.
Say the owner of the local widget store decides he'd like a DJ for
his daughter's wedding. Mr. Widget simply finds a mobile who is a
member of his barter exchange. He pays the DJ's fee by transferring
an appropriate number of "trade credits" to the DJ's
account; typically $1 equals one trade credit. Widget's trade credits
have been accrued from trading goods or services with other barter
members. He also pays a cash surcharge directly to the barter
exchange (usually 10%) for their administrative handling. Any
applicable sales tax is paid directly to the seller by the buyer.
Sound easy? In principle,
yes. But not all barter exchanges are created equal. While some limit
the use of your credits to local members; others are networked with
other trade organizations who can redeem your credits with national
hotels and resorts, or with a vendor that might not be available
locally. Some barter exchanges screen their "mix" of
business categories carefully; others put no limits on the number of
similar businesses they admit.
The latter became the
case for Rob Alberti, owner of the three-system After Hours DJ
Service in Westfield, MA. Encouraged by a feature in a national
magazine about bartering, he called several different local exchanges
before joining one. "The concept of getting business that you
potentially wouldn't have gotten cash-wise was intriguing. But
whether it was the (barter) organization itself or the area, it
didn't work out for us."
After joining, Alberti
unfortunately discovered there were already four other DJ's in the
exchange. So to encourage trade business for his company, Alberti
paid cash to buy several additional ads in the barter exchange's
listing directory.
The result? After two
years as a member, Alberti says he got only three gigs... all
low-budget events. "Members would call all the DJ's in the
exchange looking for the least expensive one. I was amazed! Not only
did they want to barter, but they wanted to haggle over the
price." Alberti later learned some of the other DJ's in the
group weren't much happier.
Luckily, his final barter
gig resulted in referrals netting three events. "I guess I just
about broke even on the barter exchange venture considering the
additional trade advertising I bought." Undaunted by the
experience, Alberti still believes in bartering... but on a
one-on-one basis. In fact, he admits barter is the only thing keeping
his car on the road -- After Hours DJ Service negotiated a trade with
a local garage for $2,000 in car repairs.
Is $2,000 a lot of gigs?
You bet! Because it's not "real" money, some bartering DJ's
may get themselves overextended in trade credits and sacrifice prime
dates for cashless bookings. To avoid this, it's good business sense
to consider "blacking out" certain time periods from trade
credits like airlines and hotels who restrict discount fares from
holiday travel. Also, to avoid a haggling hassle, you might adopt a
policy of always quoting your full regular rate for a barter gig. (A
"How did you hear about us" qualifier will let you know up front.)
To get the most out of a
barter exchange, K.C. Kokoruz of Chicago's Spinnin' Discs recommends
you thoroughly research an exchange's membership list before joining.
"If someone approached you for a bridal show and you found they
had 70 DJ's in there... you're not going to get anything out of it.
Likewise, if I have comparable competitors in my barter exchange, I
know they're after the same clientele I am. I'm not going to benefit
from a barter group where I'm going to have to justify why I don't
charge $250 to every (trade) customer who calls."
A member of four
Chicagoland barter exchanges, Kokoruz finds most of his trade
bookings are relatively last-minute -- just 4 to 8 weeks before the
event. It's a symbiotic strategy that works for the seven-system
company: it has accrued $30,000 in trade credits over three years.
"I inventoried the
type of business services I needed, then shopped for the barter
exchange that had them. I've bartered for carpet cleaning, printing,
landscaping, even advertising in "The Wedding Pages".
Kokoruz advises against trading for high-ticket merchandise.
"I've found TV's, computers and fax machines are generally used
or reconditioned and very expensive. Because of the dealer's cash
outlay, you can bet you're going to pay full markup."
Interestingly, this theory didn't dampen Kokoruz's enthusiasm for
using some of his trade credits to acquire two new Waverunners.
Because no two businesses
do business the same way, there could be one last hitch. "In my
experience most people trade labor at 100%, but those services that
use expensive materials might ask for cash." Such was the case
when Spinnin' Discs bartered for logo T-shirts and leather jackets.
Has his extensive
bartering led to more cash business? "Oh my God, yes," says
Kokoruz. "I've gotten a lot of business I never would have had
before. I also use some of the trade credits to help make me money --
I've traded for billboard advertising and even a booth at a bridal show."
A final caveat -- just
because trade credits are used as currency in a barter deal doesn't
mean that Uncle Sam won't demand his due in certified greenbacks.
"The government looks at barter as taxable income," advises
Tony DeLaTorre III, owner of Barter Exchange in San Bernadino, CA.
"Should you barter over $600 in a year, your trade organization
will send you IRS Form 1099-B which must be filed with your regular
tax return."
And if you're thinking of
joining a barter exchange today and trading for your own Waverunner
tomorrow, you could be in for a surprise. "Exchanges aren't
supposed to 'front' trade credits to your account," says
DeLaTorre, who enforces that policy for his 160-member exchange.
"Before you can receive goods or services for trade in my group,
another member has to use your service first." Over his 12 years
in the industry, however, he has seen many other exchanges make
exceptions to this unwritten rule.
Although working with a
barter exchange is a bit more complex than your grade school
lunchtime experience of trading egg salad for a peanut butter
sandwich, the basics are the same. Before you join, make sure your
barter exchange offers the services you want. Printers are the
highest in demand -- a good exchange should have several to choose
from. Check to see that the number of DJ's in your exchange is
proportionate to the rest of the membership. Confirm the business
getting your trade credits is reputable and established before you
barter. After all, after they've eaten your peanut butter there's not
much you can do when you unwrap their spoiled egg salad sandwich. |
