‘The House that Barter Built’ - It’s a proven concept that has already been happening in other parts of Canada
Why pay in cash when you can pay in kind? For some businesses, bartering can be a useful way to pay for operational expenses. If they have downtime in a services-based business or excess inventory in the warehouse, barter can be used to convert them into extra revenue in exchange for other services ranging from marketing to photography. Barterpay® President, Doug Robb and Partner, Chris Bowes explain how it works.
Q: What do you want businesses to know about bartering?
Doug: When you buy something for cash, the person who sells you that product doesn’t necessarily go back to [buy something from] your business. A barter exchange guarantees return business—which is something most people overlook. At the same time, it doesn’t have to be a direct contra with the same person you did business with. It can come from anybody in the entire barter network system.
Q: Most people would say that they’d rather have the cash business, right?
Chris: Of course. Cash is king. We don’t expect people to turn cash business away. Rather, we provide an alternative to help them sell off their spare time and spare capacity. First and foremost, we’re running a community of local businesses that works together. We’re like a networking group on steroids.
Doug: With most networks, you meet business owners and hope that one or two might do business with you in the future. The difference with a barter
network is you know that the businesses you meet have a direct financial benefit to using other members in the network. With other networks, there’s a social advantage, perhaps, but no guaranteed financial advantage.
Chris: People say barter is not for them because no money changes hands. In their minds, barter is doing business for free. So, it’s easier to think that a trade or a barter transaction has no value to it. I tell people that as long as they’re using trade dollars, they’re as good as cash. Every trade dollar goes directly into a trade bank account, just like cash. As long as you’re using it, you see the full value.
Q: Is bartering a response to the cost of living challenges we’re facing?
Doug: Is this a good time for barter? Has it come of age? Bartering has been around a long time. It’s one of those things that happens more in a down economy than an up economy. But [even in good times] barter will bring in business you wouldn’t otherwise get, because members will always want to spend their trade dollars. We spend a great deal of our time brokering deals between barter members, too. That’s how we get paid. So, we make sure people want to do business with you over and over again. The big advantage with bartering today is how technology can support a legitimate, user-friendly banking system—similar to traditional banks. You can pay with a barter debit card and those points leave your account and go directly into the seller’s trade account. The system also maintains an historical record of all of your business transactions.
Q: How can a barter network benefit business?
Chris: There’s a big difference between the buying power of a trade dollar and a cash dollar. To earn a thousand cash dollars, for instance, a business has to pay for and maintain all the infrastructure and marketing to attract customers and earn their trust over time. Very few small businesses start out with enough cash power. We introduce new customers to their business right away. Their cost to acquire a new customer is effectively zero and their only cost for a trade transaction is your cost of goods sold. Now they have a new stream of revenue to pay for collateral to operate their business. I’m always shocked when business owners say, “I don’t have any costs you can help me with.” There are always costs that are a major expense to businesses—costs they can replace with trade dollars.
Q: Can you provide some specific examples of the network in action?
Doug: A good example is a hotel with empty beds. They have no cash coming in and no money to spend. However, if a hotel receives $200 trade dollars for a room, they could use those trade dollars to have their carpets professionally cleaned. In turn, they increase their occupancy rate and decrease cash expenditures for a room that would have been worth nothing to them.
Chris: We are in the process of setting up a project called ‘The House that Barter Built’. It’s a proven concept that has already been happening in other parts of Canada in different barter pay regions.
Essentially, it’s where a contractor hires some trades who agree to take a portion of their pay in trade dollars to work on a construction project. The builder can use his accumulated trade dollars—say $100,000 trade dollars—to supplement the cost of sub trades who are building his house. So, it’s costing him $100,000 less in cash construction costs than it would have.
Doug: One of our members got some work done from another Barterpay® member. Over the next month, that member referred 5 new cash paying customers to him. It was the network that brought him those new customers!
Chris: An established Victoria technology company joined our network because we have 4,500 business members to introduce their name to. Cash flow is not an issue in their case. They built up their trade dollars and have been using them to help offset cash costs. But what they value most are the relationships that they are building up nationally. Recently, they gave me a Request for Proposal to send out to different website developer members for a quote on a large real estate website. Seven Barterpay® businesses responded and engaged in conversation. The company had several other business transactions take place just because they found each other. A couple of weeks ago I checked in on them and they said “We’re super happy. We’ve had a lot of cash business happen just because we connected with so many people across the country.”