This page is a work in progress and will ultimately contain a wealth of information about the initial set-up of a barter exchange, so be sure to visit again soon…
There are many factors to decide on when initially setting up your new barter exchange…
It will be helpful to your planning if you first think about your answers to these questions:
Future topics coming soon (highlighted in blue)…
Mission Statement
Trading Rules
You will need to develop Trading Rules detailing the Terms & Conditions for businesses to join and participate in your barter exchange. Be sure to include the duties and responsibilities of all of the parties (buyer, seller and barter exchange), in addition to specifics about transaction processing and record keeping.
Following is a list of points that should be covered in your trading rules. If you will be using online barter software, it should come with a set of trading rules that you can fine tune and modify to suit your specific exchange.
Following details ideas for several disclaimers that you might want to include in your trading rules:
YOU JOIN AND PARTICIPATE IN THE SERVICE AT YOUR OWN RISK. EXCHANGE NAME SHALL NOT BE LIABLE FOR ANY DAMAGES OR LOSSES WHICH RESULT TO YOU FROM YOUR USE OF OR PARTICIPATION IN THE SERVICE.
EXCHANGE NAME DISCLAIMS ALL EXPRESS AND IMPLIED WARRANTIES, INCLUDING THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
USE OF INFORMATION, PROGRAMS OR OTHER MATERIALS OBTAINED FROM OR THROUGH THE SERVICE IS AT THE SOLE RISK OF THE ACCOUNT HOLDER.
IN NO EVENT WILL EXCHANGE NAME, ITS AGENTS, OR AFFILIATES BE LIABLE FOR ANY OTHER DAMAGES, INCLUDING LOST PROFITS, LOSS OF DATA, OR OTHER SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES, ARISING OUT OF OR IN CONNECTION WITH THE PURCHASE, USE OR PERFORMANCE OF THE SERVICE.
Day One
Week One
Month One
Core Accounts
- Restaurants – Businesses patronize restaurants for their business luncheons and dinners. In addition, having a nice selection of restaurants will enhance a member’s personal life, as they will be enabled to dine out without spending cash. A great selection of restaurants in different areas of your city or town will enable your members to offset expenses for business related meals by paying for the meals with trade dollars instead of cash. Initially, it’s best to have at least one restaurant for every 10-15 members, and once your exchange is established with over 150 members, at least one restaurant for every 20 to 50 members.
- Printers – Every business needs printing. Business cards, letterheads, envelopes, brochures & flyers, and marketing materials are a significant cash expense for businesses that can be converted to a trade expense. Most printers welcome the extra business that can be referred to them by a trade exchange as they can use it to fill empty press time, or in many cases when the job requires four color printing, actually include the print job with another print job, filling empty space on the page that would have been trimmed off as scrap.
- Contractors - Most businesses need contractors for new construction, renovations or repairs. These include all phases of construction such as plumbers, electricians, flooring installation and maintenance and HVAC. Plus due to the current state of the economy and real estate market, contractors are anxious for new fill in business to keep their workers busy.
- Maintenance & Cleaning – Most larger businesses need facilities maintenance and cleaning and every small business can use a cleaning company for a once a week cleaning. Getting one or two maintenance and cleaning companies to start will get you a member that will provide a useful service to most of your members and it will offset a cash expense. In addition, it will provide the maintenance company with new customers that they normally would never have had.
- Cleaning Chemicals & Supplies
- Dentists
- Parking Lots
- Lawyers
- Auto Repair
- Radio Stations
- Billboard Companies
- Lawn & Property Maintenance
New Member Marketing
Managing Members
Credit Lines
Brokers
Commissions
Sales People
Sales Incentives
Trade Brokering
Account Management
Haves & Wants
Call Logs & Notes
Correlation
Newsletter
Daily Trade Flash
Networking
Trade Fairs
What about setting up an exchange that focused on real estate exhanges primarily? Is this a viable idea? It seems to me that biggest initial problem with a general exchange is that the trades are rather small and users would want more “outlets” to spend their credits than is available. With few outlets, the volume of trade is never going to amount to much.. and probably generate a lot of frustration and/or avoidance after a business feels there is no “useful” outlet to spend his credits.
ON the other hand, if a system is set up to accomodate exchanges of real estate equities, it seems to me that a sizeable cash ‘reserve” by the exchange could accomodate exhanges among owners of properties and become a “deal maker”, so long as conservative rules prevailed when controlling the currency within the system.
The retail system seems to involve a LOT of hassle and few busy business people would want to put up with that extra time and trouble .. inconvenience. Make each transaction much larger makes the time/trouble issue not nearly as disconcerting.
What do say?
There have been several highly successful barter exchanges that focus or specialize in real estate. But, there are also highly successful exchanges that focus on general business products and services as well. In a general exchange, trades can be small, as in the case of a dry cleaner or restaurant, but trades could just as well be large, such as boats, vehicles, construction services, property, litigation services, travel, elective medical and dental services, etc.
While creating an exchange just for real estate trading, especially in today’s market, is perfect timing, you could do just as well with a general barter exchange that also has a real estate department. Although the average trade may be smaller, there would be many more trades each and every day in a general exchange as compared to the few trades that would typically occur monthly in a real estate only exchange, unless of course you had hundreds or thousands of property listings nationwide.
When I owned a barter exchange in NYC, we often had numerous real estate offers available at 100% trade. One member had a 6 unit apartment building in Scranton, PA that needed work. It was traded to a contractor. There was a couple that had an old warehouse in Philadelphia. They sold it to a buyer on barter that we found for them in less than one week for $550,000. As the buyer didn’t have enough trade to pay for the property in full, we set him up with a barter mortgage.
Then there was a non-profit that received a class A office building in upstate NY as a donation. They had large monthly carrying cash costs and no use for the building. They couldn’t sell it for less than the donated value for two years and they couldn’t get the full amount in a cash transaction. So, we found them a buyer and they sold the building for $1.4 million at 100% trade + back taxes and fees in cash.
But mixed with the real estate offers, we had general business products and services. Very few of the 750 members couldn’t successfully find useful outlets to spend the trade dollars they earned and most of those unsuccessful members didn’t really try to utilize barter to reduce cash expenses. Factually, each member averaged almost $2,000 per month in trade sales and purchases, and the trade volume amounted to over $16 million per year. This generated over $600,000 per year in fees and revenues for the exchange.
The flip side is small exchanges with limited product and service offers that can’t offer much to their members as the exchange owners aren’t interested in or focused on running a world class best in service enterprise. This has nothing to do with barter being useless but more so, it has to do with a barter exchange owner that isn’t doing a good job.
In summary, if you can help a business owner or property buyer to conserve cash by reducing or eliminating their cash cost of purchasing or acquiring products, services capital equipment or real estate, you have a winner. If you can do it well and do it many times each day with any size transaction, you have a money making machine!
Hmmmm, I own a historical mansion in Pittsburgh (www.riverbendmanor.com)but don’t have the money to restore it as a private residence or as a 4 to 6 unit condo. I wonder if there is a barter solution somehow? Could its equity be sub-divided to pay off contractors who don’t otherwise have the work?
Absolutely! There are many ways barter can be used to restore a home. You can use barter to purchase building materials and hire contractors. Many suppliers such as tile, carpet and stone companies have huge excess inventories or items that have gone unsold. They would welcome the opportunity to get full value for the building materials instead of liquidating or discounting them.
Contractors will welcome the work during this downturn, as there are so many that are sitting at home every day with no work, and others that are laid off waiting for the next job to come in. The contractors could use the trade dollars they earn for medical and dental care for their family, to go to restaurants and attractions, or if they own their business, they can use barter dollars to advertise to get more cash sales. When business is slow, the first thing that gets cut is advertising, which then makes business even slower. Using barter dollars that they earned from new sales to new customers that they would never have ordinarily had if they didn’t accept barter, they can continue advertising or increase their advertising budget without spending cash.
You could also trade construction work for equity and then pay the contractors in cash when the condos are sold, but that’s a different type of barter where they are trading services now for future cash profits. The issue with that in this economy, is that the contractors need cash (or trade) now, and not months or even years from now, when the condos actually sell.
The best way to get started utilizing barter in real estate transactions or renovating real property is to own a barter exchange. It provides you with the advantage to bring in the types of new members that provide the services you need, so that you can use the barter dollars you earn from fees or from selling your own product or service to pay contractors and suppliers.
An important consideration to remember, is that barter sales are taxable the same as cash sales, so be sure to report any income from barter sales on your tax return.
Hello:
I’m interested in setting up a barter system for a non-profit organization, rather than having it setup as a for-profit business. Do you examples of others who are doing this?
Thanks!
A non-profit barter exchange would be no different than a for profit exchange. There have been several not-for-profit organizations that have used the vBarter software to develop their community or charity based exchange.
The software could also be used as a donation management system whereby members sell their product or service to other members and then donate the proceeds of sale to one or more charities. The charities then use the trade dollars to purchase the products and services they need.