Recession encourages small businesses to barter for goods, services

TOOLS OF THE TRADE

June 22, 1992|By Cox News Service

Without opening a checkbook or pocketbook, here's what Kathryn Mims got when she equipped the office of her Norcross, Ga., business: a computer and filing cabinets, a desk, the paint on her walls and the carpet on the floor.

Ms. Mims is a hypnotherapist, and as she built her five-year-old practice, she decided to add the tranquil effect of an aquarium. The fish in it were, in a way, freebies, as is the cleaning service that tidies the fishes' home.

Not entirely free, of course, since the world almost never provides even a free lunch, much less free furniture or free tropical fish.

Ms. Mims, 45, got all of that stuff in the way that more and more cash-hungry small businesses do: by bartering, rather than paying cash, for what they need.

Without bartering, she said, "I could still be in business, but I probably would be making even less money, and it would be more of a struggle."

Her modest contribution -- less than $9,000 a year in traded services -- makes her part of a huge stream of American commerce. Small businesses exchanged $800 million worth of goods and services through established barter exchanges last year -- up from $720 million in 1990 and only $380 million in 1985.

And those figures include only the business of about 460 barter companies that share their figures with the International Reciprocal Trade Association. Nobody knows how much more goes on outside those companies.

"A recession is a period of deficient demand," said Paul E. Suplizio, the trade association's chief executive officer. "There are more unsold goods, and businesses have greater incentives to seek alternative distribution channels for their products."

Bartering, including the use of commercial exchanges, is one of those channels. An exchange is a bookkeeper and a trading post for its member companies. In return, the exchange charges a 5 percent to 10 percent transaction fee, in cash.

By using an exchange, a small-business operator can sell a product and accumulate credits to spend in unrelated transactions.

Small businesses are not alone in the bartering field. Big American corporations barter in big, often multinational ways. The best-known such deal may be Pepsico Inc.'s Russian arrangement. Pepsico has bartered its soft drinks for Stolichnaya vodka since 1974, and it once accepted Russian ships as part of the trade.

The big businesses swapped $5.1 billion worth of goodies in 1991, up from $4.55 billion in 1990 and $2.9 billion in 1985.

Small businesses use bartering for various purposes, not the least of them to get some return from otherwise unsold assets. Professionals -- accountants and lawyers -- trade some of their working hours for goods they would otherwise buy at retail. Manufacturers may barter to keep the production lines going.

Sometimes companies barter for goodies that they wouldn't pay cash for in hard times. That can include incentives to employees, such as vacation packages in Cancun or the Caribbean. Social director Karyn Fuller at the Ashford Gables apartment complex in Dunwoody, Ga., recently financed a $4,000 party for tenants by bartering apartment leases in exchange for catering, a disc jockey's services and door prizes.

The backbone of most bartering systems is business necessities, such as accounting and legal services, printing, advertising on radio and other media, office equipment and supplies.

But some odd stuff gets into any bartering system:

John P. Davis Jr., president of Atlanta-based Tradebank International Inc., has traded a DC-9 airplane and an anteater. The latter went to a Texas rancher who had been fined for using a forbidden ant poison. Mr. Davis recalled that the rancher paid $2,500 in trade dollars, for the mammalian ant-zapper.

Some business operators said they've had problems bartering.

It takes time to search for bartering opportunities, said Jerry Wheeler, owner of Atlanta Auto Collision in southeast Atlanta. Besides, he added, "there are very few things that I actually need."

Still, Mr. Wheeler does auto body repairs on a barter basis, paying for parts and labor himself. Several times he has found himself with $10,000 in trade dollars. He considers them an asset, he said, though he sometimes has difficulty spending them.

Bartering is "a worthwhile tool, but you've got to be very discrete how you use it," he said. "It can cause problems if you use it unwisely, just like credit."

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