Video: Short on cash? How to find businesses willing to barter

Birmingham, Ala.—In these tough economic times, where every dollar is hard to come by, a lot of people are doing away with cash and turning to an ancient, highly effective means to get things they need and want.  Bartering is making a comeback.

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One trade exchange company says bartering for medical services has risen 45 percent in the past year. 

Bartering involves trading goods and services like dental and medical care, meals at restaurants, plumbing or electrical service, lawn care, and other household maintenance.

Tammi Reece owns her own business. She’s a hairstylist at Salon 2000 in Trussville, Alabama.

As she clips away the hair, she’s found a unique and old-school way to trim costs too. She says it’s more like a friendship trade.

For several years, Tammi has worked with other business owners to barter their services.  She said, “They need something done, or I need something done. If I need my grass cut, I’ll just say, ‘You come in and get your hair cut if you want, or however you’d like to do it.’” 
           
Larry Carmon with Larry’s Limos barters too. He said the company has been having a tough time in this economy. Larry has been in the limo business for 14 years. He has a fleet of three limos, two sedans, and SUV, a van and an RV.

What he doesn’t have these days, is as many customers. His business is down 30 percent from last year. In this tough economy, bartering is a way to keep the costs down. He said, “It works well, something you don’t have to take and write a check for.”

Larry has bartered with tire companies, exchanging his service for theirs. He said, “That’s something I don’t have to put cash out.“

Larry says this bartering thing has been a pretty good ride.  He estimates he’s around $10,000 of work of bartering. That means $10,000 cash that’s not coming out of his pocket.

Larry works with a company called Transmedia Trade that offers a wide variety of services and products for barter.

Bartering is old hat, dating back to cavemen and continuing through the ages.

Bartering is rooted in American history. In fact, people used to barter services for things like corn and deerskins. That’s where we got the slang word “buck” meaning dollar.

Fast forward to The Great Depression. In the 1930s, not many people had cash on hand, so they established barter groups.
More recently, during a long recession in the 1980s, bartering regained popularity.

Andrew Jerigan is one of the owners of Transmedia, which was established in the early 1990s.  He told us his company works with a number of clients to facilitate the barters.
Jerigan said, “The need now is lot more intense. Because with the current cash financial crisis, cash and credit are incredibly scares, it’s harder for people to borrow money. Even on the popular Craigslist website, the barter category has increased 70 percent in some categories since this time last year.”

Jerigan says his company works on a universal system.  Here’s how it works: Companies like Larry’s Limos offer a service and that service is banked in terms of trade dollars. No money is ever exchanged. Then another company can come in, bank their services in trade dollars, and get services from others using those trade dollars. It’s like a bartering marketplace. The company charges a 10 percent fee for the service.

Jerigan said, “So it’s not a direct trade or multi-lateral trade between one and another, but it’s a currency that they can use through our personalized services.”  The company issues a 1099 form to its clients because bartering is taxable income. 

According to the website for Universal Barter Group, almost 1/3 of all small businesses in the U.S. use some form of bartering. 65 percent of corporations listed on the NYSE are involved in bartering.  Bartering accounts for 30 percent of the world’s total business. 65 percent of Fortune 500 companies engage in one form of barter or another.

The Wall Street Journal reports, in 2008, about 250,000 North American companies bartered, exceeding more than $16 billion in value. The Journal cites the International Reciprocal Trade Association for those numbers.

Many businesses see bartering as a way to get new customers.

Larry Carmon said, “It works pretty well, but you wouldn’t want to do all your business that way.“
Tammi Reece said, “If here’s something that needs to be done, then bartering is good if it suits the need.”

So whether it’s an organized business barter, like Larry’s or a more mom-and-pop type arrangement like Tammi’s, the outcome is the same. Cutting costs.