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More Than Just BeansApril 7, 2011 By: Michael Browne
Remember the story of Jack and the Beanstalk? Jack’s deal—the family’s cow for a few magic beans—turned out all right for him and his mom, despite having to slay a giant. Not all deals between two interested parties turn out so well, but with the current economy, bartering has becoming an accepted business tool.
It's a cash preservation tool basically, something that's especially useful in a tough economy. Increasing numbers of small businesses are joining barter exchanges that make it possible to arrange trades within a large online network. U.S. exchanges now boast about 250,000 small-business members, up from 200,000 five years ago, according to the International Reciprocal Trade Association (IRTA), based in Rochester, NY.
For home-based travel agents, barter can take a number of forms. Most commonly, agents work with local businesses where they can hold events—bookstores, restaurants, coffeehouses—for less than the going rate, or no rate at all, just for bringing in a guaranteed group of so many people. It’s free advertising for them, a venue for you.
Informal barter has its drawbacks. Would-be traders must locate a counterpart for each transaction. And some swaps simply don't make sense. One solution is joining an online barter exchange, which can expand your network of trading partners and provide access to a much larger selection of goods and services.
Thanks mostly to the Internet, the U.S. currently boasts some 500 barter exchanges, up from about 40 in 1980.
Most barter exchanges charge a one-time membership fee (typically around $250) plus a monthly fee ($30 is standard). You also pay the exchange a commission of 5 percent to 8 percent on each barter transaction. The fees buy access to a broader range of barter transactions than you could structure for yourself. You also get to join an online community consisting mostly of small-business owners.
Another benefit to barter exchanges is that they provide useful record-keeping services. All transactions are reported to the IRS, and the exchange usually furnishes members with monthly and year-end statements of their trading activity.
It's a lot more buttoned down than Jack and the Beanstalk.