Trade for services makes sense in tough times
By Stan Choe
Knight Ridder Newspapers
CHARLOTTE, N.C. — Jill Purdy, a marketing consultant in Charlotte, needed an office.
Member companies have accounts with credits kept with the exchange. When one member, say, a roofer, does a service for another, the roofer gets credited in his account for the retail value of the job. The roofer can then use those credits to pay for another member's service, such as a restaurant gift certificate, without paying any cash. Companies must pay taxes on barters, reporting the retail income from each deal. They should file a 1099B form with the Internal Revenue Service.
Keith Luedeman, who moved his online lending company into a renovated mill, had rooms to spare.
How barter exchanges work:
Why not trade?
Luedeman sent Purdy, who he had met at local networking sessions, the simple proposition in an e-mail.
She agreed.
Purdy got an office with a window, phone and Internet access. Luedeman got a few hours per week where Purdy would help goodmortgage.com's marketing.
With their deal, hammered out in a one-page contract last month, the two joined the growing number of small- and medium-sized businesses embracing the age-old barter system.
The main benefit of bartering is it saves cash. In the still-tough economy, companies — especially startups — say they need to preserve as much cash as possible. Or they prefer paying with something they may not use anyway, such as an empty office.
It also lets companies buy goods and services at wholesale, rather than retail, prices. A Web developer may trade $50,000 worth of work, but the real cost to the developer may be $30,000.
Most of the bartering in Charlotte is done one-on-one, where one entrepreneur strikes a deal with another. But across the country, thousands of companies participate in more complex networks, trading their goods and services in exchanges similar to the stock market.
The biggest such barter exchange in North Carolina is in Cary, and its owner plans to open a Charlotte exchange later this year.
In Charlotte, young startups barter stock in their companies for a new Web site. Dentists trade teeth cleanings for plumbing work. The office furniture in Vice President Stacey Ellis' office at the Charlotte Chamber came in exchange for a chamber membership.
As the economy got tougher, more businesses offered to trade goods and services for their membership dues, said Chamber Chief Financial Officer Michael Smith.
In Cary, the tougher economy means more restaurant owners, chiropractors and box-makers trading on Maurya Lane's Barter Business Exchange. Less cash pushed them to barter more. Trading volume on her exchange increased 61 percent in December, compared with the previous December, a record month, Lane said.
The National Association of Trade Exchanges said it saw a 60 percent increase in trading on its networks last year to $11 million. Its membership includes about 75 barter exchanges around the country.
Steve Gillooly, president of Capital Style Luxury Transportation in Cary, traded over $30,000 in barter deals last year through Lane's network.
Whenever one of his limos gives a ride to another member of the barter exchange, he receives a credit in his account for the ride's retail value.
He has withdrawn from his account of bartering credits to get gift certificates for restaurants, attorneys' fees and even a $12,000 hot tub.
"I closed on my house, with the attorney fees and surveying fees, totally through bartering," he said.
A side benefit to bartering, he said, is it attracts customers who may otherwise not hire him. Companies within the network seek out others, to take advantage of their currency.
In goodmortgage.com's office, Purdy has helped overhaul the online lender's publicity system.
She gave press releases and brochures consistent colors and structure. She's helping create more appealing slide-show presentations and she's contacting banking analysts to introduce them to the company.
And although she has a separate phone and e-mail address, she doesn't feel like an outsider in another company's office. The goodmortgage.com workers ask her if she'd like a slice when they order pizza.
"Nothing's better than a barter," she said.
