When Mark Baryla purchased J Bean Coffee and Café, a six-year-old neighborhood coffee house on the outskirts of Chicago, he inherited a business active in bartering. Yet for Baryla, a CPA by day, the concept of bartering was as foreign as it was funny.
“I’ll admit some real hesitancy toward wanting to continue the store’s bartering ways,” says Baryla, who purchased the café in 2007. “I had a difficult time with the concept and thought it was funny money.”
J Bean’s previous owner participated in two barter exchanges — the International Monetary System (IMS), a publicly traded, Wisconsin-based barter company spanning 50 U.S. markets, and Art of Barter, a Chicago area exchange serving approximately 1,400 small business clients in and around the Windy City. When Baryla assumed ownership of the café, he investigated barter fully before determining J Bean’s continued participation.
“I thought it could be frustrating to work within this barter marketplace and also wondered if some of the other businesses would even be open down the road,” he says.
As his barter exploration unraveled, however, Baryla liked what he saw and continued J Bean’s bartering relationships. To date, he’s used barter for restaurant supplies, storage, and employee incentive gifts as well as personal trips to resort towns in Illinois and Wisconsin.
“Barter was not only worth keeping but expanding,” Baryla says.
For many of the nation’s café owners like Baryla, barter has emerged a compelling piece of the business environment. Given the U.S. economy’s tumult and a related decrease in consumer spending, barter has gained notoriety and favor among small business owners seeking to keep cash on hand, generate business, move inventory, and secure new customers.
“If you have a business, you can barter and reap the benefits of trade,” IMS president Don Mardak says.
Independent Bartering
From the Romans to the Greeks to the American farmer and the modern-day coffee shop owner, bartering spans generations and geography. Historically, barter took the form of direct trade — two people having a mutual need at a common time for products and services of related value.
Though direct trade can be difficult to accomplish in today’s fast-paced world, many small businesses retain the practice, foregoing any membership in a third-party barter exchange to find their own trade partners.
Amy Comerchero runs Amy’s Bakery Arts Café in Brattleboro, Vermont and has bartered with a number of local businesses over her café’s 10-year existence, including an electrician, a nearby clothing boutique, and her acupuncturist, a lunchtime regular.
“I’ve found only good things through barter and enjoy doing exchange,” Comerchero says. “It’s about everyone sharing their gifts — I can do for you and you can do for me, which is so uplifting.”
The direct trade challenge of finding a matching partner, she says, has been minimized by Brattleboro’s neighborly ways, the community’s barter openness, and a pinch of good fortune.
“I’ve been lucky to have found services and goods that I want and that we have enough food here to meet [the trading partner’s] needs. For us, we’ve been blessed that it’s a workable system,” says Comerchero.
The same direct trade spirit resonates at ChocoLate Coffee, an eight-year-old shop in Atlanta.
Owner Vera Bettin met Nick Villaume, a local Web site developer, when Villaume coached her son’s soccer team. The two soon learned they had professional experiences and services to offer one another. In return for Villaume performing regular Web site updates, ChocoLate provides space for Villaume to conduct business meetings, while offering free Internet time and drinks, a barter arrangement managed by the store’s POS-controlled loyalty card.
Bettin has fashioned similar barter relationships with a range of businesses, including plumbing, signage, graphic design, and artists, whose personal work lines ChocoLate’s walls. When hiring a contractor, she’ll often ask if they’re open to barter.
“I enjoy bartering because I don’t have cash leaving my account, which is so important as a small business owner, and because it fosters a collegial relationship with fellow business owners and service providers,” Bettin says.
Bartering with a Third-Party Exchange
Yet for many small businesses, cafes included, direct trade fails to deliver on barter’s optimal benefits — never mind the concerns over drawing the ire of the IRS, navigating testy disputes when one side fails to deliver, and record keeping blunders that could allow product to walk out the door.
For many, a third-party barter exchange is the only way to go in the barter game.
Functioning on a model much like eBay, barter exchanges serve as a forum to sell goods and services, while also functioning as a clearinghouse for trades, processing transactions and maintaining records for each business. At year’s end, most exchanges distribute Form 1099-B, which lists a café’s total trades for the year and appeases the IRS’s desire for accountability.
The U.S. hosts approximately 200 trade exchanges, many confined to a local area. Services on the exchange can range from restaurants, often the most popular target of trade dollars, to printing and advertising, car washes and window washers, landscapers and tradesmen, HVAC and hotels.
“This secondary economy has almost all of the services the yellow pages has,” says Mardak, whose IMS claims 16,000 individual businesses across the nation.
Pete Berres of Berres Brothers Coffee, a Watertown, Wisconsin-based café shop and regional coffee roaster, joined IMS in the mid-1990s to introduce his product to new clientele. In subsequent years, he’s become a major barter proponent and user, utilizing his barter dollars for travel, promotional items, employee incentives, catering, and store supplies, including a cash register.
“Our product is an easy one to barter — it’s in high demand and easy to ship — so we’re able to build up a strong account,” Berres says.
For their part in providing barter partners and clearinghouse functions, exchanges amass some mix of a membership fee, monthly charge, and a percentage of the transaction’s value. The IMS, for instance, collects a one-time $695 membership fee, a monthly service fee that varies by market ($19.50 in the Chicago area, for example), and a 6 percent transaction fee. Berres estimates that he spends $200-1,000 each month on barter transactions.
“You have to realize there’s an expense here and that you’re giving away product that could be sold for cash,” he says. “The key is in finding the right balance for your business between trade and real dollars and not letting those barter dollars grow indefinitely.”
Before entering an exchange, Baryla urges his coffee shop colleagues to do their own investigation. Speak with participating businesses to assess their experience, make sure the exchange is legit with the Better Business Bureau, peruse its client list to ensure it has worthwhile trade partners, and request a trial period, an inquiry many exchanges will accommodate.
“If you don’t like it,” Baryla says, “you always have the opportunity to spend your trade dollars and bow out.”
Barter Benefits
At J Bean, Baryla collects about $12,000 in barter dollars annually, a fraction of his café’s $360,000 income, but a viable and important slice of business. Many share Baryla’s sentiment, as barter allows an operation to keep cash on hand, differentiate itself from the competition, move excess product, fill down times, and gain valuable buying power.
Third-party exchanges, in particular, become marketing vehicles to publicize businesses. Individuals seeking to cash their barter dollars will often peruse available barter partners before utilizing cash.
“If I’m going to purchase something myself, I’m checking barter first,” Baryla confirms, a common response from barter participants that drives business at barter-practicing establishments throughout the country.
Yet, J Bean benefits on the reverse end as well.
“We get sales — transactions we never would have had — solely because we are involved with barter and the customer chooses to come to us instead of a place where he’d have to use cash,” Baryla says.
Barter participants also keep cash in house, an especially important feature as the business checkbook tightens. Rather than spending money to have the furnace cleaned or sale fliers printed, barter dollars can do the trick.
“When cash flow gets tight, you can still use barter to act on something you need or want,” Berres says, noting that profitability rises with barter.
In addition, cafes can take existing assets — inventory or space — and turn them into usable revenue on the barter system.
“With barter, commodities don’t have to be wasted,” Mardak says.
Perhaps most interesting and beneficial stands the concept of barter leverage, which affords a business owner remarkable buying power. If a café owner uses his barter dollars for a $500 landscaping project, for instance, barter leverage holds that he has not spent $500 cash, but rather a fraction of that amount equal to $500 of the café’s product. As a result, operators are trading products at retail cost for their wholesale investment.
“If your markups are high enough, you can buy things at wholesale cost, which leads to cash savings and showcases the inherent advantage with barter,” Mardak says.
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