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UNITED STATES — Jake Kaestner
wanted his five-person landscaping company to grow, but he didn't have
much money to invest in the business. In 2005, after hearing about ITEX,
a national trade exchange, Kaestner, founder of Kaestner Lawn Care in
St. Peters, Missouri, gave it a try. In trade exchanges, members earn
trade dollars by doing work for each other. So Kaestner's $500,000 company
did about $4,000 worth of landscaping at the home of another exchange member,
a massage therapist. Kaestner turned around and used those trade dollars to
buy advertising in a local paper. "I didn't do any advertising before
because its so expensive," he says. Kaestner has since used trade dollars
to buy advertising in local magazines, newspapers, and coupon books. He says
those ads are a big reason revenues increased 30% in 2006 and 25% last year.
Whether by working through a trade exchange or directly with another company,
trading can help you boost your business without spending a lot of cash.
About 400 trade exchanges in the U.S. and Canada do $4 billion a year in
transactions, says Tom McDowell, executive director of the National Association
of Trade Exchanges (NATE) in Mentor, Ohio. Commercial trade can be great for
start-ups as well as for seasonal businesses or those with excess capacity.
A restaurant with some empty seats most nights, for example, might put
gift certificates on an exchange and use the trade credit raised to pay
for cleaning services. "It's great at smoothing out the peaks and
valleys in demand," says Craig Vestal, owner of $1 million Portage
Printing in Portage, Michigan. Using the Midwest Business Exchange, Vestal
prints brochures and business forms for local companies, including
restaurants and a radio station, and spends some of the trade credit
he earns to pay for dental work for his seven employees. |
Jake Kaestner, Owner of Kaestner Lawn Care
Joining a trade exchange does entail some costs, including fees and commissions.
Every business will want to limit its trade business to 5% to 15% of total
revenue so that cash flow remains at healthy levels, says Ron Whitney,
executive director of the International Reciprocal Trade Association. (IRTA),
a Rochester, New York, organization that promotes commercial
trade. Some exchanges charge new members up to $800 to join. Most have
monthly flat fees of $10 to $30 and, for each completed transaction, collect
a cash commission of about 10% to 15%, which is either paid by one party or
split between the buyer and seller.
Once you sign up, you will receive a list
of participating businesses. Some exchanges have brokers to play matchmaker.
And if you are trading one-on-one, be careful - misunderstandings can arise if you
don't have a formal contract. |
