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Sunday, Jun 4, 2023

Valley Smallbiz

Alf Nucifora Barter it’s been a mode of economic transaction for centuries. In recent decades it’s prospered at a subterranean level with a committed and growing group of practitioners who swear by it. The numbers are impressive. At a national level, 400 independently operated barter exchanges represent a client base or network of more than 240,000 retailers, services and manufacturers. Barter is literally its own economy, representing a definable group of manufacturers, service providers, retailers and professionals who by supplying one another with operating needs also contribute to one another’s profits. Legitimate bartering is transacted through the mechanism of a commercial trade exchange, initially known as barter clubs when the concept was introduced some 30 years ago. As industry publication BarterNews states: Through the use of computers, exchanges can officially match the needs and wants of their clients. They use a medium of exchange known as a trade dollar (equivalent to one cash dollar for use of accounting purposes). Its use lessens the need for companies to locate reciprocal trading partners, as all transactions between businesses are facilitated using trade dollars. Each time a client makes a trade purchase, the exchange debits the buyer’s account and credits the seller’s with trade dollars, similar to an ordinary bank account. Sales are normally made at full retail value with a 10 percent cash commission typically paid to the exchange for its services. Under the Tax Equity & Fiscal Responsibility Act of 1982, trade exchanges are classified as third-party record-keepers, having the same fiduciary obligations as bankers and stock brokers. For tax purposes, trade dollars are taxable for the year they are earned and reported as such on 1099-B forms to the IRS. If executed in a professional fashion, barter can benefit the trading client in a number of key areas: – Generating sales and new business contacts. – Creating greater profitability, turning liabilities into assets by utilizing excess production or business capacity. – Moving excess or sluggish inventory by trading it, thus turning potential write-offs into profit. – Conserving cash. Computerized record-keeping eliminates accounts receivables and/or collection problems. – Providing greater flexibility, because trade volume is controlled by the client. You only trade when and what is appropriate to your own needs. Almost every product and service category in both the consumer and business-to-business sector is subject to barter. The list runs the gamut from accounting services to office equipment and supplies; from secretarial services to landscaping; from dental care to swimming pools. Even the Fortune 500 are in on the act. Economists have estimated that corporations barter approximately $55 million annually. Sixty-five percent of the corporations listed on the New York Stock Exchange are presently using barter, including such giants as General Motors Corp. (traded locomotives for tea in Sri Lanka), PepsiCo (traded syrup and technology for Russian vodka), Coca Cola, General Electric, McDonnell-Douglas, Pitney-Bowes, Turner Broadcasting System, Mitsubishi, Xerox and Standard Brands. At the small business and individual trader level, key barter categories include electronics, computers and personal services such as medical, dental, accounting and legal. In fact, barter is now finding acceptance as a means of employee compensation as part of rewards programs, incentive plans, bonus payouts, etc. As in all businesses that operate at a street level, barter has had and continues to have its shares of shysters, but the industry has gone to great pains to tidy up both its practices and its image. A common problem still involves the situation in which a bartering party places an unrealistic value on the product or service being offered, which in turn leads to conflict. But vigorous policing by the more reputable barter exchanges and the degree of satisfaction exhibited by successful clients would indicate that barter can be and is, in the majority of cases, a safe and effective transaction and it’s growing like wildfire. This is one to watch for both the prudent business person and the aggressive marketer. Marketing tips It’s a law of the universe that most small businesses suffer considerable constraints in terms of available time, energy and money for marketing support particularly during the first two or three years of the startup phase. From a marketing perspective, it very rarely makes sense to be a Jack or a Jill of all trades. The marketplace is simply too big and too complex to attempt to market to every available consumer. Unless you market a universal product like soft drinks or hamburgers the preferred course of action is to identify a select group of customers/consumers who provide the best marketing opportunity for your product or service. In marketing circles, these select groups are called niches, clusters or preferred demographics. For the sake of this discussion, we will address them as the target audience. The smart marketer will profile the target audience that is best suited to the product or service in question. In many instances, this will require some best-guessing in order to select and prioritize a particular target audience. Once you have succeeded in capturing or owning a particular customer segment or niche, be prepared to exploit it for all it’s worth before moving on. A friend of mine, a local attorney, had developed a particular expertise in the commercial roofing field. In a business category in which no more than a dozen players dominate the field, he has gradually built his business to the point that he now garners consistent work for more than half the companies in the business. All of this business was built by referral and word-of-mouth. Even within a competitive environment, companies have chosen to solicit his services because of his specific knowledge about this specialized industry, and because of his growing reputation for expertise and excellent service. As a smart marketer, he will continue to work the commercial roofing sector until he has secured every available piece of business. At that point, he will use the knowledge he has gained in the commercial building field to leap-frog into another commercial construction sector where he will repeat the process all over again. That’s doing segmented marketing the smart way. Don’t ignore the importance of segmentation. Be prepared to take customers wherever you can find them. But when it comes to pre-empted efforts, focus your energies and your spending on those targets that make the most sense geographically (where they come from), demographically (who are they and how they live) and psychographically (how they think, how they behave, what their needs and aspirations are). Always hunt where the herd is thickest. That is the best advice for any small business.

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