Stout, Writer for BarterNews
There are many types of
barter clubs. A club might be franchised or independent,
nonprofit or profit-oriented, business-oriented or
social-service-oriented, informal or highly structured. The
details vary from one club to the next, but we can explore
the similarities in membership fees, service charges,
policies, and ways of operating. (The word "club" simply
means "organization"; it is not a club like a social club.)
We fill out an
application. Certainly, a business-oriented barter club will
require more information and professionalism than is
required in some casual, non-profit clubs. On the
application, we can expect questions regarding some or all
of these matters:
The people who will be using the membership. When we
join, other designated people might be able to purchase
items on our account. For example, our family members
might have this privilege. In a business, the owner will
join the club, but the purchasing agent and other
officers might have permission to use the account.
Information regarding our product or service. What are
we offering to the other members?
Financial data. This data can include our business
bank-account number, personal bank-account number, trade
references, and a credit card number.
Our credit history. The club will extend credit to us,
so we need to show that our financial history has been
stable, as suggested by our credit rating, our number of
years in business, any bankruptcies, etc.
Business data. This data might include our business
license number, contractor's license number, etc.
We might need to sign a
contract. If the terms don't suit us, we can ask for changes
in one or more of the clauses. Because there are many
different types of businesses in a barter organization, the
standard membership contract might not meet the needs of
everyone. We can show the contract to an attorney, to make
certain that the details suit our requirements; perhaps we
can find an attorney who will trade this service to us in
exchange for our goods and services. (The club might have a
member who is an attorney, but we will not be able to pay
this person with the club's units until after we join.)
The club will probably
charge fees. Some non-profit clubs charge no fee; other
charge only a small fee which might be based on a percentage
of the cash value of each trade. The business-oriented clubs
might have these additional charges:
An initial fee, to join the club. The amount might be in
the low hundreds to the low thousands of dollars,
depending upon a variety of factors: the size of our
business, the geographical range of our business (local
or nationwide), etc. We might have some options:
In one club's
"introductory program," we pay only $55 down on the
membership price. The rest of the fee is deferred
until we have had at least $200 in sales or
purchases through the club.
At another club,
there is a $245 initial fee but, as soon as we join,
we receive 245 units which are equivalent to $245 in
trade. This amount also covers the first year's dues
(at $36 per year). We can spend those units
immediately. The club gets the units back (in the
long run) through its 10 percent service charge on
each trade -- 5 percent in cash, and 5 percent in
units. We can pay in installments -- $70 down and
the rest in six monthly installments (at 12 percent
interest), or with $25 down and the rest in 12
monthly installments (again, at 12 percent
Annual dues. The amount might be hundreds of dollars.
Some clubs will allow us to pay for a portion of the
dues in the form of units, and the rest in dollars.
service charge. This is the amount which is paid to the
club for each transaction which occurs among the
members. The service charge is calculated as a
percentage of the cash value of the trade; this
percentage is usually between 5 percent and 10 percent.
A club might have one of the following policies:
Both the seller and
buyer pay a service charge.
Only the seller has
to pay a service charge.
The service charge
might be payable in units. For example, one club
requests a 10 percent fee, paid in units -- but the
club still needs cash for items such as postage,
telephones, utilities, and taxes, so it charges a
high annual fee of $250 (payable in cash only).
Variable fees. Some
clubs have variable service charges; for example,
they might reduce the percentage on a large
purchase, so that a $100,000 real-estate deal will
not require the usual 10 percent fee (at $10,000).
The service might
be payable in goods or services. One company which
coordinates one-to-one deals (instead of using
"units") charges a 15 percent cash commission from
both parties in the deal; however, the traders can
give the broker twice the amount of the commission
in goods or advertising. In other words, if a
publisher trades $10,000 worth of ad space for
$10,000 worth of radio ad-time, it owes the broker
$1,500 cash. But, instead of paying the cash, the
publisher can give twice that amount -- $3,000 -- in
additional space. The $3,000 worth of space goes
into the broker's inventory, and can be used in his
own deal at another time. The 30-percent fee might
seem excessive, but many businesspeople accept this
option, particularly if they are offering services
which are ephemeral -- hotel rooms which haven't
been rented anyway, or ad space (or ad time) which
hasn't been sold (and will be lost forever as the
available time-slot passes).
There might be additional fees: carrying charges,
interest on our account, penalties for overdrafts, or an
extra fee if we use this club's units through an
The club might have
limitations on the types of businesses which are accepted.
Some clubs accept only established businesses. One club
owner said that a merchant who wants to join must have a
sizable inventory and a willingness to commit up to
$1,000 in barter sales; those qualifications mean that
other members are always dealing with first-rate firms.
Another club owner said, "We're not looking for
back-alley mechanics or basement merchants. We want only
licensed tradesmen and the good, reputable businesses."
(Kansas City Star.
By Dianne Stafford.) Other clubs will accept
Some clubs limit the number of businesses within each
category. Obviously, if there are too many dentists or
printers (or another type of business) in the group,
none of them will get enough barter-customers to make
their membership worthwhile. When a club acquires the
proper number of members in any category, it does not
accept any new applications in that category. Other
clubs do not restrict the number of members in any
In some clubs, we pay
with the club's own credit cards or checks. Those clubs have
their own private "money" system, using cards or checks
which they have issued; the values are expressed in terms of
barter-club units (which are equal to $1 each). Barter clubs
use various systems:
Some clubs issue checks, which are similar to the ones
which would be issued by a bank.
Some barter clubs issue credit cards. Sondra
Schoenberger explained (in
July, 1980), "It works the same way a charge card does,
with one important exception. With your charge card, you
make purchases during the month, and at month's end, the
charge slips go to the store or the bank. They are then
run through a computer, and you get a statement and a
bill. With barter, the charge slips come to us, and we
run them through our computer. You get an itemized
statement, but no bill."
Other clubs use
one-to-one exchanges instead of checks or credit cards. When
I was the programs assistant for a barter club, I wrote a
description of this type of trade: "How is a trade made?
First, call us to say what you need, or what you want to
trade away -- a skill or some goods (furniture, food,
firewood, lumber, a car, etc.). We'll take your name and
phone number. If we can't find what you need in our 'skills
file,' we might put the request onto our bulletin boards
throughout the city. The phone number which we give out is
ours (not yours), to protect you from bad offers and
annoyances. When someone calls us, we will ask what they
could give you in exchange, or what they want from you. Then
we will call you, to tell you about the possible deal. The
other person won't call you first; we will, so it will be
easier for you to say 'no' if you want to do so. But if the
deal does interest you, we'll give you the person's number,
so that you can call the person."
We add our barter-club
trades to our business' bookkeeping procedure. A barter deal
is entered at its normal cash value; the bookkeeping system
works the same as if cash has been used. If we need some
help in adapting our barter transactions into our system, we
can ask the barter-club director -- or we can call a
bookkeeper or accountant who is a member of the club (and
whose services can be acquired with barter-club units).
Before joining the club,
we can consider its suitability for our needs.
Show the contract to an attorney.
Consider your profit margin with regard to the service
fees. For example, if the service fee is 10%, but our
profit margin is 8%, we will lose money on every
transaction. (Refer to the chapter regarding cash flow.)
Consider our need for new customers. We might not need
new customers if, for example, our schedule is always
full, or if we are already selling all of our available
products (as in the case of a craftsperson who can
produce only a limited number of wood-carvings).
Ask about the possibility of changing the contract. In
some cases, the barter-club owner will allow us to alter
the contract, to accommodate our special needs.
Contact the Better Business Bureau. The BBB might have a
record of complaints against the barter club.
Be certain that the members have the goods and services
which we need (and be certain that they are within our
geographical area). Even if some of the members have
what we want, those members might be inactive. If this
is a new club, it might have a limited variety of
Judge the credibility and professionalism of the club's
brochures and newsletters.
Consider the age and size of the club. Perhaps the club
is new and untested. We might feel more confident if we
learn that the club has been operating for 10 years,
with branch offices in 10 cities, and 10,000 members
total, doing a total of $10 million of trading each
Talk to some members. Don't meet with the members who
are offered as references by the members; those members
have probably been hand-picked for their positive bias.
Instead, ask to see the membership list, so that you can
choose several people to contact. Ask the members for
their opinions regarding the club's operations. One club
presents a list of 75 members who have received new
sales from $30,000 to $300,000; the members' addresses
and phone numbers are available upon request.