Bartering – Why not? … It worked in the past

Bartering is defined by as “a trade by exchange of commodities rather than by the use of money.”

As a small business you have flexibility to alter with the price of your products and or services. The advantage of working in neighborhoods rather than in busy malls is the fact that you can talk with the businesses beside or around you. There is a possibility that a store down the street may be selling something that doesn’t directly relate to your store but may benefit you in some way down the line. There are many ways to set up a good partnership between stores without necessarily using money. The examples I will give are not exactly to the definition of bartering, but I will try to give practical examples for modern day small businesses. The examples can range from employee deals to shopping opportunities for customers. It’s best not to deal with relative gains, rather than mutual gains because even if the gain is in your favor, the end may not lead to a sustainable relationship.

You could try to:

1. Set up a deal between the store owners.

Ex. My parents used to own a Chinese restaurant and we had a deal with the video store owner down the plaza. The deal was we gave them free food and they gave us free movie rentals. It may just be food and movies but we did build good relations with the video store and watch a lot of free movies.

2. Bundle yourself with other similar stores to give a discount for shopping at specific locations.

This is a business to business exchange. Logic. If you bundle yourself with other stores then you instantly get free advertising for your location because of the automatic referral from the other store. You could also trade clothes with the other store, to further help advertising. Also, a discount does not necessarily mean a loss of money. At the end of the day, the entire point of any business is to make more than break-even.

Kyle’s Corner – I highly recommend if a customer is already buying a few items of clothing, then you either give them a discount to build good will or throw in an extra item for free. The basic principle behind this move is you want to show that you appreciate their business and build a good relationship between the customer and YOUR store. There are many benefits to having a good relationship with a return customer. They may bring in more people by saying good things; physically bring in friends or relatives, etc. As long as your make more than break-even, you don’t really lose money!
At this moment I just want to quickly clarify what the terms break-even and Cost of Goods sold mean in a general sense. Break-even is a point where your expenses and revenues equal zero. You’re not making anything and not losing anything. Without getting too technical, cost of goods sold is the cost a retailer pays to buy an item from a wholesaler, to sell to a customer (whew, need a breath). COGS (cost of goods sold) for this simple example will encompass manufacturing, labor, and transportation costs but normally they will be handled in more detail in separate accounts. For the sake of simplicity we will say that all COGS for one pair of jeans is 10, a shirt is 5 and a belt is 10.

To prove my point, I will break down this situation mathematically:

Item                   Selling price ($)                  COGS
Jean                   30                                             10
Shirts                 20                                             5
Belts                   40                                             10

Say a customer buys 2 jeans, a shirt and is thinking about picking up a belt. You can convince them to buy the item by giving a discount or even throwing it in for free. Even if you sold the belt for $20 you can still make a $10 profit.

Jeans X 2 = $60, shirt X 1 = $20, belt X 1 = $20, with a grand total of $100. When you look at your spending price of $35, which is a $65 profit rather than a $45 profit. There’s no point trying to get every little dollar when it will hinder profits, it’s counter-intuitive. Especially when any positive gain is better than no gain at all.

I would like to stress that in certain cases doing what I mentioned above may result in a loss, it depends entirely on your product or service and the costs attributed to it.

3. Make deals with local civic, school (university, high school, etc.) and or social clubs to give discounts.

I would like to focus on universities because I can give more thought out examples. Ex. During my stay at Carleton University in Ottawa I joined the Taiwanese Student Association. With joining you got discount card to use at different local places. My friends went to at least a few of these places because it was just convenient and nearby. Any small business can be a part of this deal as long as it is useful to the student. This strategy can be used in multiple situations. Ever go to a bowling alley and see a bunch of women wearing a certain color playing together? That’s a small business making a deal with a local club.

4. Trade a service for a service.

There are a lot of service businesses that don’t really have a set way to calculate their prices for providing their service. Ex. Computer repair isn’t exactly rocket science (I would know, I did it! sigh… took 2 years to use that joke), but what they do is charge you for their time. Usually they can solve the problem in 10 minutes but charge you for the whole hour. By bartering with IT Company’s, especially repair shops you can sidestep this fee. Depending on your store this may be easy or hard, it depends entire on the store and owner. Long story short; time to make some friends.

These are just a few examples of how you can use a loose form of bartering to help your small business get a little advertising, good will and more customers. You can think out of the box and I actually encourage you to try and put a unique spin on it. Just remember not to try and cheat anyone or even try relative gain because it can hurt a small business. I hope these suggestions help.

This is a guest post by Kyle Chan

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CEO at 3Bug Media
Gary Shouldis is the founder of 3Bug Media, a web marketing company that helps businesses create 360 Marketing Strategies to dominate their market. His blog is read by over 20 thousand small business owners a month and has been featured in the N.Y. Times Small Business, Business Insider and Yahoo Small Business.
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