by Kirby Lindsay, posted 9 January 2013
A long time ago (in 1993) in a place not-so-far-away (here in Fremont) some idealistic activists started a barter system, called ‘Fremont Time’. This non-profit, community-based exchange of services, without money, warmed hearts and inspired imaginations for a few years, until the IRS arrived. Demands for an accounting of all exchanges, with costs assigned to each service, and paperwork filed by all participants quickly caused Fremont Time to falter and fold.
It turns out that, in 1982, a trading company was founded called Itex, to allow businesses to barter products and/or services they have for services/products they need. And last July, the Puget Sound franchise of Itex, owned by Cameron Johnson, opened its office in Fremont, to help business owners here exchange services/products with others, located all over the U.S. and Canada.
‘Take Advantage of Trading’
Itex has succeeded in simplifying the barter system, and managing the paperwork. “It’s easy to overthink,” acknowledged Johnson, about bartering, but Itex members don’t sweat the details of the exchanges they make. “We try to do the heavy lifting,” he explained.
Headquartered in Bellevue, this national corporation allows business owners to, “take advantage of trading, and add flexibility and sustainability,” to their business plan. On your own, bartering requires finding a provider willing to trade the product or service you need, it takes negotiating an even exchange for your own product or service, and arranging a date and time to make the trade.
Itex works out all these details, in advance. “We’ve created a currency, an Itex dollar,” Johnson explained. They establish prices and exchange rates in Itex dollars on the items members list in the Itex catalogue. The list contains products and services from 24,000 providers across the U.S. and Canada, available for ‘purchase’ with Itex dollars.
‘Afford To Trade’
From his office at 4000 Aurora Ave N, Johnson and his staffers Clerissa Udey and Natalya Alekhina can assist client members as they evaluate what they can afford to offer for barter, and in “giving up something you can afford to give up,” Johnson recommended.
Johnson doesn’t encourage client companies to offer their biggest ticket or rarer products and/or services for exchange. He wants to help clients find a sustainable level, as he asks, “What can you afford to trade?” He advises clients to consider the margin on their product – the cost to the consumer of a product/service minus the cost to produce it – and barter the higher margin items. Overall, “we recommend 5 – 10% of your gross sales maximum,” be tied up in the barter system, he explained, “otherwise you are squeezing out your cash business, or incurring too much capital cost in your barter goods.”
‘Hundreds of Ways’ To Trade
“We’re a relationship business,” Johnson observed, as Itex serves its members to, “engage in trades that move [their business] forward in some way.” For many businesses, bartering can build brand awareness and increase the client base – either through providing potential customers with bartered products/services, or by bartering for items that help the business grow (i.e. equipment, services, gifts for clients, signage, or advertising.) “There are literally hundreds of ways you can trade,” Johnson explained.
“Big businesses do corporate trades all the time,” Johnson acknowledged, “but not on our network.” Itex typically attracts medium to small sized businesses – often one or two person shops that employ maybe 8 people total.
The Itex catalogue contains a diversity of items including carpet cleaning, rental of a town car, flowers, plumbing repair, dental care, mattresses, etc. Over the holidays, Johnson had a lot of requests for ‘Thank You’ baskets. Business owners trade for items for their business, for themselves, for employees, or for friends/family.
“There are people that get it,” Johnson acknowledged of the bartering concept, “and there are people that don’t. They don’t see the value.” And he won’t hard sell the idea. “Clients tend to run in two groups,” he described, “in-and-out in six months, and others that stay more than six years.”
“Unfortunately, it’s not as straight forward as a cash transaction,” Johnson acknowledged about bartering in our capitalistic system. Itex does charge a commission on every trade transaction – about 10 – 15% depending on the exchange – and bills members monthly, like a credit card statement, for U.S. currency.
Also, “this is a taxable event,” Johnson stated clearly. Every trade is tracked by Itex, reported on a 1099B form for the IRS, and valued dollar for dollar. “This is not a tax dodge,” he said, “it’s clean.”
Business owners looking for a new way to exchange products and services can visit the Itex website or Facebook page – or contact Johnson directly at cameron.johnson@itex.net “It’s a tool for your tool kit,” Johnson suggested, and a safe, IRS-savvy way to incorporate an ancient practice – and an idealistic reality – into your modern business plan.
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©2013 Kirby Lindsay. This column is protected by intellectual property laws, including U.S. copyright laws. Reproduction, adaptation or distribution without permission is prohibited.