Short on cash? Try barteringby Michael Caputo, Minnesota Public Radio
If you run a business and lack cash in these times of tight credit, what do you do? More and more people are turning to an age-old transaction -- bartering.
Minneapolis — Kevin Burns runs a small Web design business from his Minneapolis home. At a desk in his living room, Burns shows a Web page he built for a local remodeling contractor.
The site plays music, and there are special sound effects designed for a contractor's Web site.
"The hammer's kind of aggravating," Burns said, "but he likes them."
Burns' company offers pages like this for prices that range from $700 to $1,400. But he got no money for this job. What he's getting is just down the hallway, in his bathroom.
Burns pulled up the blinds to expose a window by his shower where the wood frame is crumbling, which the remodeling contractor is going to repair.
"He's going to rip the whole thing out and redo all the wood and fix all the damage, and frost the window and put the window back in," Burns said.
It's the classic barter. Burns offers his services on the Craigslist barter section.
Initially it was to fill the void as business slowed. But eventually, bartering allowed Burns to take on customers he wouldn't have otherwise. He kept getting calls from people singing the same song.
"'I got laid off,' or 'I lost my job and I want to start a business, I need a Web site but I don't have very much money.' And we thought if we could do a barter arrangement, then we thought we could get some services in trade for a Web site and get them off the ground to help them out," Burns said.
For Megan Kessuelke of Lake Crystal, bartering is a way to cut costs. After Kessuelke and her family moved out of the Twin Cities, she decided to stay home with her children and left the financial industry.
But living on just one paycheck -- her husband's -- was a struggle. So Kessuelke made an arrangement with the wife of a local farmer.
"She knew that I was looking for work to supplement our income," Kessuelke said. "She said, 'How would you like to do our books for us, and we will work out a payment with chicken, beef, eggs, whatever.'"
Getting a handle on the growth of bartering isn't easy. Barter transactions are taxable, but the state Revenue Department doesn't keep statistics on barter deals.
Craigslist.com reportedly said that bartering ads have risen 100 percent in the last year. And there are other indicators that bartering is on the rise.
"Our member exchanges have seen an increase in the last 12 months," said Ron Whitney, who heads the International Reciprocal Trade Association, which represents 85 barter exchanges inside and outside the U.S.
Barter exchanges are a more organized way of bringing businesses together to trade goods and services.
A business pays a fee to join an exchange, which issues credits based on the value of the firm's products. The firm can use those credits to, in essence, buy a service from another company in the exchange. But no money changes hands.
Whitney said the value of goods and services traded on member exchanges is growing at rates from 5 percent to 80 percent, and it's all due to the economy.
It's a dynamic that St. Paul's Tram Holloway is banking on. Holloway runs a local barter exchange. The business is based in his car. Holloway is a one-man show, trying to make a go of it in Minnesota as a licensee of Merchants Barter Exchange.
Holloway said that since he began a year ago, he has brought hundreds of businesses into his exchange. They pay an $800 membership fee and get about $2,000 worth of credits to spend with others in the exchange.
Even so, Holloway said building a clientele is going slowly.
"No one's heard of organized bartering in Minnesota. Everywhere else, people are like, 'This is the coolest thing ever,'" he said.
Holloway believes Minnesota businesses need to get into a bartering exchange to survive the recession.
Kevin Burns isn't so sure. He was approached to be part of a barter exchange, and declined.
"In a situation like that, we would be overrun with bartering business," he said, "and we have to make some money."
But Burns said bartering is now a part of his arsenal -- because any business he can help might eventually become a customer that can pay in cash.
- Morning Edition, 04/21/2009, 6:55 a.m.