Locally Organized Barter Exchange Gathers Momentum

It takes entrepreneurial types to make a barter exchange hum, and a group of just such business owners has helped Local Trade Partners approach a comfortable cruising speed.

LTP is a Northwest Arkansas-based exchange in which local businesses agree to accept and spend trade dollars with other members. LTP was started by Eureka Pizza founder Rolf Wilkin after he studied ways to address his company’s excess business capacity.

“If you have some extra time or capacity, why not trade it?” Wilkin said.

That pitch has been a successful one for Wilkin, who began selling LTP memberships in October and started doing business on Dec. 6. As of press time, LTP had 141 members. Businesses represented ranged from auto detailers and attorneys to pet sitters and periodontists.

In the most common scenario, a $149 membership results in $1,000 in trade. A member can then use those trade dollars to buy goods or services from any other member, as long as he or she agrees to reciprocate to any other member.

LTP tracks and manages the transactions, which count as taxable income and must be recorded for tax purposes, and collects a 5 percent fee on each buy and sell. Sales tax and tips are paid in cash.

LTP then pays The Trade Banc, a Florida company, a 1.5 percent transaction fee in return for services provided. Those services include the barter software used on LTP’s Web site.

“The whole point of this is to preserve the cash you have to have for your mortgage, your light bill, your taxes,” LTP trade broker Rich Creyer said. “You can’t use trade dollars for that, so you use trade dollars for tires, brakes, clothes, dining out, dental work, whatever.

“The smart guy looks at this and says, ‘Oh, man, this is an interest-free credit line.'”

Critics of barter exchanges often believe such systems are outdated, if not downright primitive. Some wonder if exchanges do, in fact, contribute to a healthy economy.

Ron Whitney, executive director of the International Reciprocal Trade Association, has heard all the arguments. The IRTA is a nonprofit organization that promotes equitable standards of practice within the industry.

“Barter exchanges do not displace existing cash business, but rather they bring additional business to their members by bringing them business they would not have had, but for their participation in the barter exchange,” Whitney wrote in an e-mailed response to a question asking whether barter exchanges curb the spending of “real” dollars.

“As a result, barter exchanges create additional business and therefore add new commerce, and new revenues, to the economy.”

Whitney also stressed the idea that barter exchanges create new cash business via referrals from trade partners. Creyer said he’s seen that scenario unfold already with LTP.

“A lot of the customers are telling us they’re getting customers they’ve never seen before … then those people end up coming back or tell their friends and those people come,” Creyer said. Wilkin said another form of validation has come in the form of high-profile members like Joe Fennel (Bordino’s) and Tim Stanley (TDS Xerox), Wilkin said.

“Local Trade Partners is a way for local businesses to join together to earn more profits” Wilkin said. “It’s that simple.”