The Beauty of Bartering

By Reg Scheepers

Bartering is basically when you exchange your product or service for another company’s product or service, leaving cash out of the equation.

I love bartering with my whole heart. With the new toll fees on the N1, the increased fuel tax, the 50%-and-climbing increase in just the last year in electricity prices, and excessive service charges by South African banks and government-owned enterprises like Hellkom, bartering offers a way to do business that appeals a great deal to me.

When you exchange your product at your sell value, for another product at it’s sell value, there are more benefits than just having the product you wanted.

I love bartering, not just because I can leave Uncle Sipho (My South African equivalent to Uncle Sam, i.e. the tax man) out of the equation. It’s such a powerful concept. But I love bartering when it has some beautifying elements to it.

The beauty behind a well structured barter agreement is that it is a win-win, and it has profit within the profit. What do I mean?

Let’s take two bartering scenarios where Brothers in Beat has been involved in recently.

1. Clothing Company

A clothing company approached us for team building and they suggested a barter agreement where we would do the event free of charge and they would provide us with clothing to the value of our quote to them.

They don’t sell to the public. They sell to retail stores. So you and I get our clothing once the manufacturer has put their profit on, the distributor has put their profit on that, and the retailer puts their profit on top of that.

Our quote to this company was around R5 000. Now, here’s what I mean by win-win profit within profit.

The clothing company essentially got R5 000 worth of team building for R2 500. The reason is that the amount they sell the clothing for is more than what they pay the manufacturer for the clothing. So the clothing they exchanged for the team building only cost them literally R2 500, not R5 000.

So their profit is the R5000 team building, and within that profit is the R2 500 discount in terms of the amount of money they had to spend on it. So they got a R5 000 event for half price.

On the other hand, we got R10 000 worth of clothing for R5 000 because if we had to buy that amount of clothing from the retailer, we would have to buy it from them at their marked up price. So our profit is the R5 000 we quoted for the event, and within that profit is the R5 000 we save by getting it at the distributor.

2. Food Company

A food company offered us coupons to eat at their restaurants in exchange for the same value discounted off their quote. I didn’t go for this one for the following reason…

Getting a few thousand Rand’s food coupons would just mean that now I had to eat at this restaurant. I like their food, but being locked into that specific restaurant chain to “spend my money, i.e. the coupons” is a downside. If I just took the cash, I could choose to eat there or anywhere else.

Secondly, it doesn’t actually benefit me, it only benefits them. The price I will pay for my food at that restaurant chain will be the same. In other words, if they give me R4 000 worth of coupons, I can eat R4 000 worth of food.

An agreement I would have more likely considered is if I got the food at the price they sold it to their restaurant outlets. What that would mean is the exact same as the above example of the clothing company. They would get the drumming at a discount since the amount they pay for the food is less than the amount they charge their outlets to buy it.

I on the other hand would benefit because I can eat food that would cost me double at the restaurant for half the price.

Summary

I always look for a win-win profit within profit situation when considering a barter agreement. Of course if a company is ok with me being the only one to have profit within the profit, that’s fine, I won’t say no

Brothers in Beat has done a number of events for Sasol, now if only I could barter to get my fuel at a discount. Or better yet, maybe Mercedes Benz will be open to a barter agreement in the near future.

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