Bartering - Cash Conversion

Today I write about a unique combination. The ancient bartering systems and strategic business development and with a proposal to combine these two and an analysis on how to combine them. Just before we jump into this possibility allow me to magnify some stark differences between Business Development & Strategic Business Development. Strategy for business development carries a complete different meaning. What exactly is Strategy?

Strategy is an action that managers take to attain one or more of the organisation's goals. Strategy can also be defined as “A general direction set for the company and its various components to achieve a desired state in the future. Strategy results from the detailed strategic planning process”. Now lets look at the real meaning of business development and why it is important to practice strategic business development as opposed to just business development.

Business development is usually headed by a business development manager who leads a combination of many things ranging from activities, ideas and initiatives that are implemented with the intention to make a business more profitable and the growth of these business. A business development manager works with almost every department from sales, marketing, manufacturing, human resources, accounting, investors, vendor management and product development. They have knowledge of emerging market opportunities, possibilities for expansion, competitor expansion, competitor developments and the current sources of the said business revenue. Business development personals are focused on deploying new business frameworks.

However as a result of the pressure to deliver business development consultants sometimes overlook pertinent focus. The pressures of client work and an urgent need for new businesses, there is the common danger of netting something quick and easy which can produce short term results.

Strategic business development on the other hand is all of the above and there is a further element which is included which is deciding where to focus, how to focus, what to focus on and how to target the focus. We employ strategies using high stake decisions which in turn, when implemented will drive high levels of growth and profitability. It is all about delivering impact. Business strategy today is also about being able to create a linear line of all networking, referrals, thought leadership, content marketing and combined strategies. Strategy differs from one professional to another. However they all have the common goal which is the alignment of all processes, procedures and business goals.

My exploration here are the possibilities of weaving the bartering system into strategic business development. The bartering system is increasingly gaining popularity within todays business world as a means of conserving company money. So really, how do we combine bartering into strategic business development? Bartering by definition is “the system of exchanging goods or services without using money”

Bartering is the most ancient business model. Its has existed through out the existence of human kind. And it continues to exist. It has not and will not go extinct. It is a $13billion annually generating industry and has existed and sharpened even before the start of internet. Bartering is an established act of doing business and its foundation is solid. The existence and use of internet for bartering is merely a bonus. Combining a formula that’s tried and tested into the wide web and utilising the exposure provided and incorporating it into strategic business development and producing a full incorporation of a business plan will be my epitome of success in my career. How would I combine both these dynamic processes to complement each other?

Of recent there has been an escalation of the online platform whereby bartering sites are seen promising for small- and medium-sized businesses wanting to conserve cash by trading products, skills, and services. This is done by using one of the two types of battering system or agreement which ever more suitable. The first type is the basic bartering agreement whereby two individuals trade items. For example, you will be away for a couple of months and you have an office space available. Instead of leaving it empty, you agree to allow someone to use it and in return he pays your monthly bills for the running of the office. So instead of leaving it empty while still incurring bills you barter your space in return for management and money in your absence. In many ways during the pandemic whereby the tourism industry had hit ground zero, the government's initiative to utilise hotels as quarantine center's can be viewed as a form of bartering. Government activated revenue for these ailing hotels by providing guests and in return these hotels helped the government to curb the spread of the disease.

A slightly more complex bartering system could be where there is a log or credit for services that is extended and these credits are used to extract services for themselves. Let us explore this complicated system for the use in the professional service provider's industry.

For example your company is a professional service provider, getting into a site on barter exchange can enable you to barter anywhere in the system or world. This today can be accomplished by using a credit system with a large number of willing buyers and sellers. For example, you can give legal advice to an accountancy firm and use this credit to hire a strategic business consultant or an advertising firm to carry out the relevant scope to bring your service to the forefront.

Barter site facilitator sites make a huge amount of bartering commodity. They do this by monitoring, keeping records of bartering transactions and referring businesses to each other. For every successful introduction they receive a bartering facilitators fee. These facilitators record all transactions and have monthly statements for members indicating their purchases, sales, and current balance. For centuries people have exchanged goods and services in a barter system. Today with the availability of apps and designated bartering sites bartering has taken on a whole new dimension.

Take for example a company that requires a tax consultant to help with tax advice. This is a professional service which could cost my client huge sums of money. In exchange my client had listed on a bartering site offering to make an introduction to an established organisation which will bring the tax consultancy firm huge revenue. He also offered to upgrade the entire working system for the tax consulting firm in exchange for their services. This carried the same value as their professional service fee. This transacting between my client and the accountant was not done by cash but it was done by exchange of value added services for the tax consultants office.

There are a few things entrepreneurs should keep in mind before they start bartering. Just because money is not being exchanged in the bartering process does not mean that you are exempt from taxes. Tax implications remain for both parties and should be recorded at fair market value. Be aware of any hidden fees. Lots of companies will join established bartering networks, that saves money. However, it is recommended that before joining a formal bartering network you take a look at charges, annual or monthly administrative fees which might exist. Then evaluate your before participation in a barter and ensure the other party is legitimate.

Refrain from letting your guard down because money is not used. As with anything in business, it is good to know the potential of your partners and or counterparts. If an exchange of this sort is done without a bartering site it could very easily fall under the category of referrals. On a bartering site where the services sought are spelt out clearly it then leaps that hurdle. Entrepreneurs should also bear in mind the legality of referrals in their respective countries. Some countries allow it with guidelines and some do not. However when a service is listed on a bartering site in exchange for other services, it is not construed as a referral.

In Malaysia with the downturn of economy as the result of the fight against the unprecedented pandemic, Bursa had recently extended an announcement for the registration of public listed companies transformation programme whereby Bursa Malaysia aims to steer corporate Malaysia to higher performance levels by enabling PLCs of all sizes to access best practices and data insights, with the aim of increasing attractiveness to investors. Dissecting this initiative, it is very clear that the government is exploring new ways to create and capture value. With the same valour it will be good if bartering is considered as a way to steer around restrictions imposed by cash and credit to extract value from underperforming plc’s and to extend markets and to find new customers. This can be achieved by sharing core values and engaging in open communication.

Having participated in fair share of bartering through the years, I have concluded that it can be applicable to a lot of industries/sectors. While most entrepreneurs view bartering a short term solution and I have experienced situations whereby parties involved in a bartering have establish credible relationships lasting from infancy to today.

Business bartering has been around for a while. In 2010 North Carolina Bar Association had approved lawyers to participate in organised bartering whereby they were allowed to exchange legal services for credits on professional services. Today professionals like accountants to electricians are trading their skills for goods and services or skills credit which is used to pay off for the running of their consultancy.

Corporate barter firms are flourishing by facilitating companies to create value from assets that no longer fit their establishment or business strategy. These “ill fitted” or “unwanted resources” are frequently bartered for needed services like freight, travel, advertising, etc.

Food for thought, how about setting up an online bartering site whereby your startup is an online bartering exchange site. How will this work? Will this enable you to start battering with accountants, law firms in return for cross exchanges between the different service providers. This is bartering in between bartering. Complicated, takes a bit of thinking but absolutely doable and has been done with great success.

A glance at your organisation. What do you have to offer for barter to reduce costs and enhance revenues, build awareness or otherwise expand the profitability? Bartering is especially useful when it comes to running an office. When needing to purchase goods for the running of an office first think about what you can offer for it in exchange. This thinking process can very well be able to finance the costs of running an office. My take on incorporating the bartering systems into strategic business development models.