By James Harvey Stout (deceased). This material is now in the public domain. The complete collection of Mr. Stout's writing is now at http://stout.mybravenet.com/public_html/h/ >

Jump to the following topics:

1. We can consider these issues.  
2. We can acquire a franchise from an established barter club. 

(This chapter describes the procedures in starting and operating a barter club. The chapter does not cover every possible detail, but it gives guidelines -- and an overview such that we can decide whether we want to start a club of our own.)

We can consider these issues.

1. The focus.
   • A for-profit business.
   • A non-profit organization. It can be a social-service agency which might direct its efforts specifically toward low-income people. Those people do not have much cash, but they do have many skills which can be traded.
   • An informal club. This could be a group of friends who like to trade.
   • A specialized group. We might want to limit membership to one group: our own neighborhood, or our own church, or our own age-group (e.g., senior citizens), or only one skill (e.g., babysitting or tutoring or car-pooling), or only one product (e.g., home-grown fruits and vegetables).
2. Income and expenses.
   • Income. We can earn money in many ways:
     • Service charges. If our service charge is 10% for each transaction, and the members are spending an average of $200 per month through the club, that $20 might be multiplied by 1,000 members into $20,000 per month, or $240,000 per year.
     • Membership fees. Some clubs charge $250 or more as an initial membership fee.
     • Annual dues.
     • Additional services. At some clubs, the management does more than just oversee other people's sales; it engages in its own sales -- in real estate, insurance, advertising, travel packages, and other goods and services.
     • Grants, donations, fund-raisers (if our barter club is a non-profit organization). In Oregon, a barter club was started by a VISTA volunteer; that government agency paid for the director's living expenses while he created the club.
3. Expenses. The expenses can include rent, salaries of employees, postage, printing, telephone, office supplies, transportation, etc. If our barter-club is a non-profit organization, volunteers might perform some of the tasks.
4. The business aspects. We need to know about taxes, business insurance, bookkeeping, zoning, licenses, etc. We can get that information from business texts, college courses, the Small Business Administration, accountants, attorneys, other barter-club directors, and other experts.
5. The format of the organization.
   • A barter club. We maintain ongoing accounts for our members, to keep track of their debits and credits, probably in the form of "units" (which are equal to $1 each).
   • A clearinghouse. We simply keep a list of the members (and their goods or services); we do not set up the trades, or accept any responsibility for the outcome (except to remove members who violate rules). When members want to make a trade, they can use one of these procedures:
     • They call us. We look at our list of members. We find someone who has what the caller wants, and we give that phone number to the caller.
     • They refer to a directory of members. The directory has a list of members, their phone numbers, and their goods and services.
   • A brokerage. We have a list of people who barter; when someone calls to request a particular item or service, we arrange the deal, and we charge a commission.
6. Acquiring new members. We can consider these options:
   • We can invite friends, neighbors, and co-workers.
   • We can invite members of a group to which we belong: our church, social club (e.g., Kiwanis), volunteer organization, senior citizens group, retirement community, food co-op, social service agency, school club, or government-funded program. For example, in one community, the Head Start program initiated a barter group of its own.
   • We can use newspaper ads, fliers, notes on bulletin boards, announcements in local Usenet newsgroups, listings in local directories on the World Wide Web, a listing in the phone directory, radio ads, television ads, press releases, etc.
   • We can call individuals who have classified ads. In our phone call, we can say, "If you are not able to sell that item with your ad, maybe you'd like to try to barter it through our club."
7. Our explanation of bartering. In brochures, press releases, and conversations, we can explain various aspects of bartering:
   • The benefits. Give a personalized presentation by referring to individual needs; for example, the person might want to save money, or to share, or to meet people, or to help people, or to have fun, or to get a specific item or service (e.g., babysitting).
   • The process. People are accustomed to using money; bartering might be an alien topic, so we need to give details regarding the club and its operation.
   • "Resource identification." At non-profit barter clubs (i.e., clubs where many members are not business-owners), some people might believe that they have nothing to offer to the group. We need to explain that everyone has barterable goods and skills: garden produce, unwanted possessions, babysitting, unskilled labor (e.g., yardwork, housecleaning), the products from hobbies, etc. This book has a long list of items which can be bartered.
8. Our office. We might be able to barter for office space -- paying with barter-club units or our services. A small non-profit club can be operated from our home, or from a donated room.
9. Units or direct trades. We can use either system:
   • Direct trades. In this system, we trade one item directly for another.
     • Main advantage: It doesn't require much paperwork; we simply keep records of the members, their phone numbers, and their "needs" and "wants." Then, when someone calls us to set up a trade, we look through our records to find someone who might be interested.
     • Main disadvantage: The system relies on a "double coincidence," i.e., a situation in which I have what you want, and you have what I want. But, for example, if you want my computer-programming skills, but I don't want your pottery, we can't make a trade.
   • Units. Units are a type of "money" which the members exchange among themselves; they are equal to $1 each.
     • Main advantage: This system does not rely on a "double coincidence"; i.e., you can buy my computer-programming skills even if I don't want your pottery. You aren't paying with the pottery; instead, you are paying with units, which I can spend at someone else's place of business.
     • Main disadvantage: It requires an ongoing, time-consuming bookkeeping system to keep track of the members' debits and credits. We also have to deal with abuse of the system; for example, some people will use other members' goods and services (on credit), and then they will not provide goods or services whereby they could pay off that debt to the system. Clubs solve this problem in various ways:
       • They might simply prohibit "deficit spending." The members cannot spend units which they do not have.
       • In some clubs, the members must call the office for an authorization for each check. In the office, an employee checks the files to be certain that the check is backed by enough units.
       • Membership applications usually ask about a prospective member's finances -- employment history, credit history, etc. People who have been financially irresponsible can be prohibited from joining our club.

We can acquire a franchise from an established barter club. We can consider these issues:

1. Expense. A franchise could cost $25,000 or more.
2. The viability of the franchise.
   1. We can talk to some people who have bought franchises, to ask whether the franchiser has been helpful to them or whether they should have done it on then own (without the franchiser's help, and without spending $25,000 or more for that help).
   2. We can investigate the franchise by the same means by which we would investigate a barter club (as explained in the chapter regarding barter clubs).
3. The application. The franchise application will probably ask about our business experience, our barter experience, our employment history, and our educational background. We might also be required to disclose our finances: credit history, financial statements, sources of income, any mortgages, any loans, any bankruptcies, etc.
4. Training. When we buy a franchise, part of the fee will pay for our training.
   • The topics of training. The franchiser will teach us about marketing, accounting, office procedures, staffing, sales (to recruit club members), member relations, general management procedures, software for barter clubs, taxes, advertising, etc.
   • Training at the franchiser's headquarters. This might be a week-long session for us and our key employees.
   • Field visits. The franchiser will probably send a representative to our office periodically, to review our operations and to give advice.
   • On-going support. We can call the franchiser with our questions, or we can ask a representative to visit us. One franchiser has a cost-free "800" phone number for support, and it promises to send a rep "within hours" if we have an emergency.
   • Training for our sales staff. One franchiser can send a professional sales manager to us to help in the hiring, training, and motivating of our sales team.
   • Other support. The franchiser might give additional information through newsletters, regional seminars, and national conventions.
5. Software. The franchise will have software which is specially designed for barter clubs. The software will be able to record transactions and fees, handle our bookkeeping, print mailing lists, and produce monthly statements.
6. The operations manual. The manual will cover all aspects of the business.
7. Printed material. The franchiser will provide the materials which we need for our club: forms, contracts, membership cards, brochures, audiovisual presentations, manuals, marketing kits, advertisements, receipts, etc.