Trading services, items instead of spending cash

Interest in an age-old practice is increasing as thousands are bartering using "trade dollars" in place of cash.

Dentistry for computer services. A real estate appraisal for furniture refinishing. Athletic training for baby-sitting. Restaurant dinners for snow plowing. Carpet cleaning for an improv camp.

Barter exchanges, which essentially act as accounting and marketing firms rolled into one, say business is up as a result of the tough economy. People want to protect what they have or may have a harder time obtaining credit.

Even the village of Libertyville is testing the waters. In return for space at the Libertyville Sports Complex for an International Monetary Systems trade show Oct. 17, it will receive 10,000 trade dollars.

"When cash is tight, people look to alternative ways of getting things done," says John Hora, vice president of Art of Barter Inc., an Elgin-based company with about 1,400 clients in the Chicago area.

"There's no question we've experienced a spike in our business and a difference in how members are utilizing their trades. We have had a lot of online signups," said Krista Vardabash, director of marketing for International Monetary Systems, or IMS. The company, founded in New Berlin, Wis., in 1985, describes itself as the largest full-service trading network in the United States, with 17,500 business members.

Exchange members have the option of swapping goods or services directly with a trading partner or accepting or giving trade dollars, which can be used elsewhere.

Concrete evidence of an uptick in barter activity is elusive, as it is not compiled as part of standard economic reports. One indicator could be Internal Revenue Service data showing the number of 1099B forms (Broker and Barter Exchange Transactions) filed: In 2009 that number is expected to finish 25 percent higher than in 2007. That includes the sale of stocks and bonds, however, with no separate listing for barter.

Many barter arrangements are off the radar and unable to be measured. Who's to know if you agree to watch your neighbor's dog in exchange for your lawn being mowed, for example.

But members of barter exchanges pay a percentage fee for every transaction and may have to pay monthly maintenance fees as well. The companies track activity and supply statements.

Barter or trade dollars are considered identical to real dollars, and the fair market value of goods and services exchanged must be reported as income by both parties to the IRS.

"In a way, we are considered a third-party record-keeper," Vardabash said.

IMS has a network of barter brokers who build relationships for what Vardabash called the "incidence of coincidence" - when you have something someone else wants.

Both Hora and Vardabash report seeing a shift in the type of services being sought.

"In better times, they're out buying art works and riding in limousines. When times are tough, they're keeping the car running and practical things," Hora said.

In Des Plaines, Brian Shelton, owner of BGT Landscape, has bartered for a variety of items or services, including equipment for his business, a dunk tank for the employee picnic and a kitchen remodel for his home. He also spent trade dollars to obtain a used minivan for a needy employee with five children.

"I've gotten rental cars and hotels in Vegas. I bought a truck in Wichita, Kansas," says Shelton, who does $50,000 to $75,000 in barter trade each year.

Jayne Hayes, owner of Body & Sol Salon in Barrington, has been bartering for five years. Most recently, she secured polycarbonate bottles for customers who had shied away from the plastic variety, has placed magazine advertising and is acquiring an electronic massage table.

"Literally, I use it all the time," she said. "We have this whole other economic culture. You treat them the same as people who are spending U.S. dollars. You end up having a better cash flow."

Barter is not for everyone. What if there's nothing you want or need?

The Green Oaks, Libertyville, Mundelein, Vernon Hills Chamber of Commerce tried bartering a few years ago.

"We found it didn't work well for us. A lot of the services they were offering were not things a chamber of commerce could use," said Dwight Houchins, former GLMV executive director. "We had members who wanted to barter their services to be a member of the chamber, but how many Web sites can I use?"

Web designers and real estate professionals are examples of services that may be saturated in the barter world. Others professions are in demand.

"In every single one of our markets, printers are almost always needed. Hotels, too," Vardabash said.

"I could never have enough dentists," said Hora, who noted that dental insurance is sometimes a casualty in the poor economy.

And what of the quality or cost of the services?

Then-village trustee Luke Lukens raised that question when Libertyville was considering the IMS arrangement with the sports complex.

"If they're not usable in a meaningful way, is it really a deal?" he asked at the time. "I'm worried we'll get all these credits - and because we've got them, now we have to spend them and it's not something we'll really need."

There is a plan, though, for spending Libertyville's 10,000 trade dollars.

"The first priority will be carpeting. The second would be cleaning supplies," said James Zych, director of parks and recreation.

He said the arrangement also could lead to future business for the complex.

"We're going to give it a one-year shot. We'll see how it turns out," Zych said.

Hayes and others consider the barter system a marketing tool. Using barter dollars for advertising can boost exposure, for example, and access to other businesses in the system spreads the word to potential new customers.

And that could be anyone, since nearly everything is fair game for barter.

"I've got a dog whisperer who's gotten three or four jobs. There's another lady who teaches potty training," Hora said.

"Anything can be for sale. One time I saw an island," said Luchie Saraceni, owner of Jani-Master Inc., a family-owned cleaning company based in Aurora.

Saraceni said she barters up to $5,000 per month for business and personal uses.

"The key is to know how to use it," she said.

Saraceni, Shelton and Hayes are all members of IMS. The company in August plans a national advertising campaign promoting its service as a way to attract business in a poor economy.

"This is not your great granddaddy's barter anymore," Vardabash said.

Barter: Exchanges help businesses market their wares, too