Felder, president of World's Best Rated Cigar Co., a North Miami Beach-based cigar manufacturer and distributor, is a member of Ubarter.com, a business-to-business barter exchange based in Seattle. Established in 1983, Ubarter has about 10,000 members who, like Felder, exchange goods and services instead of cash.
"We have a significant investment in the cigar business, and we really didn't want to expend any more cash," says Felder. "Since it's very hard to market without money, we've gone to barter to turn our inventory and to convert that inventory into a usable asset."
Barter has been around for as long as people have been willing to trade something they have for something they want. But business-to-business barter is a new twist, one that has become an important tool for many small businesses. "Barter is a big marketing tool," says David S. Crombie, vice president of marketing for Ubarter.com.
There are two types of barter. The simpler is known as direct barter, a face-to-face swap of goods or services of roughly the same value. A dentist needs his office painted. The painter has a toothache. They trade painting for dental services.
What happens if the dentist needs painting, but the painter doesn't have a toothache? That's where barter exchanges come in.
Barter exchanges (list of bartering websites, page 42) act as middlemen, taking commissions for arranging swaps of goods or services. They use a currency called "trade dollars," often referred to as "funny money" by barter adherents.
Here's how Felder would conduct a typical barter transaction through an exchange. Felder would accumulate trade dollars in his barter account by providing cigars to a retailer. The amount of trade dollars would equal the retail value of the cigars he provides.
He can then use the trade dollars to purchase goods or services, such as advertising, for example, from another member of the exchange.
In the past, barter exchanges would publish phone book-like directories for their members; most now use the Internet for e-swapping, allowing for nearly real-time trading.
Barter is booming in the U.S. According to the International Reciprocal Trade Association (IRTA), there are more than 1,500 trade exchanges serving the U.S. and overseas markets, engaging in $7.5 billion worth of barter transactions every year.
Based on current trends, IRTA forecasts that 1.2 million businesses will be engaged in barter in North America in the next decade -- four times the 300,000 firms now bartering.
To join a barter exchange, a business must typically pay a membership fee, as well as commissions on barter transactions. Commissions range from 10% to 15% per transaction.
Barterers shouldn't think they're avoiding Uncle Sam, though: Barter transactions are taxable events, says David S. Appel, an accountant with Rachlin, Cohen & Holtz in Miami. Barter exchanges send out 1099Bs, and the value of the goods or services received is considered ordinary income.
Why then should a business barter? For one, barter enables businesses to buy the things they need without a cash outlay. But it's also a marketing tool, bringing new customers to businesses in trade exchanges. And barter reduces excess inventory, allowing businesses to run more efficiently.
Yet barter is not for everyone. For businesses that operate on tight margins or lack excess capacity, bartering won't work. And businesses still need cash; although trade dollars look good in a barter account, a business person can't use them to pay the electric bill.
On the Fly
Small businesses flock to the Internet for savings and convenience -- not to mention double mileage points.
By Robyn A. Friedman
When Myriam Cohen needs to travel between her office in Davie and the Orlando headquarters of CareerShop.com, she goes online. "I almost always use the Internet for travel arrangements," says Cohen, senior vice president of information technology for CareerShop, which operates an Internet career site. "I log onto Southwest Airlines. I click Fort Lauderdale. I click Orlando. And I hit submit. Within five minutes, I get a fax back from them confirming the flight. And I get double mileage."
As travel bookings on the Internet surge -- Forrester Research predicts that by 2004, online business travel bookings will exceed $20.3 billion -- the primary draw to small businesses is convenience. The Internet allows business travelers to make their own arrangements through easy-to-use travel sites such as Travelocity.com, Expedia.com or Yahoo!Travel (www.travel.yahoo.com).
"One of the limitations of travel agents is that they have business hours," says Peter Montadas, executive vice president of Initiatives Corp., a Miami-based consulting firm. "Sometimes consultants have to fly out, and you don't find out about it until after-hours. You'd have to wait until the next business day to talk to a travel agent."
Instead, Montadas logs onto the Net and makes his own arrangements. But he does admit that when he's busy, he'll call a travel agent, although the Internet helps him keep her honest. "If she tells me, 'This is the best flight I could get,' I can always go on the Internet and check that out," he says.
In addition to convenience, many business owners save money by going online to book their own travel arrangements. As more travel agents offset commission cuts by charging fees for obtaining airline tickets, businesses can book direct and avoid the fees. Plus, sites like Priceline.com allow users to name their own price for air fares, hotel and rental cars. Cohen, for example, used Priceline to save $200 on a weekly car rental during a recent trip to Colorado.
On the Web
Business-to-Business Barter Exchanges
BarterTrust.com
Founded in 1999, San Francisco-based BarterTrust.com has more than 7,000 member businesses that generated over $120 million in barter transactions last year. Members pay registration fees, monthly administrative fees and transaction fees of 5% to 6.5% of the price of the goods or services purchased or sold.
BigVine.com
BigVine, based in Redwood Shores, Calif., is an online barter exchange. Membership is free, but BigVine charges a transaction fee to members' credit cards each time they buy or sell. Buyers and sellers both pay the fee, which ranges from 4% to 8% per trade, says founder Bippy Siegal. BigVine recently formed a strategic alliance with American Express, which will market the barter exchange to its more than 2 million small-business card members and merchants.
ITEX Corp.
ITEX is a trade exchange based in Portland, Ore., that is in its second decade of operation. It offers the ITEX Express Card, an electronic debit card that can be used at member businesses throughout the nation.
LassoBucks.com
Based in Los Angeles, this site allows member businesses to spend and earn LassoBucks, rather than cash, as a way of facilitating barter. Membership is free, but members pay a transaction fee of from 2% to 5% when they buy or sell goods or services.
Ubarter.com
This Seattle-based trade exchange has more than 9,000 member businesses who transact an average of $30 million in barter every year. Membership is free, but members pay a 5% transaction fee every time they buy or sell. New members that agree to credit-card billing are automatically extended a $5,000 line of credit.
-- Robyn A. Friedman
Risky Business
Employees at a Tampa photography studio fly high for Florida businesses.
by Amy Welch
Collette Eddy has guts. The 49-year-old owner of Aerial Innovations, an aerial photography business based in Tampa, spends her time hanging out of helicopters, airplanes, buildings -- anything higher than 500 feet -- taking photos for businesses.
But the biggest risk Eddy took came in 1987. She was fired from her sales job at an aerial photography company after working there for seven years. Shortly after, an executive from Trammell Crow called her to say he would give her all his business if she started her own aerial photography company.
Eddy took him up on his offer. She headed out of her 350-sq.-ft. office every day with one camera -- the only equipment she had -- and started taking pictures for construction companies, banks, law firms and amusement parks.
In her first year of business, she lost $44,000 of the $50,000 she'd invested. But she kept working, knocking on doors and spreading the word. She's now been in business for 11 years and has turned a profit every year since the first.
Today, Eddy doesn't have to farm for business. She has to make time for it, mapping out photo shoots across Florida. In one day, she or her staff might easily fly over the entire state -- shooting 100 construction sites for companies looking to keep a record of development, or clicking roller-coaster rides at Busch Gardens or Disney World. An average day can include some disappointments and oddities such as the time they had to stop a shoot at Busch Gardens because the hovering helicopter was disturbing a pair of mating elephants.
Most of Eddy's business comes from tracking the progress of construction projects. But the service doesn't come cheap. It starts at about $75 a shoot for scheduled flights, which is the average, and runs up to $700 for one-time, custom shots.
"We're not the Kmart of this business," says Eddy. She says she prefers to focus on quality rather than price.
This year, Eddy says she expects $1.4 million in revenues, up from $1.3 million last year. She shares her profits generously with her nine employees. Once a week photographers are given a free massage at Aerial Innovations' airy, naturally lighted home-turned-office building. On the second floor there's a room with a cushy leather chair in which staffers can relax if they need a break. The maternity plan is unique -- babies come to work with mommies. And pets are welcome. Eddy's puppy, Leica (like the camera), an Australian shepherd, is part of the Aerial Innovations family. The only prerequisite to working for Eddy? "If you can go flying and not puke, then you've got the job," she says.
Briefs
Tax Relief
Florida legislators took the final step in a three-year plan to eliminate the accounts receivable portion of the state's intangibles tax. Accounts receivables that are owned, controlled or managed on Jan. 1, 2001, will be exempt from the tax. In another action, the sales tax exemption for manufacturers who are purchasing machinery and equipment for expansions was extended to property that is leased under a capital lease or leased from a governmental entity for educational purposes. In addition, silicon technology, or "chip," facilities also will be able to buy machinery and equipment without paying sales tax.
Buyer Beware
Fraudulent business opportunities can be found almost everywhere, from work-at-home schemes to Internet scams. To protect prospective owners against these unfair and deceptive practices, the U.S. Federal Trade Commission has set up a website (www.ftc.gov/bizop) with extensive information on business opportunities, federal and state laws and recent enforcement actions. The Florida Department of Agriculture, Division of Consumer Services, also has a useful site and a help line, 1-800-HELP-FLA, to help individuals check on business ventures.
Learning the Ropes
The new 2000-2001 edition of Florida Trend's Florida Small Business magazine includes a step-by-step guide to starting a business in Florida, including information on financing, taxes, insurance, technology and marketing. The 116-page publication also has features on using the Internet effectively, venture capital and utilizing high-tech tools. For a copy ($6.95 including shipping/handling), call Florida Trend at 727/821-5800.
Home, Suite Home Office
Is a home office better than a real office? For small-business owners, it's a tough call.
by Jeffery Zbar
Barry Epstein was paying high prices for office space he really didn't need. Kevin McCarthy was finding it hard to separate home from home office. So they each decided to head to the other side of the small office fence.
Two small businesses, one dilemma: Office space, and when to move into or out of a home office.
Epstein had spent the last 21 years operating his public relations firm, Barry R. Epstein Associates, from pricey, yet sublet Class A office space. Not only was he paying upward of $24,000 a year in rent, but at least three times when the primary leaseholder moved out, Epstein was forced to pack up and seek new digs. "It was always 'sayonara, Barry,' " he laments.
Recently, Epstein began to look at his business, his Boca Raton residence and how the two could work together. Up regularly at 4 a.m. and working late into the evenings, even on weekends, Epstein found himself breaking away to go to his corporate office five miles away to do work he could do from home. Rarely did he entertain clients, instead visiting their offices for meetings. "I was spending more and more time working from my home office," he says.
On the home front, his five-bedroom, 4,000-sq.-ft. home was set on a lot close to one acre -- providing ample space to build a home office for himself and his assistant. So Epstein hired an architect and drew up plans to convert his two-car garage into 600 square feet of space with private entrances from both the entry walkway and the home. Concerned that the home retain its value, the design also included a new three-car garage, closets and a separate full bathroom for the work area, Epstein says.
Sure he dropped more than $100,000 in the renovation. But that sum paid for substantial benefits: No commute, no rent and increased value on his home. What's more, his wife, Joanne, moved her feng shui consultancy, Feng Shui Placements, into Barry's old home office.
The only downside for Epstein, who has an adolescent son, was what finally drove McCarthy out of his Winter Park home: family interruptions. With two grade-school-aged children and a stay-at-home wife, McCarthy was finding it hard to separate home from office, even though he's worked from home on and off for 20 years. Workdays would creep into the evening, and McCarthy couldn't close the office door and set aside time for the family.
The clutter of the office and thousands of copies of his books ("The On-Purpose Person" and "The On-Purpose Business") were piling up throughout the home. "My wife said, 'Get this stuff out of the house,' " jokes McCarthy, president of US Partners, a motivational and leadership consulting firm.
So McCarthy moved out in 1998, when a friend offered to sublet 750 square feet of office space to him at a competitive rate. Month-to-month with no lease, McCarthy doesn't feel hemmed in by a long-term commitment and has plenty of room for himself, an employee, his office clutter and his inventory. He doesn't even maintain a home office, instead working from his laptop or his son's computer.
McCarthy capitalized on the additional space by buying more books to sell from his website and at speaking engagements. But he also now pays rent and utilities -- a double-whammy for a former home-business owner accustomed to paying those expenses related only to the home. "It was a big jump," McCarthy admits, "but it was cheaper than putting an addition on the house or buying a bigger house."
It also was a mental leap to leave the comfort of the home office, a move McCarthy debated for six months. The office's location 10 minutes from home made the decision easier to accept. McCarthy is home for dinner every night -- and back at the office if he needs to work a little more. He is able to make time for his children -- and grow his business. "In retrospect," McCarthy boasts, "I'm thrilled I did it."