CREATIVE BARTER: Small Company Solution

Anybody can throw some paint on a wall and call it creative, but our culture too often identifies creativity exclusively with poets and artists.  Even more creative are those who combine ideas with hard work to create a productive enterprise.

By Craig Kaufman

Unfortunately, many would-be entrepreneurs never succeed.  They have a good idea, they are willing to work, but they just don't have the money to pay for advertising, office equipment, lawyers and all the rest--they think.

Their business fails, and they think it's because they were underfinanced.   But the problem isn't lack of capital, it's  lack of imagination.  All it takes to be successful is the flexibility to see beyond cash and have the willingness to barter.  There are many situations when cash is unavailable.  If you lack the hard assets required for a bank loan, you need to be creative and flexible.
My specialty is helping businesses get off the ground.  A dozen deals come across my desk every week and I am able to facilitate many of them.
A new publication needed graphic design, accounting, legal help, and media kits.   I was able to provide these, and the publisher saved his cash for hard goods.

In another transaction, I dealt with a fairly large consumer goods manufacturer that did not have an advertising budget.  We structured a deal in which I took a small equity position in exchange for the advertising.

"Do you need money, or do you need what money can buy?"

Instead of $50,000 in cash, many businesses really need desks, telephones and other office equipment.  Maybe they need legal help in drawing up contracts, or help with advertising their products.  In either case, it's possible for a company to get what it needs through bartering.

If a company needs a catalog printed, or the services of an accountant, they can be provided through barter.  The company repays later in barter, cash, or a percentage of the gross.

For growing companies, barter is an effective economic tool.  It's buying power is based on the ability to generate goods or services rather than on cash reserves.

Barter is especially valuable for companies with excess items in inventory.   By bartering these away, the company kills two birds with one stone.  If excess production capacity is bartered, the company benefits by reducing the unit cost of production.

A piece of the action.

Often new businesses offer an equity position in exchange for what they need.  Service businesses are good examples of those that benefit from this approach.  These companies typically lack the hard assets that banks use as collateral.  This is true in the high-tech, communication and entertainment industries as well.  Giving a percentage ownership in exchange for goods and services helps get them rolling.  In these deals the company offers blue sky tomorrow for goods and services today.

Every company's needs are different, so every deal is different.  Barter is simply a form of alternative financing.  Cash is not the only way to buy things, and there is no one way for deals to be structured.  Flexibility and creativity are the keys to success.

Craig Kaufman is president of Kaufman and Associates, a national, Chicago-based corporate barter company that specializes in consultation and deal facilitation. he can be reached at 773-334-1631 or by fax at 773-334-2549.