My 6 year-old nephew wanted some playtime on my tablet so I said if he gave me one of his Easter chocolates, I’d give him some playtime. He put his hands on his hips and said “Isn’t that what you do at work?”.
I spent a few seconds contemplating whether I was prepared to explain to a 6-year old the business differences between barter and Corporate Trade.
“Something like that.” I replied.
Truth is, confusing barter with Corporate Trade is common misperception at any age. With new TV hits such as Barter Kings on the air, the odd person or two will ask me if “that” is what I do. While there are definitely similarities, there are also major differences. Placing Corporate Trade in the same category as the Barter Kings makes it difficult to understand how Corporate Trade is used as a more strategic Corporate financial solution.
With that in mind, my first blog will focus on explaining some of the key differences between barter and Corporate Trade.
To start, let me say that the principle behind the two is similar. Both are a financial solution - a means to get more with less, using trading principles. The differences between barter and Corporate Trade are in the application and execution.
What is barter?
Barter is an exchange of goods and services between two parties (which my apt nephew recognized). One-to-one bartering is generally practiced between individuals (or small business merchants) on an informal basis as a simple swap of goods and services. With time, this one-to-one swapping of goods evolved and developed into an organized business between third party groups (i.e. brokers). There are a handful of barter companies in Canada who charge a commission or flat fee for finding a trading partner.
For example, a spa shop might use a barter network website to trade a hot tub to a graphic designer for a logo and some promotional materials. Although the spa shop and the graphic designer are both happy with the deal, no additional value is created. Based on availability of services within the exchange, minimal quality controls exist, tax reporting becomes more difficult, and a fee or commission is usually charged for brokering the transaction.
This type of bartering is generally suited to individuals or small businesses – as the process would become inefficient for larger organizations, not to mention complicating audit and tax reporting. On the positive side it generates goodwill and can be a tool used by small businesses to generate exposure of products and services to a larger network.
What is Corporate Trade?
The Corporate Trade industry has taken this basic concept of bartering and transformed it into a strategic solution suited to large corporations, many among the Fortune 1000.
Corporate Trade is subject to qualitative and quantitative requirements and creates measurable, incremental economic value. In addition, large quantities of products or assets are used in combination with cash to purchase media, goods or services that otherwise would have been purchased for 100% cash. No fees or commissions are charged.
In a typical Corporate Trade deal, a company sells its under-performing assets to a buyer in exchange for Trade Credits. The value of the deal is typically three times what the asset is worth on the open market, allowing the company to maximize cash flow. The Trade Credits from the transaction are then used by the company to purchase services the business needs to thrive such as media.
So, although the terms “barter” and “Corporate Trade” are often used interchangeably, Corporate Trade offers a distinct and measurable advantage to large corporations.
Want to learn more about how the Fortune 1000 use Corporate Trade to grow their bottom line? Get answers to the 21 most common questions in our eBook.
Until next time,
Director, New Business Development