Home Barter In The News Entering the Barter Industry: Buy a Franchise, Go Independent, or Align with a Big Company?

Entering the Barter Industry: Buy a Franchise, Go Independent, or Align with a Big Company?

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In an effort to inform those that would want to enter the barter industry as a career, I’ve chosen to write this piece about the different pathways that a person can take to break in to barter. Some professionals, like myself, may have used a multi-faceted approach to the industry, which isn’t a bad idea. Below we are going to explore the different ways that the major players handle offices, franchises, employees, and expansion.

The Path of the Employee

My first experience in the industry was as a manager of a small exchange, less that 400 members, which disappeared in 2003. I was hired on in sales in 2000, and within three months was promoted to manage the exchange. Barter was just one part of the equation at that company, with two other operations that promoted business networking and education. I fell in love with barter at that company, though my pay was downright criminal. I received $150 for a $395 sign up and no share of the volume I or my trade directors created. Admittedly, this is not the industry norm, just one of the flaws that company had.

As a new employee you can expect to receive between 30% and 100% of what the company charges on a new account and between 15% and 70% of cash collected on your clients. Depending on how the company’s fees are structured, you could be making more on the initial sale than on the brokering of transactions, so be conscious about who you are doing business with and what the nature of your work is going to be.

Companies like International Monetary Systems, one of the two publicly traded barter exchanges in the United States, or BizXchange do not sell franchises, but every person that represents the company is a corporate employee who has been trained by the corporate staff before working in the field.

Before signing a contract, find out how the company trains their employees, how much time and effort they give to new hires, and how they handle non-compete agreements. Many exchanges spend only a day or two with their new hires and then it is up to them to sink or swim. You’ll need more than just a day to have enough understanding to make barter work as a career.

Also, you can expect that the company will want to exchange their training and employment for an agreement for you not to compete with them. Having been an employer, this is a reasonable request, but there are a couple of caveats: find out what you are going to get in exchange for the agreement, and find out what is generally enforceable in your state. In most states, non-compete agreements between employer and employee are considered “right to work”, which means that you can compete with them in a reasonable time frame (about a year) or if it is the only thing you are qualified to do. You may want to consult with an employment attorney before signing an agreement with an exchange so you know and are clear about what you are getting in to. Plus, you want to make sure that the company is going to give you enough training and support to make signing that non-compete worth your time.

The Path of the Franchisee

ITEX, Bartercard, Tradebank, and Tradia all sell franchises of their systems to individuals or groups that want to start a barter exchange. According to the ITEX website, they offer, ”

1.  Systems to run your business
2. Training & operational support
3. Proprietary web based software
4. Professional Members Services call center
5. International brand/service marks
6. Marketing department and Co-Op program”, and other services.
Purchasing a franchise can be an expensive undertaking. Franchise fees for ITEX can be up to $40k or more. Same with Tradia. Tradebank ranges between 10k and 35k. Bartercard has the UK franchise listed at ₤55,000 ($89,804 US Dollars).
The range of training and support you will receive will vary from system to system. Tradia has gained a solid reputation for not providing support or training to their franchisees. One former Tradia franchisee who wishes to remain anonymous reported the following:
“I bought two franchises for $45,000 each. Matt (Matthew Humphreys, CEO of Tradia) promised to come down personally and train myself and my employees, but never did. We operated for months and months without any real training or support, other than the operations manual they sent us. After some time in operation, they started being very hostile and making it very difficult for us to do business. I closed my franchises and took a tremendous financial loss.”
Other Tradia franchisees have also reported hostility and difficulty with the Tradia corporate office, including over-using step in rights, filing law suits against those that leave the company, and locking contractors out of their system without warning. Tradia currently has five pending lawsuits in Oregon State Court against former employees or franchisees of their company.
ITEX has also used their step in rights on occasion, as have all other franchisors. Franchisors have a right to protect the name and goodwill of their company, so they include the right to step in to a franchise and take over operations. Make sure that the franchise you buy will be safe by investigating whether the company has a history of abusing the step in right. A lawyer or a private detective can help in this search.
Not all franchises are created equal, so be diligent in your research. Make sure the company you are going to do business with gives you references of current AND past franchisees and interview them thoroughly.

Lastly, make sure you have the stamina and the guts to take this path or the path of the independent. It takes real guts and hours of work and toil to start a business from scratch. And barter is even a little more difficult than most other businesses, because what you are selling is a strange concept at best.

The Path of the Independent

If you don’t want a corporate office telling you what to do or a franchisor to help you get started and provide a team for you, then the path of the independent may be the one for you. Essentially, you create a barter exchange from scratch, everything from the systems and operations to sales manuals and transaction fees. The easier way to handle this is to rent a software package from either Barter 21, Virtual Barter, doBarter, or XO Limited. Each system has its strengths and weaknesses. Pick the one that is easy to use, has flexible options, and allows for the most communication with your members.

Some independents get stuck at the point of startup and need some help getting off the ground. To our knowledge there are three organizations that provide training to new or aspiring barter exchanges: BarterExchangeTrainers.com, BarterTrainer.com, and BarterCoach.net. All three provide sales training, weekend boot camp seminars, and other services to new members. Be sure, before hiring any of them, to ask for credentials, core philosophies, and referrals from past clients so you can better gauge which will align with your idea of business and provide the best bang for your buck.

Success is out there, somewhere

The barter industry is poised for tremendous growth. It needs professionals with grit and determination to take it to a more public and proper level, so if you are a business person who loves a challenge and enjoys long term relationships with clients, the barter industry may be for you.

6 COMMENTS

  1. To anyone that is thinking about buying a franchise with Tradia, I would reconsider, and investigate more fully the company you are interested in getting in bed with. Their reputation in the barter world is terrible, they have been black listed by both industry associations, and regularly sue franchisees that leave the business.

  2. As a very rapidly growing Barter Exchange in Westchester County, NY, I would like to give a big thumbs up to Catherine and Barry Cohen at Barter 21. They will provide you with the tools, wisdom and platform to start a very successful exchange. 14 Months in, we have over 210 members with more to come. Hudson Barter Exchange can also give a huge thumbs up to the training we received from Tom McDowell at the Barter Trainer. We have been so lucky to have such rock solid mentors.

    Kevin Brown
    CEO, Cashless Exchange Operator
    Hudson Barter Exchange
    Westchester County, NY

    • Without any mentorship, but with average sales and marketing knowledge, you should be able to win over 200 members or more in 1 month

      If in 14 months, you have only been able to win 210 members, then, you have been coached wrong and obviously received mediocre training and mentorship.

      I think you have been unlucky to have NOT rocksolid mentors

  3. It is about the organization, and your broker, and you. Used well, it is a wonderful tool: I am unimpressed with Itex, consider mytradeamerica.info, or tradia is my recommendation.

    oh yea, i have done millions in Barter.

    • So you encourage people to join two of the most questionable barter companies in the industry? (doBarter and Tradia) The article isn’t about which to join as a member, the article is about which to choose when considering entering the industry.

      Tradia has a long history of suing their brokers/franchisees. DoBarter has a clause in their software agreement that requires a $300k penalty for leaving their system. Would you really recommend either of these companies to someone that is looking to get in to the industry?

  4. I originally bought a BXI franchise (now ITEX) . After four years of pure torture I left and started my own trade exchange. I have been with Dobarter for 6 years and kiss the ground every day I use their software.
    Becasue I was a techie before getting involved with trade using the BEST software was important to me. Dobarter provides the best software avaible to the industry and offers the largest network for trading.
    Dobarter provides me with the tools I need to run my business without interfering in my business.

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