Kevin D. Feldman
Charities and Trade Exchanges: How Consultants and Nonprofits Can Benefit from Bartering (Part 1)
Part 1: In this issue we will cover:
- The Modern-Day Barter/Trade Exchange Organization
- Bartering Non-Cash Gifts
- Key Benefits of Bartering for the Consultant
- Key Benefits of Bartering for the Nonprofit
As consultants, we are most often called upon to advise our clients in making the best use of the conventional ways to operate an NPO and raise money for it. Changing the "MO" (method of operation) may require more work, changes in staff and even, heaven forbid, some risk. It was Mason Cooley that said "Proverbial wisdom counsels against risk and change. But sitting ducks fare worst of all."
Are any of your clients "sitting ducks," waiting to be the victims of the next national crisis, economic downturn or negative publicity? Whether they are or they aren't, here's and idea that can help both you and your nonprofit clientele to survive and grow:
In my 15 years of being intimately involved with the fundraising and management of charities, there wasn't one of them that encouraged or even welcomed non-cash gifts. In fact, many literally fled from them, failing to see the real opportunity that comes with each donated item -- opportunities to grow their list of new supporters; free-up more cash for programs; expand public awareness; and ultimately, increase revenue! The advantages don't end there. For the consultant, new business can be gained during lean times -- business that can become lucrative as you help your clients to grow. Using trade exchanges, consultants can also acquire goods and services needed for their work without hurting their cash flow.
So, what is a "trade exchange," exactly, and how can it help my clients and my practice?
The Modern-Day Barter/Trade Exchange Organization
Think of the barter or trade exchange organization as a bank. Rather than dealing in cash, this "bank" deals with the real, fair-market value of goods and services charged and credited to businesses and individuals who participate in this alternative economy.
For example: Business A provides catering services to Business B. The fair-market value of that service is credited to Business A, who then uses all or part of that credited value to acquire new computers from Business C and pest control services from Business D. Businesses C and D can then redeem the value earned from bartering with business A at any of the hundreds of companies in the trade exchange network.
Bartering Non-Cash Gifts
For nonprofits, there is tremendous opportunity in receiving and redeeming non-cash gifts through a trade exchange. While the bartering concept may be rather new when applied to nonprofits, it is the oldest form of exchange for goods and services. In the US, the barter or trade exchange has been growing in popularity for decades, allowing businesses to meet their needs when cash-flow is down or their budget won't allow it. Nonprofits can benefit from bartering in the same way, and more!
Key Benefits of Bartering for the Consultant
New and Old Business, Even in Tough Times -- Consultants can get new business from charities that belong to a trade exchange. These nonprofits may think of themselves as too small to hire a consultant; they may need more consulting than they can afford; or they are a larger charity that wants to hire a consultant, but use their accumulated barter value rather than cash -- that way the charity's cash can go to support their programs.
Some of your established clients can't afford you right now, or they can't afford to have you do more for them? This won't be an issue if your nonprofit customers join a trade exchange.
In my consulting practice (aside from CBN), my clients (mostly small) would gladly pay cash for consulting if they had it. My job is to help them grow, so that they can afford to pay me in cash someday. But, bartering isn't just for small charities, I am familiar with some larger charities that are paying both cash and barter for consulting services.
Acquire Needed Goods and Services Without Hurting Cash Flow -- In my practice, I use barter all the time to purchase goods and services that I would normally pay cash for -- new office equipment, software, stationary, building services, etc. The cash that I’ve freed-up using barter, I can now use to pay for overhead or debt relief.
Key Benefits of Bartering for the Nonprofit
New Donors -- Charities will gain new and confirmed donors that nonprofits would have missed otherwise. Bartering will introduce new supporters to the charity -- people and companies that may not have cash to give right now, but maybe later. Donors of non-cash gifts are much easier to convert to cash donors, than those having no previous relationship with the charity. Donors both inside and outside the trade exchange network can have their non-cash gifts redeemed through bartering.
Increases Satisfaction of Current Donors -- Many donors would like to give more to their favorite charities, but can't. Bartering allows nonprofits to graduate their donors to higher levels of giving without requiring them to donate cash. Using a trade exchange, donors can easily and quickly relieve themselves of unwanted, discontinued or overstock items, and receive the same tax benefit as with any in-kind or non-cash gift.
Nonprofits Can Redeem Non-Cash Gifts More Quickly, and at Greater Value -- Charities usually lack the space to store non-cash gifts, and often receive only a small fraction of the fair-market value in cash when the items are auctioned or sold in resale stores. Some charities pay steep finder's fees as high as 50% of value to companies that look for buyers of donated goods. This is why most nonprofits do little to encourage this form of philanthropy. By belonging to a trade exchange, charities can redeem non-cash gifts given from donors both inside and outside the network. The turnaround is quick and often doesn’t require storage, with non-cash gifts redeemed at 100% of their fair-market value!
Getting It Now, Not Later -- Bartering allows charities to get the goods and services they need now, rather than waiting for improved cash flow or approval of next year's budget.
"Money Saved is Money Raised" -- is a different spin on a wise and familiar saying--however, it is true with nonprofit organizations. If you can barter for needed goods and services that you would otherwise pay cash for, then you are saving money that can now be applied to sustaining or growing vital programs. Now, that’s good stewardship!
Provides a Source of Free and Consistent Publicity -- Most trade exchange or bartering organizations have a Web site where members are listed in a directory and sometimes given their own Web pages. Frequent e-mail bulletins from the trade exchange will alert members to the latest donated items available for sale by the charity. Some trade exchanges will even alert members of the charities' events. Printed directories and monthly newsletters are additional ways that members are publicized. Many trade exchanges have sales representatives that physically leave their offices to promote member businesses and charities in the community.
Allows Charities to Market Non-Cash Gifts as an Alternative Way to Give -- Most nonprofits would never consider asking for non-cash gifts in their marketing literature, appeal letters, or in telephone calls. Probably because, until now, they haven’t had a means to quickly redeem donated goods and services for cash -- at 100% of fair-market value. Trade exchanges can help nonprofits do just that!
May Provide a Source of Incentives for Employees and Volunteers -- Trade exchanges can help to add value to employment and volunteering with nonprofits as well. Rather than using cash or credit, charities can offer nice incentives to employees and volunteers by purchasing them through a trade exchange. Incentives like dinners at local restaurants, entertainment and gift certificates -- all acquired through bartering using no cash!
But, there are many other ways that charities can benefit from belonging to a trade exchange. Providing added convenience, service and value for their donors -- building loyalty and promoting repeat giving are some other examples.
In part 2 of this article series we will cover the following points:
- An Exciting New Development!
- Three Ways to Give Non-Cash Gifts Using the Bartering System
- FAQs About Bartering, Consultants, and Nonprofits
- A Sampling of Trade Exchange and Association Web Sites