Broker looks to build a diverse group of clients

Bartering, the predominant method of trading goods and services before money and credit cards were invented, is making a comeback thanks to a company that has created a modern-day spin on the practice.

In a society driven by consumerism, bartering takes a back seat to cash, but it continues to thrive as an alternative means of conducting business, say officials of International Trade Exchange Corp. Founded in 1982, ITEX brings together hundreds of independent barter brokers and more than 20,000 businesses to form the world’s largest online retail exchange network, generating more than $200 million in trade transactions each year. It became the nation’s first publicly held retail trade exchange in 1995.

Bill Downing, who moved from Chicago to West Des Moines seven months ago, said he was looking for a career that would allow him to be a stay-at-home dad when he decided to become an independent licensed broker for ITEX, the network’s first in Central Iowa. After paying a $10,000 franchise fee and completing training, Downing said he is eager to tap into a market that has yet to be exposed to ITEX’s bartering system. His biggest challenge, a competing broker said, will be educating Des Moines business owners about the benefits of bartering and dispelling the notion that bartering’s confined to children swapping Yu-Gi-Oh! cards on the street or businesses seeking a tax haven.

“If you’re looking to generate more business, this is a great way to get it,” Downing said. “Cash will always be king, but bartering has been around since before the Bible. Everybody at one time or another has traded something. Our job is to make sure those trades are fair and equitable.”

Downing said the premise is simple: You sell for trade dollars and you buy with trade dollars. Transactions are handled through trade drafts that work like checks. All “tax neutral” items or services for trade must be regularly priced, and items priced less than $5,000 must be offered for full trade value. ITEX monitors pricing to ensure there is no gouging. Brokers receive a 5 percent commission for helping a client buy or sell an item, a rate, Downing said, that is comparable to those paid to salespeople. The company offers a money-back guarantee for its $995 memberships if that amount is not met in trade dollars and it charges a monthly association fee of $20 in cash and $10 in trade dollars.

Downing already has recruited 10 members and his goal is to have 100 members by the end of his first year in business, noting that markets such as St. Louis, Chicago and Minneapolis net as many as 300 clients for some ITEX brokers. His biggest transaction to date involved a $27,000 ultralight aircraft.

Like other ITEX brokers, Downing seeks businesses with a minimum 25 percent profit margin, avoiding those selling items such as gasoline or groceries, which typically produce only a 3 percent profit margin. As a third-party broker, he helps clients increase sales, move idle inventory, reduce cash expenses, open new markets and build cash profits.

“Iowa is a conservative group of people, so it can be tough selling a new concept,” he said. “But to those who traded before, they know it’s the easiest thing in the world.”

Terri Smieja, an Omaha-based independent licensed broker who owns one of ITEX’s top-producing offices in the nation, has clients across the country, including Des Moines. She opened her office in 1997 by cold-calling and pounding the pavement; now she arranges more $4 million in barters annually for more than 270 clients. Her customers average approximately $14,000 a year in bartering services, and her biggest trade deal involved a $100,000 piece of land in Centerville.

“We call ourselves ‘alternative financing,'” she said. “It’s a way to save cash, and last year I saved my clients more than $4 million in cash. We’re successful because we’re tapped into a network of businesses that your typical business owner doesn’t know about.”

Smieja said her biggest clients are warehouse owners who want to liquidate merchandise. “They love it when I can help them move hundreds of thousands of items in a flat market,” she said. “They’re fun transactions.”

From $5 sandwiches to beachfront properties, Smieja said anything for sale can be bartered. She once bartered $15,000 in services for her own wedding. The most unusual trade she worked on involved 6,000 condoms between an Omaha music store and a Chicago pharmacy.

Before the terrorist attacks in 2001, Smieja said hotels and air travel were among her best deals. She was brokering more than $600,000 annually in air travel.

When Smieja moved from her native Texas to Omaha due to her husband’s job transfer, she was pleasantly surprised by the influx of business to be found in Omaha and neighboring cities.

“I was shocked there is so much opportunity here,” she said. “It’s a big market.”

Smieja said the biggest challenge of operating an ITEX office is educating potential clients about the merits of bartering.

“My biggest challenge is getting respect as a viable business,” she said. “This is not a get-rich scheme. We’re somewhat of an unknown, but since 1982, we have been federally approved as a bona fide financial institution.”

Smieja said she once considered opening a branch office in Des Moines, but decided against it because she couldn’t be there to conduct business in person.

“People tend to trust those they can touch, and because Bill is a local, his only battle will be educating people about bartering,” she said. “There is a learning curve, but ITEX gives you the tools, and from what I understand, Bill’s been aggressive and already enrolled new members. He’s done a phenomenal job.”

Downing said the concept might be difficult to sell at first, but Des Moines is ready for it.

“Once we get more members, it will be easier to show people,” he said. “We don’t want bartering to replace everything, but we want to show people how even doing 10 percent more business through bartering can improve their business. It’s a cool thing that can impact a bottom line.”