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A Winning Trade-off
INNOVATOR OF THE YEAR
Cash has never been king in Ray Bastarache's
rapidly growing barter empire
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Business New Haven
1/25/1999
By: Fiona Phelan
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In the days before currency, bank loans and credit cards, civilizations thrived by bartering essential items. Today, more than $36 million worth of goods and services are traded through the Milford-based Barter Network Inc. (BNI) using the ancient practice of bartering.
BNI is the innovation of Stratford-born Raymond J. Bastarache. With close to $5 million in annual revenues, BNI is the largest privately held bartering company on the East Coast. In addition to the company headquarters at Harbor Towers in Milford (one of eight commercial properties Bastarache owns in Connecticut), BNI also has offices in Cheshire, Massachusetts, Rhode Island, New York, Delaware, Virginia and Maryland.
“Bartering is a very interesting and innovative business,” notes Bastarache, Business New Haven's 1998 Innovator of the Year. “I am very pleased with where the company is today and I think our future is very promising.
“This is a company that is never satisfied with where it is. We are on an on-going path of growth,” Bastarache says. “We are always making continual improvements, and of course those things don't happen without great employees.
“Although I am the visionary for the company, the kudos have to go to the employees.”
Two years after graduating from Sacred Heart University in Fairfield, Bastarache began the company in a ten-foot-by-ten-foot warehouse space in Bridgeport.
The space was bartered.
He borrowed $3,000 from his parents and maxed out his credit cards. When Bastarache founded the company in 1985 there were three employees. Today there are 74 brokers spread throughout BNI's nine offices. BNI currently represents more than 6,000 clients. More than 1,400 accounts were added in 1998.
This past December the company launched its Internet site: www.BNIonline.com. The site was created by one of BNI's clients. On barter, of course.
In February, the Web site will include an on-line auction in which clients can bid on goods and services and receive immediate notification when a bid has been accepted or rejected.
Also on Bastarache's agenda are the possibilities of taking the company public and issuing the first of a limited number of franchise licenses. If BNI does go public, Bastarache notes, it will join only two other publicly traded barter firms.
Bastarache is also in the process of negotiating to acquire a bartering network in New Jersey. That acquisition, he notes, would be another step in his long-term business plan: to have offices from Massachusetts to Washington D.C.
Bastarache says there are ten reasons why a business should barter: to improve cash flow; to generate new sales; recapture lost value and find hidden profits; to conserve cash; to enjoy the advantages of a managed business relationship; to attract, keep and reward quality employees; to tap an alternate form of financing; enhance personal or family income; to find more time to enjoy success; and to enjoy some of life's luxuries.
Under Bastarache's guidance, bartering is a method of conducting business that is as successful today as it was thousands of years ago. Unlike ancient Egypt, however, the range of goods and services being bartered today is phenomenal. BNI's list of clients runs the gamut from attorneys, dentists and consultants offering a variety of services to restaurants, hotels and resorts offering meals, rooms and vacations.
There are also electricians and electrical supplies; appliance dealers and auto-repair shops; newspapers and magazines (including Entrepreneur magazine); contractors and radio stations. According to Bastarache, anyone with a good or service to sell and anyone in need of a good or service can barter.
“One of the largest barter exchanges that we brokered involved a utility that purchased $7.8 million in parts through bartering,” Bastarache proudly notes. His own company, he adds, bartered for the creation of custom-designed software that established a 24-hour transaction-authorization system, fax-on-demand information, and on-line information for employees to view and communicate with clients. This unique software, which Bastarache has subsequently sold to other bartering companies, has made trading more efficient and effective.
BNI makes its money by earning a commission on each barter. That commission, says Bastarache, ranges from 12.5 to 15 percent of the value of the good or service.
How does barter work? First, you have to be a member of the network. Membership costs $350 for the first year and $200 annually for a membership renewal.
Members are then issued a BNI barter card, which works just like a credit card. The card can be used for purchases at other member businesses. When the purchase has been made, the cardholder's account is debited for the amount of the purchase. The business making the sale will be credited for the amount of the sale.
That amount can then be used as purchasing power at another member business. The debit will be paid off when other member businesses use a barter card to purchase something.
Network members are not locked in to bartering with other members of the same network. According to Bastarache, there are 500 barter exchanges across the country. A BNI member may also purchase from members of those exchanges.
“Everyone can benefit from bartering,” says Bastarache. “From the small, one-person office to Fortune 500 companies - we represent them all.
“Economically, bartering makes the most sense for a lot of companies,” he adds. “No company wants to tie up capital if they can purchase a good or service in another way. The additional benefit of bartering is that it brings incremental business.”
Bastarache notes that time and again members of the bartering network use the system to make initial purchases but then use that business for future business. This brings additional profits to members, he says. What starts as a barter arrangement can quickly expand to incremental business for members, he says.
“All our advertising is word of mouth, by referral,” says Bastarache. “Hopefully our clients like bartering with each other, and that can lead to other business [relationships] that are money-making for the clients.”
While there are cash-flow advantages to bartering - Bastarache estimates that Barter Network Inc. has saved clients $18 million in cash - there are no tax advantages to bartering. The IRS and the state's Department of Revenue Services, he explains, consider the income earned through bartering as taxable income as they would any other business transaction. Also, the IRS looks at BNI in much the same way as a bank or brokerage house - as a third-party record keeper.
“We're essentially here to facilitate business between clients,'” says Bastarache. “We keep records for them of their BNI card purchases, just like a credit-card company.”
There are other benefits to being a BNI member. Members can reward employees by offering trade dollars. BNI trade dollars can be used by a member's employees as a bonus or incentive. Employees can use these dollars within the system to purchase gifts, trips, health-club memberships, jewelry - whatever they're looking for.
According to Bastarache, barter can also be used as an alternate means of financing. For instance, BNI might extend credit to members that offer goods and services in demand by other network members. These barter loans can be used for any purpose - for example, to fund a company expansion that might not have been feasible by cash alone.
“We have helped our members make down payments on property, transfer excess inventory, “ says Bastarache. “There isn't anything that can't be done.”
In addition to the other benefits of bartering, BNI also offers “BarterCare,” a health benefits program for members. BNI members can use barter dollars to provide coverage for basic health services or supplement an existing health care plan.
Members can cover basic needs like dental or eye care, or they can put together a wellness plan designed to meet the needs of their employees. In this way, notes Bastarache, member employers can remain competitive and attract the best employees by offering additional benefits.
When he's not running his multi-million-dollar business, the 37-year-old Bastarache can be found out on the golf course, playing basketball, or enjoying his 31-foot cigarette boat, aptly named Barter One.
Over the years, Bastarache has received numerous awards, including most recently the 1998 Governor's Distinguished Service Citation from the Milford Rotary. But the awards he is most proud of come from his own industry. In 1992 and 1995 he received the Distinguished Service Award from the International Reciprocal Trade Association (IRTA). It is an special honor, Bastarache says, because he is one of only two or three individuals to receive this award twice.
In addition, he received the IRTA's Mentorship Award in 1997 and the organization's Barter Ambassador Award in 1992 and 1993.
“I'm a very big believer in giving something back to the industry,” says Bastarache. “I've worked with a lot of other companies to get them started in the field. When I started out after college I wanted to get into an industry where I would make a lasting impression. I hope I've done that.”
Bastarache is also active with area non-profit organizations including the Boy Scouts of America where he sits on the advisory board for the Quinnipiac Council. As well he is a member of the Founders Club for the United Way of Milford and sits on the advisory board of the YMCA. He also serves on the board of regents for his alma mater, Sacred Heart University.
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