Do you receive a “reward” or some form of compensation when you buy from your suppliers? Probably not. But here’s an example of what’s being done in some sectors of the marketplace. (And this technique doesn’t have to be limited to super huge deals.)

Sun Microsystems had worked out a barter agreement with Ancor Communications, a supplier of Internet storage switches. Ancor says the equity relationship was designed to cement a strategic tie and generate $100 million in additional sales, in return Sun would receive up to 1.5 million warrants.

Here’s how the deal was structured. For every $67 in purchase revenue Ancor received from Sun, one warrant share (exercisable at $7.30) was vested. To be vested for the full 1.5 million shares, Sun had to buy $100 million in switches from Ancor.

Under this relationship both companies benefited. Sun received an ownership stake in Ancor and earned a nice paper gain on the warrants, and Anchor boosted sales as a result of the deal plus realized an appreciable gain in the price of their stock.

(When the agreement was announced Ancor was selling at $10-1/4. The stock price hit a high of $38-1/2 and Ancor was able to sell a follow-up offering of 2.5 million shares at $27, far more than they could have done without the Sun deal.)


Here’s How To Use The Same Strategy In Your Business

Of course, if you’re not a public company, the use of stock options is out of the question. So develop some strategic relationships with critical suppliers. Consider another form of incentive such as supplying them with your company’s scrip (gift certificates) for your products or services.

If that’s not feasible, then look at structuring one through your trade exchange, to accomplish your goal. This strategy is easy because of its simplicity.

Begin by offering your supplier a set amount of “purchasing power per sale” in the form of trade dollars. Then open up a sub-account in the supplier’s name, and deposit trade dollars at various intervals into that account for your supplier. They can access the account at any time to use the trade dollars for whatever purchases they desire through the exchange’s network. (Contact your barter company for details on a sub-account.)

For a list of U.S. Barter Companies see: USBARTER

For a fast start in your bartering efforts you will want to get your hands on the BarterNews FastStart Barter Program, see: FASTSTART

This entry was posted on Saturday, December 22nd, 2007 at 8:32 am and is filed under Best & Brightest Barter. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.