Should You Barter?
During difficult times, many small business owners turn to bartering as a way to exchange products and/or services with other business owners without exchanging cash. While this can be advantageous for both parties if done correctly, there are a few things you should consider in advance:
1. Do you REALLY need the product / service?
Just because you aren’t exchange cash doesn’t mean it is free. In return, you are going to give something of value. Remember, your time and energy is limited and valuable and could be spent in other areas of your business. Ask yourself, “Would I pay cash for this product / service if I could?”
2. Is the barter agreement equitable?
Take the time upfront to ensure you have an equitable trade. Consider using retail or fair market value as a measurement. For example, if you have a $100 product I want and my services are $25 dollar an hour, an equitable agreement may be 4 hours of my services in exchange for your product. Vague agreements often end poorly.
3. Are you following your standard business procedures?
Even though you are not exchanging cash, you are still entering into a business agreement. Following your standard procedures is critical. As with all business agreements, I encourage my clients to put barter arrangements in writing to avoid misunderstandings.
4. Have you talked to your accountant?
You may not want to hear this, but there may be tax consequences related to your barter arrangement. Talk to you accountant and understand the implications BEFORE finalizing your agreement. Better to know now than to find out during an IRS audit!
Before entering into any business agreement, it is important to do your homework. Barter agreements are no exception!
Scott Walkinshaw
Business Coach & Speaker
South Florida
Walkinshaw Coaching, LLC
I agree with the point you make about bartering. You need to remember the IRS. From my own experience with bartering it has really helped my business during slow times. I have bartered my marketing skills for other goods and services on a site called http://barterquest.com
I often work with new or struggling holistic practitioners. With this group, bartering is quite the touchy subject. Many of them barter because:
1> they lack confidence as a business owner
2> believe that taking ANY opportunity to show what they can do, even if not paid in cash will earn them a referral
3> sub consciously do not believe in their ability to succeed with their business
Under these circumstances, the points you make in section 1 & 2 are really important. Make sure you are bartering because it is a service you actually want, and be sure that the barter is for an equitable amount. Then be sure to follow your normal protocal as outline in section 3, and finally, be sure you’re tracking it correctly because up here in Canada, your accountant will tell you that Revenue Canada wants their cut as well!