Is barter good for your business?
Want to trade accounting services for goat cheese? How about bike repairs for graphic design? Advertising for overnight accommodations?
Small business owners get lots of offers to swap services or trade products. These types of barter arrangements can be quite appealing, sometimes helping you purchase a product or service that your budget precludes under other circumstances. Some businesses find the concept appealing enough that they subscribe to barter associations, the hope being that lots of businesses can swap their products and services to the benefit of all.
I believe in bartering, but I also believe in finding trades that are equitable – and in having enough cash on hand to pay the bills. That’s something no one will barter for.
Having been on all sides of the barter agreement, I would offer a few things to consider before you agree to trade.
First, is the swap equitable? If you’re trading 5 hours of consulting services for 10 free meals at a restaurant, work through the math. What would those meals cost you, and how much would you bill for the consulting time? Is it equitable?
Sometimes even if it looks equitable on paper, the trade doesn’t wind up feeling that way. And in that circumstance, both sides walk away unhappy. If I agree to write a brochure for your business and you agree to do my accounting for three months, although the hours work out as a even swap, you’ll feel like you’re giving away more because your work is spread out over time. So even if the trade is equitable, one party feels like too much has been given away.
Second, do you need the product or service you’re trading for? A barter arrangement is only a good idea if you’re getting something that you would otherwise pay for. If you don’t need what the other party offers, then don’t give your product or service away to get it.
Similarly, does a barter association offer products and services you can use? Some barter associations offer lots of restaurant meals and hospitality services. If you frequently entertain clients, this might appeal to you. Some barter associations offer magazine or other advertising services. If those services reach your target market, you might consider the barter worthwhile. But read the contract carefully before you sign up. The associations charge monthly membership fees, and some add in transaction fees that can add up quickly. And talk to some business owners who already belong to the association to see how well the set up works for them. We all know that things look different on paper (and sound different in a sales pitch) than they sometimes work in reality.
Talk to your accountant before you get heavily involved in barter arrangements. There may be tax implications. And you want to make sure you aren’t trading yourself into a cash-poor position.
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