Bartering As A Small Business
Like most small business owners cash is in high demand. But it doesn’t have to be if you always think barter first. Learning how to trade your product or service can be the lifeline of your business. This simple guide can help you catapult your small business no matter what stage you’re in.
If a client (or you) can’t pay with traditional means, it doesn’t mean anyone needs to call small claims court. Instead, what about bartering?
You may be imagining old-time scenarios of doctors accepting a bushel of farm goods in exchange for medical treatment, but bartering is alive and well in the modern age.
Put simply, bartering is an equal trade: Two businesses trade one service or product for another. You can conduct barters individually with business owners you know, or you can work through a barter network or exchange. Through a barter site, businesses list goods or services for trade, receive a trade credit and then use the credit to obtain goods or services offered by other businesses. The barter network or exchange then takes a percentage of the transaction value. (For tax guidelines, see the IRS tax topic page on bartering.)
Here’s why small businesses should consider bartering.
“Bartering is an especially good way for a startup business to build a portfolio demonstrating the superiority of their work and the strength of their ideas,” says Liora Farkowitz, founder of LioraFarkovitz.com, a content marketing and organic promotion company in Brooklyn, New York. “If you do well with your bartering projects, you can also gain a great reference for work that puts cash in the bank, too.”
John Strabley, CEO of IMS Barter, says savvy business owners are discovering that bartering is a great way to boost sales production because it’s a vehicle for using downtime, moving excess inventory, attracting new customers and generating barter dollars that can be used for advertising and other business expenses.
For example, if you have excess inventory, you may liquidate the merchandise for a reduced profit, he says. Alternatively, you can trade that merchandise through a barter exchange—and often receive trade credit for its full wholesale value. You can then use those trade credits to purchase the services or products you need to run your business.
And because barter exchanges connect new buyers and sellers, your business can potentially earn greater exposure and a new customer base.
Gain Access To New Products & Services
Bartering is a great way to get products and services that might otherwise be unaffordable, says Tony Rotter, owner of Tony Rotter Woodwork in San Diego, California.
“I’m a woodworker with a very physically demanding job,” he says. “I’ve been plagued with back problems and chronic pain, but I benefit greatly from alternative medicine. I was able to work a trade with a licensed acupuncturist who agreed to provide treatment in exchange for custom furniture for her office. She gets high-end pieces for the cost of the materials, and is therefore able to afford pricey wood if she chooses it, and I get weekly treatments that I wouldn’t be able to afford were I paying cash.”
Sandy Arons, founder and president of Arons & Associates Divorce Planning in Brentwood, Tennessee, has also used bartering to obtain services she wouldn’t have otherwise received. She provided financial counseling to a photographer and in return got a photo shoot with her children. She also helped a dermatologist create some marketing materials and received an equal value in her services in exchange.
“In both examples, these were luxury items to me,” Arons says. “I would not have spent the cash on these items. The barter allowed me to receive goods and services I enjoyed; the other party also benefited. They were win-win solutions.”