Bartering for Business

It’s the oldest form of payment, but does it make sense for your business?

Bartering for goods and services as opposed to using currency has been going on for thousands of years. With a small business in any economy, there are always perspective clients that will offer you a non-monetary form of payment for the services that you are offering. Does it make sense for your business? As with many things, the answer is “sometimes”. There are a few factors to think about before deciding.

Cash flow is the most important component to any business. If you barter on an unlimited basis and chalk it up to “getting your name out there”, you could end up with what I call “barter heavy and cash poor”. Sure, you may have some free meals at restaurants, a flashy website and a freshly painted bedroom all gained in trade, but none of these things can assist in paying rent or meeting payroll. Unfortunately, the largest bills that you pay on an ongoing basis are not able to be bartered for.

If you move forward with a barter with another business, I always suggest that you write up the same agreement or contract that you would for any client. Note that no cash is exchanging hands and be clear about the expectations from each party. If this is not done, there are two major pitfalls. First, your service may be monthly and the other party’s service is twice a year. You could end up providing months of value on your end and then the other party decides they don’t want to barter anymore. Now, you’ve given away your service for free. The second pitfall is what I call “free has no value”. For example, someone agrees to do your bookkeeping in exchange for your service. Do you get timely responses to your questions? Do you receive your reconciled financials in a timely fashion each month? The sad reality is that there are times when one side in a barter agreement treats their end of the deal as if they are doing you a favor. Since “cash is king” and you don’t pay money for their service, you may go on the “when I have time” list. They quickly forget that your service is being provided as it should be. Now, this agreement is not working and at least one party is dissatisfied.

Another important thought to consider is to only barter for things that would pay for anyway. Would you get a massage every month or your car washed every week if you weren’t in a barter relationship? If not, what are you really gaining? This is why websites and accounting are generally the most desired relationships to barter with. However, remember that the industries that are the most attractive to you likely get offers to barter every day. These businesses need their cash flow to be strong like everyone else.

A full barter exchange may not always be the best way to go. A partial barter/partial cash option may be more optimal or maybe one side is the only one that pays any money because their service is significantly more expensive.

So, when considering a barter for services, think about the health of your business and does the situation save you any money. Don’t de-value the worth of your service. Understand that just because someone offers to barter with you does not mean that you have to accept. Bartering for things you don’t need or don’t have time to use, could just bring you a headache you don’t want.

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