If you take a look at a book on microeconomics, you'll see a section on bartering. Generally, it will say that the process is fairly inefficient. Hey, that's why societies have invented currencies, right?
This is all true. Yet, for those who are trying to run a business, bartering may be a good thing. Perhaps the biggest reason is that it saves on cash. It also can be a great way to build relationships and perhaps even get new customers.
So, here are some things to consider:
Treat it like any other transaction: OK, when putting together a barter deal, make sure you put a monetary value on it and that there's a contract. It's a way to provide a frame of reference, and it also helps to reduce friction. Both sides want to feel like they are getting a fair deal.
Due diligence: Before striking a barter deal, investigate the other company. Will it be able to deliver the service to you?
Barter exchanges: This is an association that manages bartering arrangements and even grants credits. For example, a PR firm can perform its services for hair salon. In exchange, the PR firm will get a credit that it can use to purchase services from other members in the network.
However, before joining a network, do some research. Are there items that you'd be interested in? Or companies that you would want to deal with?
Online services: No doubt, there are lots of them. But one that seems to be quite popular for bartering is Craigslist. Oh, and it's free.
Taxes: Keep in mind that the IRS considers bartering to be a taxable activity. So, make sure you consult with your trusted tax adviser on things.
Resources: To learn more about bartering, visit the International Reciprocal Trade Association (IRTA).
Tom Taulli is the author of various books, including The IPO Primer and The Complete M&A Handbook
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Reader Comments (Page 1 of 1)
8-17-2009 @ 5:19AM
al coholic said...
The key to Craigslist success is that it puts local people together. Many who would never frequent a national auction site gleefully trade their junk for other peoples junk. It satisfies the need to shop without spending any money. Most of my experiences have been positive.
8-17-2009 @ 9:24AM
Julie_and_the_city said...
My experiences have been positive too. I found a website called: http://barterquest.com. It’s a great site for bartering goods, services, and real estate. I think bartering is a great way to save!
8-17-2009 @ 5:37PM
MyKisa said...
ofcourse IRS thinks that barter is taxable....they think the air you breathe is taxable., oh thats what cap and trade is all about
8-18-2009 @ 2:06AM
smervan said...
I found another site for bartering and it is such a cool site. I think everybody should check it out.
http://www.exchangebazar.com/
Give it a try
8-21-2009 @ 1:18PM
Debbie DeSousa said...
IRS says if you barter one dollar for business it is taxable. If you trade with your next door neighbor it is not taxable.
Trade exchanges like Barter Bucks.us are regulated by IRS and are required by law to report all trade at the end of the year by 1099. IRS also says a trade dollar = a barter dollar. Trading is 100% legal as long as you follow the laws.
When there is little cash in circulation like now trading becomes very valuable. Businesses still need to repair their cars and get dental care. Trading extra time or unused inventory is a win win for everyone.
8-24-2009 @ 1:33PM
Anthony Donnelly said...
Great article! Let's all not forget the best barter exchange out there, and still the only one that can do big and small trades all "100% on trade, 100% of the time" - the Merchants Barter Exchange (MBE)
Many of the directory-based and online barter companies simply lack the control and oversight to stop trades happening at inflated prices, or with part of the transaction being paid in cash (which isn't barter), or more importantly in this economy, cash customers converting to barter ones!
Again, thanks for the great article.