Recently there’s been lots of talk about the increase in bartering in light of the economy. There’s been some chatter on Twitter about it – and even a few articles, like this one which claims:
“Bartering -- the trading of goods or services without using cash -- is making a comeback in a troubled economy. It can be as simple as trading baby-sitting with another family, or as complex as an exchange with strangers facilitated by one of the several Web sites that have sprung up to connect barterers.”
Hmm, call me skeptical, but I doubt bartering will be right for most businesses. If you’re low on cash and think bartering is the answer to your cash flow crunch … find another answer.
At best bartering is a short-term tactic, used opportunistically to get something that might otherwise be out of reach. For instance, when I first started my business way back when, I bartered my services to write a business for a Web design company, in exchange for them designing a website for my new business. I couldn’t afford a website, and I had few clients and plenty of time on my hands. They needed a business plan.
That worked out reasonably well, but it hasn’t been the type of transaction I could replicate over and over.
Bartering is tough to do well ... especially on a large scale and over an extended time period.
Why? Several reasons:
· It’s so random and ad hoc. Bartering assumes that you have something I want, and vice versa. Maybe that’s true, but for a business, it’s much more likely not to be true. It’s not all that easy to find two parties with complementary needs at the exact moment in time when YOU need something. Could it happen sometimes? Sure, but not that often.
· Paying customers trump barterers. When bartering services the parties may not give priority to providing their own services, or may not value the other side’s services, unless there’s cold hard cash involved. Paying customers always come first. So, unless you are trading something physical and well defined (such as a can of caviar for a chain saw), in my experience, one side or the other ends up with the short end of the stick.
· It can be deceptively complex. To make bartering work for businesses in a big way, you have to document everything and assign an equivalent monetary value. Then once you do that, you may well be subject to taxes on a barter transaction, and have to file a barter form. And actually pay taxes on the transaction (one thing I can guarantee, the IRS doesn’t accept barter for that tax liability).