You don’t need me to tell you that this tradition, which goes back to the days when a caveman would barter his two rocks for a sharp stick, is today’s new killer business strategy. Whenever a societal phenomenon becomes a cable TV hit show, you know it’s time to pay attention, or find yourself at the back of the pack.
Since the Internet ties us all together, the reach of bartered transactions has been greatly extended. For small business, startups and solopreneurs, bartering can be an excellent way to preserve cash. We’ll look at some basic ways to leverage bartering for your business as well as some more sophisticated strategies.
First Steps in Bartering
If you do business in at least a moderately sized community and want to test the waters, reliable Craig’s List is the best starting point. For businesses that offer goods or services in the B2B marketplace, you can probably easily connect to someone interested in striking a deal.
For example, web designers or programmers could connect with virtually any business. If you’re a retailer, there’s a good chance a small business owner would be willing to work with you; a clothing store might trade a certain amount of merchandise for some basic carpentry work. If you decide to try Craig’s List, be sure that you’re working with legitimate businesses. You don’t want an uninsured, unbonded electrician coming into your business, getting hurt or breaking things.
The Rise of Barter Networks
While you can accomplish some deals through a local listing service, I’m sure you see that directly bartering with other businesses in your immediate area has its limitations. To break that barrier, a wide variety of barter networks have been created. The drawback with these networks is that there are overhead costs you need to pay.
Networks serve as a clearing house for products and services. When you provide a product or service, your account receives a credit equal to how you value your offering. You can exchange that credit for another member’s product or service. Generally there is a membership fee that must be paid in real money and the network may take a percentage when exchanges are made.
NOTE: Barter transactions don’t allow you to bypass tax collectors. You need to account for them as you would cash deals by reporting them on form 1099-B.
What to Barter
For retail businesses, there’s not much question about what you have to offer in barter transactions. For service providers and manufacturers, it may be a little less clear.
One good approach is to see where you have an excess ability to produce. If you employ graphic designers who aren’t truly busy throughout the day, you could capitalize on that free time and create value that you could then barter for things you need. The same principle holds true for assembly lines or other manufacturing operations. Look for unused capacity.
Similarly, how difficult is it to increase productivity by five percent? Putting that bonus production to good use in a barter network could push more of your cash flow into the bottom line of your profit and loss statement.
Explore the possibilities of bartering for your business. You may discover why this ancient form of commerce won’t go away.
Image: Viktor M. Vasnetsov [Public domain], via Wikimedia Commons. Published in the US before 1923 and public domain in the US.
Megan Totka is the Chief Editor for ChamberofCommerce.com. She specializes on the topic of small business tips and resources. ChamberofCommerce.com helps small businesses grow their business on the web and facilitates connectivity between local businesses and more than 7,000 Chambers of Commerce worldwide.