By Doug Wilson
The exchange of goods or services for other goods or services without a medium of exchange, such as money.
Tony exchanges the use of his mountain cabin to Bill and his family for a weekend, who in turn exchanges his service of lawn care to Tony for three months. Both parties agree that the product and service are worth about $300 respectively and that the transaction is fair.
Lindsey agrees to style Sharon’s hair every two weeks and Sharon agrees to clean Lindsey's home every two weeks. Both determine that their individual services are worth about $100 per occurrence and write up a contract detailing the exchange. Lindsey and Sharon are elated about their bartering agreement and believe that it is fair.
Bartering on the Rise
“…bartering is very popular right now at 4.2 billion estimated in trade for this year… up one billion from a year ago…” Bob McCormick KNX (2008)
“…the U.S. barter market is a staggering… $12 billion worth of goods and services traded every year without any currency changing hands…” Bloomberg (April 2012)
- Almost 1/3 of all small businesses in the US use some form of bartering.
- 65% of corporations listed on the NYSE are involved in bartering.
- 65% of fortune 500 companies engage in barter in one form or another.
- Barter accounts for 30% of the world’s total business.
Sited from The International Reciprocal Trade Association (IRTA) reports, NATE (National Association of Trade Exchanges), WIR, and the U.S. Department of Commerce.
Bartering During Economic Crisis
Higher volumes of bartering usually occur during stressed economic times.
Small Business Advantages
- Develop a Client Base: Bartering can bring in a client that might not have been generated through traditional marketing methods.
- Preserve Capital: Sometimes businesses, especially startups, don’t have a great deal of money on hand to work with. Bartering can allow the business to receive services or products without pulling capital.
- Free Excess Inventory: Often businesses have inventory that won’t move. Bartering can be a great way off getting it off the shelf.
- For More... Great Short Article on Bartering by Darrell Zahorsky
- No Tax Loophole: Many think bartered products or services are tax exempt. However, that is not the case. The value of the product or service that was exchanged is still taxable in the year that the exchange took place.
- There is saying in bartering, “One side always gets a raw deal”, or “The good guy always gets the bad end of the deal.” This shouldn’t be the case but it can happen to those who miss judge the value of their product or service compared with the exchanged product or service. Also, some of the following tips can help prevent this.
Before You Barter
Bartering Contract Example (pdf)
- Know the Exchange Value: Before you barter, determine the actual value of the exchange. Don’t make a quick decision. You may know the value of your product or service, but do you really know the value of the exchanged product or service is? If the two are not close in value then someone is getting the bad end of the deal.
- Get Third Party Input: Ask a friend or someone else who has done business with the other party if they think it is a fair exchange. The Bible says that in a multitude of counselors a plan is established.
- Is the Deal Fair To Everyone: Getting the best end of the deal is not the end goal in bartering. Making sure that all parties are happy and satisfied with the transaction is far more beneficial. In network marketing you don’t want to come off as cheap, or worse yet, a swindler. You do, however, want to be perceived as fair.
- Put It In Writing: Contracts are an essential component of bartering. Contracts will help ensure that all parties fulfill their bartering obligations. Detailed contracts will prevent misunderstandings, and even simple contracts are legally binding in a court of law.
Christian Business Partners assumes no responsibility for lacking or miss presented information in the above contract.
Bartering and Federal Regulation
- There is no regulation for bartering with the except of taxation. Those involved in bartering are required to file a 1099-B
- Anyone can create a flat currency and market it as a barter exchange.
“A barter exchange operates as a broker and bank in which each participating member has an account that is debited when purchases are made, and credited when sales are made.” Wikipedia
Where Do I Start?
- Make it known that you are willing to barter.
- Verbalize at networking groups and other business events.
- Post on business cards, flyers, website, and social media... “I Barter!”
Finally and In Conclusion
If this presentation is being given at a networking meeting, who here today is interested in bartering?