Imagine getting one year of rent for free? “No way,” you say! Too good to be true? Well, it’s absolutely possible.
My friend’s expanding staffing company needed more space, but in a down economy she was nervous about incurring the additional overhead. One of her clients had sold a division of his company and had empty office space, but also needed staffing assistance to fill a number of open positions. So the two decided to barter with each other. She received free rent for one year in a new, expanded space, and in return she recruited and filled his staffing needs.
Bartering can be a tremendous boost for a cash-strapped small business. In fact, the International Reciprocal Trade Association (IRTA) estimates that approximately 500,000 companies participate in commercial barter, and the majority of them are small businesses. With a little creativity, you can get almost any product or service you need for your business. The most popular barter categories are advertising, machinery and equipment, hospitality, and retail. However, you can get everything from janitorial services, delivery trucks, solar panels … even livestock if you need it.
My father once accepted a 1972 Chevy pick-up truck in exchange for a funeral. I still have that truck in my garage. It’s an ugly dull green with three on the column, no power steering, no radio, no nothing — but it’s the vehicle I learned to drive with, so it has sentimental value. The point is, you can even barter for your funeral.
Barter arrangements can be managed informally like my dad and my friend did, or they can be conducted more formally through barter exchanges or barter websites. There are more than 500 barter exchanges in the United States, and you can locate one in your area through the IRTA website. A quick Internet search will direct you to a variety of barter websites that are similar to eBay, except no cash is exchanged.
If you’re interested in bartering, it can help you get the products and services you need without putting you into a cash-flow crunch. However, let me caution you about a few things that can get you into trouble with barter.
1. Don’t get carried away. When you barter for something, it kind of feels like it’s free. So some people barter their business services for personal items, such as clothing, jewelry, or state-of-the art HD televisions. (Yes, it happens.) Even though money doesn’t change hands, the products or services you are bartering do “cost” your business either in direct expenses, time, or both. Therefore, you need to make sure you utilize the bartered goods for items that will truly benefit your business.
2. You need to make smart business choices. In other words, when you barter with another business, you need to do your homework just as if you were purchasing the goods for cash. Make sure the business has the reputation for delivering a quality product and can fulfill its end of the deal.
3. Even though you aren’t paying or receiving cash for the transaction, that doesn’t mean you don’t have to account for it with the IRS. You can’t escape Uncle Sam, and I’ve seen my share of small business owners wind up in serious trouble with the government because they didn’t believe they’d get caught. A barter exchange must be accounted for in your bookkeeping records. You must record the income and expenses at the fair market value, just as you would in a cash transaction.
So the next time you need something for your business, explore the opportunity to barter for it.
Have you ever bartered for something you needed? Leave your thoughts in the comments below.