Bartering for Customers
Many businesses have excess capacity, at least at some times, and would like to find a way to create value with the time or inventory they have available. Bartering can do that, as well as helping new customers to become aware of the business.
Bartering is simply an exchange of goods or services instead of cash. If you need $1000 worth of printing services, would you rather pay $1000 in cash, or with goods and services having a retail value of $1000? The goods you provide in return for $1000 of printing might have a manufacturing or wholesale cost of $500 to you. In effect, with barter you are paying wholesale prices as well as not having to come up with the cash. If you are bartering with services, you use hours not sold to clients, for which you would normally receive no value.
In addition to direct exchanges, where you come to a barter agreement with another person or business, there are barter exchanges where you receive credits for the goods and services you provide. You then use those credits as currency to “purchase” goods and services from other members. One advantage of using a barter exchange is that you do not have to find an individual who has what you want and wants what you have.
Bartering not only helps your cash flow, it brings your business to the attention of new customers. Barter exchanges publish directories of members and offer networking opportunities that will put you in front of many potential cash or barter customers. A barter customer may refer cash customers to you, increasing your cash client base.
Products and services available through barter include advertising services, photography, party supplies, boating equipment, orthodontia, hotel stays, office supplies–even tattoos! Chances are, you can obtain many of the things you currently pay for in cash through barter instead. According to the International Reciprocal Trade Association, barter in the U.S. accounted for $8.25 billion in trades in 2004.
Some people mistakenly believe that barter transactions are tax free; however, the fair market value of the goods and services you receive is considered taxable income. In general, bartering transactions are treated as if they were cash transactions. That means that you can deduct the value of barter transactions made for your business, just as you can when paying cash. Barter exchanges will track these transactions for you and provide necessary tax documentation, such as 1099-B forms, if needed. For more information on tax issues related to barter, see the Internal Revenue Service Web site or IRS Publication 525.
Bartering can be an effective way to use your excess capacity to save money, improve cash flow and find new customers, too. And now the Internet makes finding barter partners easier than ever before. To get involved in a barter exchange, see The International Reciprocal Trade Association (IRTA), The Nationwide Clearing House for Trade Exchanges, and Texas Barter Exchange.
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