You never know how challenging it is to run a business, no matter how much you prepare, until you actually open it. Day by day, you realize that you have to purchase different products and services to keep your business operational. When you start adding up all the expenses, you find out that soon you will be strapped for cash.
For this reason, many home-based business owners attempt to DIY as many business operations as possible and waste lots of time hunting for the lowest prices for supplies. As a consequence, these business owners end up losing focus on their business in the search for affordable services and supplies. Instead of developing new products, connecting with potential customers and developing effective marketing strategies, they try to keep the business going on a shoestring. At a certain point, that shoestring will snap and the business will fail.
What if we told you that businesses did not appear and grow along the history by exchange of money but by a fair trade of products and services? And that this system of acquiring supplies and services still works at the present? This system is called bartering.
Bartering means that your business needs a certain product or service and, instead of money, it offers the supplier other products or services that it needs and which have an equal value to those you seek. Most small businesses all over the world help each other stay on the market and become successful by using the bartering system. So, how can you make it work for your home-based business?
1. Seek a Fair Exchange, Not a Bargain
The first thing you need to do if you want to benefit from bartering is to get in the right mindset. You are not looking for a bargain, but for a valuable business service or product, just as valuable as your products and services. If you think that bartering means getting something very cheap or for free, you set yourself on the path to finding unreliable partners who will offer you low quality products and services.
In turn, these will impact your own business and the way in which you serve your customers. It will not be long until your own products and services will also decrease in quality.
2. Consider What You Offer for Barter
As a corollary of the above, the product or service you offer for bartering must be one of actual value and utility, one which would find customers if it were for sale. In other words, do not trade “junk” products and services. Bartering is about a fair exchange, not getting rid of valueless items. It is also not the same thing as “unpaid work”, so if you agree to provide a service as your part of the barter, execute it with the same level of skill and care as you would have done for a paying customer.
3. Apply Ethics and Judgment in Selecting Bartering Partners
It is neither ethical nor good for your professional reputation to ask a supplier from which you have already purchased products or services to barter. It looks too much like pleading for a freebie and it may cause your business partner to believe that your home-based business is not in good standing. Instead, seek other small businesses like yours and offer a mutually valuable and beneficial deal: that of long-term partnership in barter, helping both your business and the partner’s business grow and succeed.
If you do not know where to look for a good bartering partner, you should consider joining a bartering organization. For a very affordable fee on the actual transactions you conclude, they will put you in contact with companies which are willing to barter and know exactly how this system works.
4. Do Not Forget about Tax Implications
Bartering must be recognized in your tax returns and financial statements. Before you decide to go ahead and conclude a bartering agreement, you should always consult with an accountant or tax advisor in order to understand what it will mean for your business in terms of tax and to make sure that the formal agreement you conclude is valid according to the IRS.
5. Always Put the Agreement in Writing
Never start bartering with a business partner without concluding a written agreement first. This agreement should clearly specify the quantity of products or services you are exchanging, state both parties’ acknowledgment that this exchange is a fair one, of equal monetary value, and state the terms and conditions for the bartering, including duration and termination.
This is the only way in which your business is protected from liability in case your bartering partner decides that they are not getting a fair deal and tries to sue you. Also, the agreement is necessary as a supporting document for your tax return filings.