Start-up costs and cash flow are an ongoing concern for small business owners. The ability to control the overheads will have an impact on whether your business succeeds or fails. Given this, any opportunity to alleviate pressure on the finances is worth investigating. And for nascent and growing businesses, bartering is one such opportunity.
What is business bartering?
Bartering as a form of currency has been around for centuries. The idea is that you supply goods or services to another and receive ‘payment’ in the form of goods or services. It works on the simple premise that what you supply should be of equal or approximate value to what you receive in exchange.
A typical bartering partnership might be between a graphic designer and a bookkeeper. The graphic designer might supply printing and or a logo design in exchange for some bookkeeping work.
How do you find a bartering partner?
Finding another professional or company to barter with is usually done via two approaches. The first is to negotiate directly with a local business or freelance professional offering a service or goods you are interested in and putting to them the proposition of a barter exchange. The problem with this method is it depends on the other party being interested in the service or goods you are offering.
You might also post an advert to try to encourage others to contact you. This might attract people who are interested your offering as part of the exchange. However you would need to carry out due diligence to check the qualifications and experience of the professional or quality of the goods they would be offering you.
The second and most common method is to use a business bartering website such as BarterCard. Bartercard offers an international platform to source goods and services but requires payment of a joining fee and subscription for access. They also levy a transaction fee on all items sold and bought through the bartering process.
There are various free bartering sites but they tend to rely on users self listing with little sales work to drive businesses to join. This means they tend to have very few services and goods available for barter trade.
What are the benefits?
The most obvious benefit of bartering is the money you will save. In the early days of setting up and growing a business you may prefer to avail others of your services or excess stock in exchange for something you need. This prevents you having to tie up the cash flow to purchase the goods or services with cash. If you supply goods you will purchase at trade prices but barter at market prices, saving you the difference.
By trading via barter with other companies you get to build a client list and possibly good reviews. You also benefit from the normal advantages of networking with possible repeat business and word of mouth referrals outside the barter framework.
What are the concerns?
If you barter for goods and services you need to treat the transaction as if you had bought and sold goods or services with cash. In other words, you need to generate an invoice and process any sales and purchases through your accounts. All transactions are subject to VAT if you are VAT registered and that amount must be paid to the HMRC in the normal way.
If you don’t make clear the bartering arrangement with your bartering partner you may find there are problems with the transaction. For instance, you need to clarify what you consider a fair trade. It may mean both parties detailing what is offered and received so both you and your bartering partner feel happy that goods or services of equal value have been exchanged. You might also want to include a timescale and commitment to deliver. This should be written down in a bartering agreement to avoid any unexpected and disappointing outcomes at a later date.
You should always do due diligence before accepting a barter trade. Be sure to have reviewed the quality of service and goods your bartering partner offers. You don’t want to embroil yourself in a dispute if the goods or services are not what you expected.
And finally…
Bartering for business is an ancient but still thriving form of trading. It has become more relevant today with many businesses looking for ways to save money and find new customers. But it’s not for everyone. If you do feel you could benefit from business bartering the barter agreement is not to be overlooked. Negotiating an exchange that suits both parties is not without its challenges.
The online platforms, such as Bartercard, also come with their fair share of benefits and drawbacks and should be researched carefully before investing your hard earned money in their services. However, if you can find a way for bartering to work for you it has the potential to save a lot of money for your business. In the early stages of a business start-up and growth, that could make all the difference.