Bartering Services with Your Business (a Skill to Start Learning in College)

Close up of business handshake in the office

When starting a business, there are always a few things you will be in short supply of. Unless you have a tremendous amount of capital behind your startup, it’s likely that one of these scarce commodities will be spare cash, at least for a little while. However, there is at least one thing, usually, that a young company will have extra of: products and services. This makes the prospect of establishing trade relationships with other companies a very enticing one. This isn’t a new practice, by any means. The world has always run with some sort of bartering system, even entirely so, before the establishment of currency. However, it can also be like navigating very tricky waters when a young business starts to engage in trade work. There are several guidelines that should be followed, lest you fall into a trap of doing too much work. Here are some tips on bartering services with your business…

Working for trade

When money is scarce for a young company, there will still be inevitable expenses and commodities that they will need to pay for. In some cases, this can often be done by trading products and services for other products and services. For example, if a new Italian restaurant needs a plumbing job done, but lacks the initial capital to hire a plumber, they can always offer a desirable plumber a decent amount of free meals in return for his expertise.

Working for trade isn’t always a good idea, but it can be incredibly valuable to do so when you have a purchase that you need to make anyway, but can save on money by having it done for trade. The key to setting up a trade agreement is to keep the value of the trade about equal. Don’t try to screw anyone over by working for trade, as it will build bad relationships, but also don’t run your business through the coals to do trade for someone else.

Barter background concept glowing

Use your services for PR

One great way to use services in a trade sense is a bit more abstract, and that is when you use your services for a great publicity reason. This often means donating your services for a cause that you and the community find to be a valuable one. Not only is this charitable act an altruistic and humanistic move, but it also builds a good image for your company, in the eyes of the public. In this sense, many PR stunts that businesses do are actually a form of bartering (products or services for the attention of the public). Another great thing about this approach is that there will often be a great tax incentive for companies who donate their services to charitable causes.

Keep trade to a reasonable amount

Whatever you do, don’t go overboard with carrying out trade agreements, as this will usually mean that you are bogging down the productivity of your system with work that doesn’t actually generate revenue. Find a limit that you are willing to do on trade agreements and stick to it. This usually means finding a value that you don’t exceed when bartering. Let all potential trade partners know about this limit what you need, in return, to consider them as a bartering partner.

Only do it with people you can trust

This should be very obvious, but it is usually only beneficial to enter these types of agreements with people that you know you can trust. Since there is a much bigger grey area, when it comes to reimbursement, with trade agreements, it can be much easier to get a poor deal and have people not hold up to their end of the bargain. Consider sticking to people that you know and have done business with, before, when it comes to setting up a barter system.

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Keep up to date with the tax standards for trade

While there may be a tendency to be rather informal about the informational and bureaucratic aspects of bartering services, this is often a bad idea. Always get any trade agreement down on paper before it is carried out, so that both parties can examine the barter and get a good idea of where they stand. This is also a very important step for tax reasons, as bartering services is still something that needs to be reported to the IRS, by order of Federal law.

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