It is easy to overlook the value of bartering goods and services with other entrepreneurs – especially when you are unaware of just how widespread the custom is today.
Although bartering predates the use of currency, the practice thrives in today’s marketplace – made even easier by the use of the Internet.
Bartering is the exchange of goods or services for other goods or services of equal value instead of cash. A common example involves trading services for media placement – radio airtime, ads in industry magazines, etc. This can be a boon to new businesses looking to get the word out that they have opened shop.
In Canada there are several organizations dedicated to linking entrepreneurs with others who are interested in bartering. Some go beyond merely connecting you with other like-minded business owners, and actually manage and track the transactions, for a fee.
The practice is common enough to warrant specific reference by Revenue Canada, and there are rules regulating the exchange of goods and services, including the obligation to charge and collect GST on the exchanged items.
This is an introduction to bartering in Canada; perhaps you will find that it is beneficial to your business.
Benefits of Bartering
If you are a new business owner financing your start up on your own, you need to keep tight reigns on your cash. How can you acquire the goods and services needed by your company without tapping into those reserves? Find someone who needs what you produce and strike a deal.
Other reasons to barter:
- Move that extra stock you have on hand;
- Make the “down time” in your business (between clients or a seasonal lull) pay off;
- Reach new clients that wouldn’t necessarily purchase your services – show them the value of your offerings and you may win over a long-term customer in addition to the services;
- Happy barter exchange partners generate word of mouth for you!
What happens if you don’t happen to need the services offered by the person requesting yours?
Let’s imagine that you are an accountant, who wants a website, and you know a web designer but they already have an accountant. Well, you could find a third person who provides a different service that the web designer does need, perhaps a publicist, and who happens to need accounting services.
As long as you are trading services of equal value (based on the amount of time spent and the hourly rate), it all can work out fine.
However, if you need 10 hours of web design, and the designer needs one hour of the publicist’s time, and the publicist needs 20 hours of accounting, this can break down pretty quickly. Keeping track and making sure that everyone gets an equal value out of the deal gets hard. It’s at this point that you might seek the services of a barter network.
Barter networks are third party organizations which help track the potentially complicated dealings (also called “barternets”). When you join a barternet, you post the value of your offerings (for instance an hour of your services) and other members “purchase” your offerings. This leaves you with a credit to spend. This simplifies the process by allowing you to exchange hours that you have put in for other services than those provided by the person requesting yours.
Before laying out money for a membership, here are a few questions you should find answers to:
- How many members are in the network?
- How diverse are their offerings? A barter network with only a few members or one that has too many members in your field is not going to be useful to you. The more members in the network and the wider the selection of offerings of those members, the better the opportunities for you to get what you need.
- How do they review the members for membership? There is no point in joining a barter exchange network if there is no verification system or peer review to prevent unethical practices by members.
- How established is the network? You want to have some assurance that the organization will be around for you to collect the credits you amass through your labour.
- How do they charge? Some networks charge a fee (monthly or annually), others charge per transaction (usually a percentage of the value of the exchange), and still others charge a combination of membership and transaction fee.
- What are the reviews like? Speak to some of the members of the network, and better still, find people who have left recently to find out what their experiences are and what impression they are left with.