You have a great idea for a business and the ability to handle some of the work required to get it up and running. The challenge is that you don’t have any investors or available cash to manage the remaining work. What are your options? One option is Entrepreneurial Bartering. Entrepreneurial Bartering is when two or more businesses decide to exchange goods and/or services instead of money. This practice has been around for centuries and has proven quite valuable to those that have little or no funds available. However, when considering entrepreneurial bartering, there are risks as well as benefits to evaluate.
- Valuation of goods and services on both sides. When deciding to barter, an entrepreneur must first decide on a value of both offered and needed goods and services. This understanding will help during barter discussions to ensure what is being offered is of similar value to what will be received. In an interview, David Fling, CEO of three ITEX trade exchanges says, “[bartering] happens when two parties offer to exchange with each other exactly what each other wants at a similar value and quality. What bartering is NOT is a method of haggling or negotiating prices.” (Emmerson, 2019)
- Agreements can provide some assistance. Bartering can take many forms and may vary in formality. If possible, consider a simple agreement that is signed by both parties regarding the exchange of goods and services, the expected quality and dispute resolution options. Considering entrepreneurial bartering happens for entrepreneurs with limited funds, it may be difficult to include financial remedies to problems. An example of a barter agreement can be found at Rocket Lawyer (https://www.rocketlawyer.com/document/barter-agreement.rl#/).
- Partnerships can be a double-edged sword. As an entrepreneur you are building your business and your brand. The partnerships you establish while bartering can provide opportunities for networking and synergies that promote and support both businesses. However, the wrong partner can also tarnish your business and brand. Consider the partner as much as the goods and services they offer when bartering.
- Utilize Barter Exchanges. Like shopping for cars, finding the right partner(s) to barter with can take time. There are barter exchanges where businesses can build a network of potential barter partners and select the ones that best fit. Keep in mind, exchanges typically are also businesses, so they will have costs associated with using them.
- Bartering is great for starting a business and opportunities. While bartering can be an ongoing practice for a business, it is not typically going to sustain long term growth. Successful businesses are those that are financially sustainable and have strong cash flow. Businesses relying on bartering to sustain performance can be viewed as a risk or not healthy. The ultimate goal should be to use bartering to build a business until it can stand on its own and then continue using bartering only when there is a clear advantage to your business versus paying cash.
Entrepreneurial Bartering can be quite useful when starting a business. The Barter and Trade Industry was estimated at over $3.6 billion for global corporate barter in 2018. (IRTA, 2018) This reflects the value and amount of bartering that is happening every day to help businesses succeed. Bartering may not be for everyone, but if you are starting up your business or looking at an opportunity and are limited on funds, bartering may be a perfect means to a successful end.
Emerson, Melinda. (2019, August). What Business Owners Should Know About Barter and Trade. Retrieved from https://succeedasyourownboss.com/what-business-owners-should-know-about-barter-and-trade/ .
IRTA. (2018). International Reciprocal Trade Association: The Barter and Trade Industry. Retrieved from https://www.irta.com/about/the-barter-and-trade-industry .
Murray, Jean. (2019, August) Barter Exchanges and How They Work. Retrieved from https://www.thebalancesmb.com/what-is-barter-exchange-398141.