Bartering is when you exchange your goods or services for other goods or services. No cash is involved in the transaction. It can be very beneficial tool when used properly. Bartering can get your business through rough times. For businesses that are strapped for cash or start-ups looking to get their name out there, bartering can be key in a business’s survival.
Though bartering can be beneficial, many business owners do not consider the potential negative side effects of bartering. There are many advantages and disadvantages to business partering
1) Bartering can devalue a product or service - When a customer pays cash for your work, they can easily see the worth in your product. When clients do not pay a set price for your services or products, they fail to see the real value of your work. Once a client gets accustomed to not paying cash, it can be almost impossible to turn that bartering customer into a cash paying customer. The customer has never paid for your services in the past, so they are reluctant to pay in the future.
2) You do not make money when you are bartering - Bartering as a business model does not work in todays market. A common example of when bartering fails is when someone is asked to become a speaker at an event in exchange for recognition or exposure. The speaker arrives at the event and either there is a minimal audience or the audience paid for the event. By charging a fee for the speaking job, the speaker would have funds to put back into the business. In addition, remember that grocery stores, mortgage companies, and utility companies only take money from their customers.
3) You still pay taxes - When you barter, you are still liable for the taxes that would have occurred if you had sold your Items for money. Remember that Uncle Sam will not barter with you.
What advantages and disadvantages to business bartering have you experienced?