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By Nancy O'Neill Bartering for goods and services has been around for centuries and often involves some form of negotiation. Societies lost interest as the monetary system developed but with technological advances, bartering has seen a comeback. While it is definitely a good option in some circumstances, there are things to consider when entering into this type of exchange.
The emotional value. People often trade products or services
that don't necessarily have an equal monetary value. It comes down to how
badly you need or want something that the other person can provide and how
willing you are to give up something you have. Remember Kyle MacDonald? You
may not recognize his name but if I said, One Red Paperclip, you probably have
seen his story about how he took one red paperclip and began a year-long
trading project. After fourteen trades, he ended up with a small house. People
traded for some very interesting items along the way. I encourage you to read
his story if you haven't already.
The monetary value. It is much easier to trade products than services. When a person's time is involved, both parties need to be clear as to how much or how often their service is provided in the trade. With so many people outsourcing today, it is easy to get excited if you find someone who is willing to trade services. However, if you don't have a dollar value associated with your time or service, it may cause one or both sides to feel they are not getting an even trade. This typically happens later on as one side completes their service before the other. The contract. Just because there is no money changing hands, treat the trade like any other business deal. In the old days, the barter system relied a lot on trust. We have all seen old movies where two guys shook hands to make a deal. Unfortunately, that doesn't happen anymore. We need contracts so both parties are protected. I can hear some of you saying, "But I know he'll keep his end of the bargain." Or, "I feel awkward asking for a contract." Let's just say, getting at least an informal agreement is the first rule in Business 101. The third-party barter system. If you have read up to this point, you probably have either bartered before or are considering it or just enjoy my articles. While many people make trades one-to-one, there are many barter companies online where you list your HAVES and WANTS. If you haven't looked at one of these sites before, it's amazing what people list. It is a combination between Craigslist and E-Bay. The taxes. Even though no money is changing hands, you know the IRS gets involved in bartering. They want their piece of the pie. Since I cannot give tax or legal advice, if you barter, exchange, or trade services or products, make sure you understand the tax rules involved. As with any other business transaction, do your homework, understand the agreement, and then live up to your end of the deal.
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