Barter Exchange Networks Will Help You Build Your Business
When times are tough, and companies filled with overflowing warehouses, a smart executive will try and discover alternative methods of dealing with the problem. One method is to exchange your excess goods for services from other companies. This is the original form of commerce: barter.
This is one of the most time-tested ways to do business. There is no need for money. It is simply an exchange of something that you need with an item that the other person needs. In ancient times, it may be the exchange of livestock for crops. Today however, an exchange may be made with more modern products and services. By bartering for business, you can work with other barter network members to create a marketplace where you can take what you have and exchange it for something you need.
That is why savvy businesses owners join a barter exchange. These are organizations that act as clearing houses for their member businesses. The barter exchange is almost like a bank, keeping a tally of the credits and debits as each member barters with other members. There is usually an initial membership fee and monthly fees. Plus the barter exchange will usually require a small percentage of each transaction as an operating fee.
The exchange sells your products at their full retail value. Since your products are not discounted, there is no loss of value of your goods and services. Thus, business productivity is increased while downtime and reserve capacity is reduced by conversion to credits within the exchange.
The other benefit of joining a barter exchange is that your business is marketed to the other members. It is like receiving free advertising or having an extra sales person. Once they find your services or product usefule, members of the exchange will refer your business to their friends and will likely become your cash customers as well.
One caveat: the fact that actual cash is not exchanged has nothing to do with tax consequences. In the eyes of the IRS, barter of goods and services are considered as if they were cash transactions. At the end of the year, all member businesses receive IRS Form 1099B. All income, whether from cash transactions or barter, must be reported on your yearly income tax return. There are advantages to barter transactions, which are useful business services providing you with more control over your cash and inventory, and these advantages are worth the small price you pay in the form of tax on barter income.
Joining a barter exchange is a smart business move for most businesses. It is an especially great boost for a startup business which may be cash poor. Your customer base can be increased and goods and services obtained while initial capital is preserved. Established businesses also benefit with an expanded customer base, increased sales and reduction in excess inventory.
Using a barter exchange is an excellent way to enhance business. Consider the farmers of long ago who traded a cow for the neighboring farmer’s chicken eggs. Trading in this manner has proven over the ages that the trading of products and services can be beneficial to all. Bartering for business has some costs such as transaction and start up fees but the overall benefit is incomparable to the ultimate gains such as reducing inventory, overhead costs, and essentially receiving free advertising. Just remember that U.S. tax laws still apply and you will need to report all income.
- Terry Lamb
