Before money was invented, bartering (also known as trading) was how local economies worked: you give me a chicken and I give you a bag of potatoes.
Today there are organizations that facilitate barter (or trades) between businesses. I used to be a member of one.
The organization functioned as a middleman between the service provider and the client. When you bought the services of another member, their fee was deducted from your account with the barter organization and credited to theirs. The service provider could then use that credit to buy services from other members of the organization. The fee you charged for your services was the same as your regular dollar fee: if your cash services cost $100 an hour, then you charged 100 barter dollars for trades.
This type of system works well because you can use your credit to buy from anyone in the organization.
It gets slippery when you trade directly with another individual, rather than through a middleman. A few simple guidelines can help avoid some of biggest mistakes people make when trading. They will help keep the relationship professional and avoid animosity, misunderstandings and resentments later.
These simple guidelines will help you make sure that your trades unfold in a way that's satisfying and productive for both sides.
- Do business exactly as if the client were paying you by check, credit card or other traditional method. Even though you're getting paid with services rather than cash, it's still a business relationship and should be treated as such.
- Only trade the VALUE of your services, not the TIME you spend delivering your service. I once had a massage therapist ask if I'd trade services: she would give me a one hour massage and I would give her an hour of consulting. The problem was one hour of my services was more expensive than one hour of her massage. That kind of trade can end up with one person feeling that they haven't received full value. Make sure the value you're giving or getting is the same as if you were both paying cash.
- Trade the full monetary value of your services. Just because it's trade doesn't mean you have to offer a discount (unless you have a solid business reason for doing so).
- If you usually use a contract, use the same one as for your cash transactions. The terms of your business relationship remain the same, only the form of payment is different.
- Trade for services you genuinely need or want. Don't trade to do someone else a favor. It devalues your service.
- Only trade for services you need right now or in the very near future. Many people do not keep good records of their trades because they don't take them as seriously as cash transactions. They can forget that they still owe you. That can lead to awkward situations and has the potential to damage the relationship.
- Check with your tax professional on any tax ramifications of trading.
Copyright 2012 Maggie Dennison. All rights reserved.