When Carrie Kerpen of Buzz Marketing was looking to create the “buzz” needed to get her business off the ground she faced a typical entrepreneur’s dilemma: she didn’t have any extra funds to allocate to the cause. So she took an old-fashioned route: bartering.
Starting out cash-strapped, the company --which today has 8 full-time employees and 30 part-timers in offices in New York City and Boston -- worked out a quid-pro-quo relationship with a flower retailer that needed marketing help.
“The company provided us flowers and gifts that we sent to potential clients after meetings. It really added that extra ‘Wow’ factor,” said Kerpen, who founded the company with her husband in 2006. “It definitely made us look more creditable and helped us snag clients.”
Bartering allows businesses to exchange goods and services without hurting cash flow, which can be especially tight in today's economy. Business-to-business barter transactions generate $12 billion annually, according to the International Reciprocal Trade Association. Last year, more than 250,000 businesses engaged in bartering to help boost revenue.
Here are five tips to keep in mind when bartering.
No. 1: Start Small
“If it’s a big project start with the person doing a small task to make sure the long-term relationship is going to work,” she said.
No. 2: Don’t Sell Yourself Short
If you are using an online bartering site make sure to really sell your qualities—treat it like a dating service.
“If you are an electrician include your experience, number of clients, a list of skills, recommendations and before-and-after pictures,” said John Moore, founder of the online bartering site U-Exchange.
Moore said businesses that are interested in bartering should go for it.
“Don’t just sit back and wait for people to come to you—make the initial contact to see what is out there,” he said.
No. 3: Keep it Professional
Treat a barter client like any other client, said Kerpen.
“Compare prices with others in the industry to make sure you are getting a fair deal and put everything in writing,” she said. When drawing up the contract, be sure to include a deadline for the services or goods to be delivered.
No. 4: Stay in Contact
It’s a good idea to check in with the barter client to make sure the exchange is on track.
“Have a monthly status meeting if the deal is long term. Communication is key, and you want to make sure everyone is happy,” Kerpen said.
No. 5: Don’t Forget Uncle Sam
There is no loophole for bartered transactions and trades are taxable in the year it is performed, according to the IRS.
The fair market value of the goods and services being exchanged should be declared as tax income.