Note: This post is part of the January Word Carnival — a monthly group blogging event specifically for small business owners. (It’s the most fun you’ll have all month!) Check out the rest of the fabulous carney work here. And don’t forget to join us for our Twitter Chat on Thursday (Jan 26) at noon (Pacific). We’ll be tweeting up a storm under the #WordCarnival hashtag.
Bartering. Most people don’t think twice about it. Bartering is just an archaic form of commerce that doesn’t exist any more. But that’s not entirely true. In fact, it’s not true at all. Business bartering is alive and well. And for businesses trying to advance on a shoestring budget, bartering may be a godsend.
Money was created to make transactions between individuals. You can give something of value to one individual, get paid, and then obtain value from someone else.
If you are a musician for example, a mechanic may not be willing to fix your car in exchange for a song performance. That is why money is necessary.
But in the business world, especially online, bartering is still alive and well.
Who Can Barter?
Anyone.
Anyone that can provide value for each other that is.
In the example I provided above, a musician and mechanic may not be able to come to an agreement. That is why money is necessary. Although you never know 
.
But anyone that can provide a business related service, can easily find a match in someone else providing a business related service.
For example, writers and SEO backlink specialists can find common ground. Consultants and business specialists can make agreements with businesses that have something of value (for example a large subscriber list).
Service providers can offer their services in exchange for a product they might want to give as a gift.
The possibilities are really endless.
Why Barter?
Bartering is a great way to perform transactions without actually exchanging money.
Many small business owners and “solopreneurs” have to run operations on a shoestring budget. That means the less cash they have to spend, the better.
And bartering offers an alternative to obtaining value by spending cash. You can obtain value by offering value. You have to hire someone to provide a service for you to advance your business. Instead of paying, you can offer your services in return.
That’s the most “on-the-face-of-it” reason. But bartering can be a much greater tool if you get creative with it. Read on…
Where to Find People to Barter With
Anywhere!
Anywhere you can network is an opportunity to set up a barter deal.
LinkedIn is a good place to start. Business sites and blogs are another great place. Anywhere you can connect with someone is really a potential for a barter relationship. Network, connect and offer a transaction.
There are also barter networks that you can look into. But these aren’t always the best, or most “pure”, form of bartering. Networks such as BNI actually create their own monetary system through “BNI points.” If you’re going to use a monetary system, you might as well use a real one earn dollars rather than points.
Ingredients for a Successful Agreement
To cook up a successful barter deal you need to have a couple of ingredients in place (line inspired by Tea Silvestre, The Word Chef ).
The first of these is trust. Because there is no monetary exchange taking place you must trust the other party to hold up their end of the bargain. This is especially true in deals where services are being exchanged because these can take time and you may not know for a while if the other party is staying true to their word. And since you aren’t paying with money, refunds aren’t exactly an option.
The other ingredient necessary for a transaction to take place is Value. To be more specific, you need equal value being exchanged between both parties. To be even more specific, you need equal perceived value.
When you sell a service for money the value is established in dollars. But in barter exchanges value can be a bit more unclear. Depending on how desperate the parties are in a deal, one may be getting more out of the deal than the other.
There is a bit more flexibility in terms of value exchange because perceptions can be different. Since there is no cash being spent, one party may be willing to give up a bit more than they normally would. And, since there is no cash exchange, it’s harder to go compare and find a “cheaper” provider.
But Wait…There’s More!!!
As I said before, bartering can be much more than just a simple exchange of value between two parties.
Bartering can actually be used to leverage your way into getting your first clients if you are starting up a new business.
Let’s face it, getting clients without any references can be difficult. People want a proven track record. But if you can offer up a deal where you will do the work and no cash is being exchanged, people are willing to be much more lenient.
In fact, this is often a great way to advance your business presence much faster than you normally would. If you are providing your services to a well established company, they can promote you in return. This can be a huge boost to your business.
Your Two Cents
Have you ever taken part in a barter deal?
Who got the better end of the bargain?
How did you go about setting it up?
Where did you find someone to barter with?
Excellent post, Eugene, and I especially like the way you phrased it — “equal perceived value.” I would call it “equivalent,” though — things may never be perfectly equal but they can be equivalent, and sometimes that’s good enough. I think we’re saying kind of the same thing, just using different semantics, though.
Yeah, the idea is the same. I guess that’s the one benefit of using money. You ask for a value, and that is exactly what you receive.
I recently entered into a barter agreement where I am doing some consulting work, and at some point I will be able to leverage the company’s network (which is huge).
The owner stated himself he thinks he can do more for me than I can for him, but he was willing to do it because the work was that important to him.
I do use barter occasionally and always get value from it, Eugene. I don’t advertise that this is an option, as I need to earn cash too, but I’m open to alternative arrangements where both parties get value. I have also found that there’s additional value in finding new people to work with who will also promote your services harder because of your flexibility.
Yeah, cash is still obviously the better option in most cases just because it is universal. But I’ve done a barter agreement or two and they’ve been valuable to both parties. So why not?
When I first started my business, I did a lot of non-cash arrangements (but only with folks who fit my ideal customer profile). These days, I reserve those non-cash deals for things like sponsorships. Again – where it means getting exposure to my ideal customers. Bartering can be extremely effective if you use it wisely!
The ideal client thing is definitely a key. I am currently in a bit of a barter deal where the owner of the company would be an ideal client…but he also has a huge network of people who may also be ideal clients…so it’s quite a nice arrangement
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“The other ingredient necessary for a transaction to take place is Value. To be more specific, you need equal value being exchanged between both parties. To be even more specific, you need equal perceived value.”
Absolutely right.
It’s amazing how often equal perceived value is skipped. Perceived value is what makes the difference between a $150 website and a $5,000 website.
It’s really easy to over-inflate your own value or under-value someone else’s contributions, leading to all sorts of crazy mishaps when it comes to friendships, business ventures, and deliverables.
Getting everything in writing is the best way to go, but more to the point, making sure that everybody knows exactly how much work is going in to their part (and coming from everyone else) is key.
That’s true, perceptions can be kind wacky at times. But you make the point of getting everything in writing…I think that’s a good idea at any time that you are entering into a business agreement.
Eugene I’ve done a number of barter arrangements, and I really believe that both parties walked away very satisfied. Your ingredient list is spot on, and I love the point about ways to build up a client base and testimonials when you are new.
I think that when the topic of money comes up, people get a lot more stingy. But when you offer a barter agreement, they are more open to it. I find it a little funny because if it really, truly, of the same value then it should not be any different than paying the cash.
“Networks such as BNI actually create their own monetary system through “BNI points.” If you’re going to use a monetary system, you might as well use a real one earn dollars rather than points.” That’s my sticking point with closed points/currency systems…why reinvent the wheel? If we’re not directly exchanging goods or services, then why not just use the system we already have: money.
Great stuff, Eugene!
Hey Eugene! What’s going on, man? I;ve never bartered online but I am positive it is alive and well. In fact, I ve known people to perform som blog services in exchange for content.
I definitely believe this is a great way to connect with new customers if you’re a new business. Of course, the only issue that may arise is how much of something to trade for something else.
In the monetary system, we have the dollar so we have ‘some idea’ of what that may be worth. The great skill I think bartering can help most people in is ‘negotiations’ – trust me. There’s going to be a lot of that going on.
Interesting you mentioned BNI…that’s where I met my one and only barter partner. The value is so key and so big a part of what I missed. I didn’t know my true value at that time so I definitely did not have the correct arrangement. It was truly my first 6 months in business and no real clue which may be an issue for others if they are newly in business. Nice post Eugene!
“The owner stated himself he thinks he can do more for me than I can for him, but he was willing to do it because the work was that important to him.”
This was really insightful Eugene for me, as it opened up a completely new dialogue. Bartering within bartering.
If you just stuck to agreement on the present value of one trade for another, then perhaps the opportunity to enter into more complex, long-term relationships like this one couldn’t happen.
Your post points out that some strategic thinking may prove to be beneficial when faced with an uneven barter at some point in your business life.
This year one of my goal is to learn more about business and your article has some very interesting information. Thanks for your insights.
I agree that barter is still alive. I have a pet related site and I found a dog food distributor that
in exchange on a banner on my site gives me 2 bags of Acana monthly. So, we are both happy
Bartering can be a best way to do business with others. Sometimes in bartering you could actually get best deals wherein you can get a product or a service in a much cheaper price. So more or less, it’s a benefit on the part who agreed with the barter offered. I actually experienced that with my dad’s business.
Interesting Case sandy that you have discussed here and it seems that the case you have discussed gone into a troublematic condition!