I got into a barter deal and I think I might get burned. Since we started our deal, the folks on the other side got busy and are not delivering what they promised. What can I do?
Managing a barter properly can mean the difference between getting paid and working for free. In all cases, it”™s seller and buyer beware. Treat this like any other business deal.
Here are a few things to keep in mind to increase your chances of success:
- Is there a written commitment to deliver something specific?
- Can both parties deliver without additional cash layout and how hard will it be to acquire what”™s needed to complete delivery?
- Have both parties done barter and delivered as promised, and have you checked references?
- What”™s the remedy process in case something goes haywire?
- A barter deal is a business deal. Treat it with all the care and formality of any other transaction.
Work it out or write it off
If you”™re already in the middle of the deal, as this reader is, and lack written documentation and clout, straightening the deal out can get sticky. Your best bet is to sit down with the other party to work things out. Listen carefully to what he or she has to say.
Do you both have the same understanding of where you are in the deal? Ask about intentions going forward. What stands in the way of delivering?
Brainstorm solutions together. Remember, people do business with people they know and like. Preserve a working relationship until both parties are satisfied.
If the other party plans not to deliver, without a written agreement and remedy process, you could be in for a loss. Face the reality of a potential write-off. Stop work you”™re doing immediately. Do not get in deeper.
Equate the barter to dollars, just as if you were selling the deal for cash. This makes it easier to compare what each party is putting into the deal ”“ is it approximately equal in value? It also helps with IRS recording ”“ yes, barter deals are taxable at fair market value. And if something goes wrong, you can estimate what you owe or are owed.
Is it worth the effort?
You might be asking, “Why bother with barter?” If you have a product that is hard to get rid of, entice a buyer by making it easier to come up with a way to pay. Consider barter as a tool to put people to work, if you can afford the cash outlay for payroll. You can acquire goods and services you need when cash on hand is tight.
One mistake business owners make is exchanging business goods and services for personal luxury items. At the end of the year the business is stressed because it didn”™t gain from the transaction.
On the other hand, if as a business owner you need a break and you can negotiate a get-away or other personal reward, it might be just what you need to re-charge your engines for the coming economic upturn.
Barter networks may help
There are also barter networks out there. Some are better than others. Most charge a carrying cost.
The advantage of barter networks is that you can extend the parameters of a deal. Barter networks can replace the one-for-one arrangement: I do “x” for you, you do “y” for me. Instead of having to find someone who wants exactly what you do and who does exactly what you need, you can work on barter for someone and build up points you can use to “buy” what you need from someone else.
Be sure to check out the barter network carefully. Are there members in your area doing the kinds of things that you might want to acquire? Are members satisfied? If you plan to use the arrangement for business purposes, are there plenty of members who offer business services or products or is it mostly a retail network? Do the members place restrictions on what they offer and how much can be acquired through barter? Is the network itself on solid financial footing, with a growing membership base, brought in and supported by a dedicated sales and customer service staff?
Andi Gray is president of Strategy Leaders Inc., www.StrategyLeaders.com, a business consulting firm that specializes in helping entrepreneurial firms grow. Questions may be emailed to her at AskAndi@StrategyLeaders.com or mailed to Andi Gray, Strategy Leaders Inc., 5 Crossways, Chappaqua, NY 10514. Phone: 877-238-3535. Visit www.AskAndi.com for archived Ask Andi articles.
