Barter System: Still relevant, still reliableFebruary 23, 2013 | By: Nikki Hall
The barter system has been around conceivably since man created and networked a logical system of economics. Utilized correctly, it is a sound and sensible means of alternative income or an expense reduction for business owners. Bartering can be done in multiple ways and allows companies to get ahead and become competitive with their services in an economy that is cash-strapped. The down side of bartering is that it can be dangerous and if not well executed, very expensive.
I fully believe that bartering is an effective game changer. If you’re a small business, you know that being self-employed is a big gamble and at times, it will feel as if laws, taxes, politics, and insurance regulations are against you. They are forces that come at business owners fast and they can be relentless, but keep your head about you and be creative. To be competitive in a chosen market, an owner needs to devise money saving ways that compensate for over-regulation and inflated taxes. To be efficient, an owner needs to be willing to look outside of the obvious and evaluate and consider where in the company the losses are being made, who is potentially adding to those losses, what is expendable or reusable. These three areas, once determined, are excellent points to barter with.
We’re in the tree industry, we’re a small company, and contractors that we come into contact with are blue collar workers just as we are, and they match our needs just as we compliment theirs. Bartering between small business owners isn’t anything new and most established businesses have their own way of trading services. It isn’t always about increasing sales. Sometimes it just about stalling time and keeping the “machine” humming. When money is scarce or you need to delay a utility or truck payment, trading services or materials is a means of reducing overhead while helping the company to still run. In our case, it becomes about finding a place to dump logs and reduce dump fees or keeping our crews on the road and still generating enough money to cover fuel and insurance costs. Insurance and fuel costs for us work hand in hand. Because we are a high risk and fuel based industry, our trucks cannot get on the road without insurance. It is illegal. Without fuel to get us to our jobsites and run our equipment, we cannot pay for the insurance to keep us legal. If we’re money poor, it is impossible to cover these expenses. Typically fuel companies and insurance firms are big business and bartering with them isn’t possible. This is where trading services to keep you running kicks in. For example, as I mentioned earlier, because we’re in the tree industry, we’re always looking for ways to dump logs that are earth friendly and still cost effective. Factors we consider are: anything considered “green” is usually more expensive, however landfills are rapidly filling up and depending on your area and what your dumping, it runs anywhere from $150.00 a load to $300.00 a load. If you dump your trucks 3 times a day, 5 – 6 days a week, the dump fees add up pretty quickly. Logs are a useful commodity for sawmills. Depending on the species we’re removing, the more precious our load becomes. We’ve located a small sawmill close to us, and through them, we’re able to dispose of our loads in an earth friendly way and at the same time, depending on the wood species and the demand for that particular species, we’re paid for the materials.
As mentioned earlier, while bartering is a solid avenue for generating and saving money, it can also be dangerous if not done properly. For example, the IRS and state (of your business origin) requires that you report all services and goods traded. If this isn’t done accurately, a business owner can incur fines and fees that far outweigh the positives. Additionally, depending on the service, the person or company you’re bartering with, they may not carry a warranty or guaranty on the services or goods rendered. This is where solid trusting relationships come into play. Be careful with who you trust and who you involve with business dealings, but don’t be afraid either. Just be aware.
Bartering requires company owners to thoughtfully determine how and who your services or materials benefit. Our recommendation is to find a local business that can utilize what you’re offering, then devise an agreement that is sound and benefits you both. At first, this arrangement can be hard to develop, but once it is made and the relationship is built, the positives are overwhelming. And it’s a double positive, because you’re helping to strengthen small businesses in your local area and creating long term relationships that will see you through hard times when money isn’t consistently coming in.Last modified: February 23, 2013
Nikki is the co-owner of Aspect Tree Service in Alexandria, VA. Learn about her business at www.aspecttreeservice.com
This story is part of our Small Business Corner, a peek into the life and trials of small business owners.