10 Mar

Barter BEFORE your business is in trouble

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The other day I was telling my son about someone I was trying to recruit into my barter exchange.  To my surprise he said he hoped they won’t join.  When I asked him why he said that too many of the businesses that I barter with go out of business.  I couldn’t help but laugh out load.  He’s right!  Too many do go out of business and I think I know why.

First, let’s be honest here;  cash is better than barter.  Yes, I said it…. and it’s true.  So with that in mind, any business that already has all the cash business they can handle shouldn’t bother with barter.  So the businesses that should be using barter are the folks who would like more business than they currently have.  Many of the organizations in that category are great healthy businesses that simply have some excess inventory or service capacity that they want to take advantage of.  These are folks with vision who can think outside of the box and are interested in new ways to expand their business.  Those are generally the best people to barter with.

Another group of potential barter partners are the folks that have businesses in various stages of failure.  These are folks who are using barter in desperation because their business is going so badly that they are willing to try anything to keep it afloat.   As you may have guessed these are less than ideal people to barter with.  Not only are relationships with these businesses often short-lived, but it is not unusual for people to be more …. morally flexible… as their financial situation goes downhill.

The solution is simple;  Use barter as one of your many tools to keep your business profitable so you never fall onto hard times.    Use it early.   Use it often.  Find a mentor who has experience with barter to help you get the most out of it.  Businesses that I’ve bartered with don’t fail because they trade.  They do however sometimes fail because barter was their last resort.

 

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25 Feb

Accurate Accounting for Barter

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I keep track of barter transactions to the penny.  OK I admit it.  I can be a little uptight and “Type A.”  Personally I blame my mother.  I remember borrowing money from my parents when I was little.  I little paper IOU was posted on the fridge and it was slowly reduced penny by penny until it was paid back in full.  Not a single cent was ever forgiven.  And I’m not complaining about that.  It just helps explain who I am.

Anyway… personally my advice is to conduct your barter transactions in a very professional way.  That means that both parties need to agree to the cash value of the trade, contracts are signed and both parties are assured to received the correct value for what they’ve traded.  It’s very rare for me to run into a disagreement about a trade, but when it does happen, I’m always happy to have a written agreement and a set value for our trade.   I also believe that good accounting helps avoid issues in the first place.  It’s harder for someone to feel like they got the short end of a stick if they are looking at a statement that shows the details of each transaction.

Another reason that good bookkeeping is important for barter is to keep the IRS happy.  Although I heartily encourage everyone to conduct tax planning and legally avoid as much tax as they can, barter is NOT a tax dodge.  Remember to report all barter income on your 1040 exactly the same way you would your cash income.

I have found that keeping good records as an active trader is challenging.  My two secret weapons in this area are:  1)  A good book-keeper who understands barter (tough to find by the way) and 2) A barter exchange that will do a lot of the book-keeping for me.

Let me know if you have any questions on this topic and keep those pencils sharp!

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09 Feb

Bartering for groceries

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As I’ve mentioned in past, food is one of my favorite things to barter for.  I truly believe that food that I’ve bartered for tastes better than food that I paid cash for.  To that end, I’ve had some successes in trading for food lately that I wanted to share.

All over the country for the last decade that has been a resurgence of slow food.  Food that is grown locally, raised organically and sold at a premium to foodies that can’t get enough of it.  The barter benefit is that much of this food is raised on small entrepreneurial farms that have sprung up in every state.  The farmers and ranchers are usually big on idealism and short on cash which makes them great people to talk to about barter.

I’ve had a lot of success working through Craigslist and my existing barter and business network in finding local farms to trade with.  This has included folks that raise chickens, beef, turkey, pigs and even meat rabbits. I’ve also had success trading for eggs, bread and veggies.  Last season I even traded with local fisherman for fresh crab.  Bottom line:  There are a lot of potential food trades available if you invest the time to track down barter partners.

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