So….how much barter really is too much? Ultimately that is an indiviual question. I’ve heard people in the industry throw out recommended percentages as rules of thumb… 5% of your total sales; 10%, 15%. It’s nice to have a number to put out there for newbies but I really question the accuracy of any general number like that applied across the board.
First off I should point out that 99% of the traders out there that think that they can’t handle more trade are probably wrong. It’s not that they have too much trade, it’s that they are not good enough at trade to take advantage of more trade than they are currently conducting. I don’t mean this as an insult. It applies to myself as well. Right now I have more of one partcular barter currency than I need and I’ve (for the most part) stopped accepting that currency. Does that mean that I have too much? Maybe. Or it could mean that I simply have not yet figured out how to use that currency to my advantage well enough.
Occasionally I hear a story about someone who supposedly lives on 90 to 95% barter income. Frankly I find this very difficult to believe. As much as I love barter, there are some things that you have to pay for in cash. Taxes for example. The IRS won’t take a chicken as payment. Plus, trying to barter for absolutely everything you need would be a lot of work. I’m not convinced that one person would have enough time to in a normal work week to find all the trades they need to make it on 95% barter income. I’d also point out that because setting up a trade takes a while, even if you have enough time in your week, that doesn’t help you with an immediate need you might have in the next hour.
I just checked over my records for 2010 and it looks like about 35% of my income was on trade. I don’t know about you, but that number is a little scary to me. I love to trade, don’t get me wrong, but it is unsettling to me that I am that dependent on barter. It means I really need to be motivated to find good trades for things that my family needs. If I don’t find those trades, my income goes down substantially.
Of course, it’s not like I’m decreasing my cash sales in order to take on barter sales. All barter sales are in addition to the cash sales I was going to do anyway. So from that point of view, the percentage doesn’t really matter. Barter does not replace my cash slice of the pie. It helps me have a bigger pie.
I realize it’s a somewhat personal question, but I would be very interested if folks would post back a comment on this article and let me know what percentage of their income is in barter and how they feel about that number. Feel free to post autonomously.
2 thoughts on “How much is too much barter?”
love your articles, keep ’em coming!
I suppose on paper my barter income is probably more than 50% of total income. I agree the thought of “depending” on barter for that amount of income sounds scary—if you think it might just disappear someday. But i doubt that will ever happen. (When i had a “real job” i depended on that one company’s execs to handle 100% of my income, now THAT’s scary). I don’t like the thought of my “income” for IRS purposes, being largely in barter $. (Funny, the IRS calls it income, calls it regular currency, yet wont accept it as payment…. LOL)
I think the best thing barter has done for me, is that my standard of living has increased substantially. There are tons of things I’ve purchased on barter (spa services, expensive purses, gifts) that i would never spend my cash money on! In fact, my family vacation to Florida for an entire month this summer, is almost completely on trade. ALL my accommodations, large portion of food, and tons of attractions tickets — total value around $10K — all on trade. We’d never do that with cash.
I’ve also been able to “gift” my employees tons of trade items, bonuses that my small business would not have been able to afford to give in cash.
I’ve still got a lot to learn — like how to keep those cash fees down, and how to “exchange” dollars in different currencies — but i enjoy the thrill of a deal, so i’ll stick with it as long as the ride lasts!!
For “most” businesses, barter should not account for more than 10% of their gross-annual-sales. However, if I owned a movie theatre, and was running at 40 percent capacity, that changes things. I’d be elated with a 25% barter increase. I wouldn’t want that increase coming from several different barter companies though. Figure most exchanges charge about $288 per year in monthly fees alone, multiply that by 4 or 5 and it gets expensive. At the end of the day, whether a company is doing 2% in trade volume or 50%, it comes down to the ability of the trader to spend that currency on legitimate cash expenses and other fun stuff. Nothing wrong with using trade dollars on diamond earrings that on a cash basis you probably wouldn’t buy.