In Part 1, I talked about why trading services can bite the big one. But, in case there is someone you really do want to trade services with and you feel good about it (it can happen), I'm going to share some tips on how to do it right.
How can you go about coming to an agreement with this person, so that you are not only protecting yourself, but also your relationship from falling apart at the seams? Here are a few ideas:
Only barter if you have some down time to share.
You have to put real time in to provide a service. If your business is operating at near or full capacity when you enter into a bartering agreement, you will have to postpone or turn away new business. You could end up disappointed with the arrangement, especially if you have to forego cash sales to fulfill your end of the bargain. If you don't have any down time to spare, you may want to seriously consider skipping the bartering process altogether and just stick with paying clients.
Only barter for business supplies or services that you really need or value.
Think about it… you're going to be giving up your valuable resources – time and energy – so make sure you are receiving something of value in return. Entering into a bartering agreement with a "Sure, why not?" kind of attitude is playing a dangerous game. You may end up feeling resentful of the drain on your time if you don't truly value what you are getting in return.
Always have a written agreement.
Even though there is no money exchanging hands, an agreement is still a necessity. This agreement should include the following:
a. What is expected of each of you
b. What the deliverables will be
c. How much time each will take (i.e. a timetable for both of you)
d. How much each service is worth (exchange equal value for equal value)
Keep careful records.
Did you know that the IRS requires everyone to report the value of goods or services received in bartering transactions? Bartering works best when you exchange business goods or services for business goods or services (bartering for personal goods or services is not tax deductible). In this case, you won't be taxed on the value you receive since it's a business expense that you deduct. One way of handling this is by sending out an invoice to your bartering partner, billing them for the value of the services you've provided, then deduct the value of the goods or services you've received on the invoice, until it shows a zero balance.
If you have a contract or agreement, send the IRS and your bartering partner form 1099B at the end of the year to report the value of the trade. If you've conducted the trade without a contract, you may have to fill out a 1099-MISC.
Treat your bartering client the same as you would a paying one.
Always do your very best work (it goes without saying)! Even if the bartering client never becomes a paying client, the business owner of the company will become your biggest fan, provided you offer exceptional value to them. Word of mouth is still one of the most powerful marketing methods for building your business.
So, you're probably wondering whether the above situation actually happened to me. No, it didn't. But similar situations have, so I've changed the details to protect the innocent. Personal relationships are extremely valuable, and it's such a shame when business messes everything up. Actually, business isn't the culprit here — human beings are. Our #1 job as humans being designers is that of communication… so, let's do it the very best way we know how, by getting every little detail ironed out right from the beginning!
Do you have any bartering stories to share?
PAMELA SAXON helps those in arts and entertainment visually express themselves through integrated marketing, as well as helping them to get organized in their social media efforts. You can find her on Twitter, and on Facebook, or sign up for her newsletter here: www.saxondesign.com.