The Covid-19 pandemic has brought about many changes in our world. One surprising development is the sudden rise in bartering and trading in the business world. When money is scarcely traded for services, many people find themselves exchanging their skills and services for other’s work to even greater returns. They are discovering the power of bartering.
Bartering and trading aren’t unlike what many people see on personal ad websites like Craigslist and Facebook marketplace. People offer their goods and services in return for specialty service and work in exchange.
The power of bartering and trading comes with the increased value of what’s received back. Many people can offer their services at a reduced rate towards services they would have to pay a great amount of money for in return. This can be a win-win for both sides without the exchange of money. Let’s explore how bartering and trading works.
History of bartering and trading
Thousands of years ago before the concept of money, people were bartering their goods and services freely. A shepherd might trade a sheep and its wool for waxed cloaks for their family. The wool of these cloaks was made from the sheep the clothing maker cut from the sheep they acquired, spun, and woven into cloaks. Once these sheep began to age, they could be sold to a butcher in exchange for beef tallow that can be made into candles--a luxury at the time!
Even monkeys understand that act of bartering. The adage of, “You scratch my back, I scratch yours”. Sometimes these services aren’t mutual in value, either, as they are invaluable at the right times. One monkey might show another monkey which berries are good to eat in exchange for that monkey’s companionship and thus protection if danger would arise.
Nowadays, there are many skilled workers with marketable talents wanting to exchange their services, not for money, but someone else’s work and services. People are becoming highly skilled in specific talents wanting other highly skilled professional’s work without needing to exchange money.
Bartering Scenarios
Many might think of the adage, “Cash is king”. This is indeed true; you want services, you can always receive that service for the right price. However, consider a few scenarios where bartering for services can be a great idea:
A young health food startup company wants to spread exposure for their products, but they have a limited marketing budget. They’re willing to offer a sample kit of goods for exposure either in-store or online.
A gym is going through hard times, perhaps pandemic-related, and is barely able to keep the lights on. The owner knows once the pandemic is over their business will flourish with many people focusing on their health coming out of lockdown. They want to update their website to reflect their new attitude towards fitness and health, and perhaps better reflect the quality of their gym.
A junior web developer has some downtime and wants to work on a project to help develop their portfolio. Money isn’t an issue to them, but that experience is invaluable to their career aspects.
A senior web-developer is offered a job by a great company, but they had to pass. That employer asks them if they’d recommend anyone else to the position through networking. The issue: This person can’t remember someone who’s shown them great enough initiative to remember someone in particular.
Are you seeing the connections here? Let’s explore how each scenario can play out in terms of what kind of trade deals can be made through bartering.
Marketing and Exposure
If someone is looking to bring goods to market, they can offer a trade of their goods for exposure to the right customers. If the health food startup strikes a deal with the gym, they can offer their goods for free to see if the gym sells them well, and then offer reduced pricing for continued sales. In this way, the startup receives exposure that money cannot buy, and the gym can reap higher profit margins.
Trading of Service for Work
The gym is searching for someone who can update their website, which is a great marketing tool but lacks the funds to pay the thousands they were quoted from a business. They might have found a web-developer through a local barter exchange willing to do work for the exchange of services. They offer the developer a two-year membership at the gym, virtually free for the gym, for their website to be updated.
Trading of Service for Work
The gym is searching for someone who can update their website, which is a great marketing tool but lacks the funds to pay the thousands they were quoted from a business. They might have found a web-developer through a local barter exchange willing to do work for the exchange of services. They offer the developer a two-year membership at the gym, virtually free for the gym, for their website to be updated.
Use of Free Time as Advancement
The junior web developer, who previously worked on small projects in their introductory position, is contacted by the gym to refresh their website. It would be a big project that would look great on their portfolio, and they've offered a two-year gym membership on top of everything.
Networking Payoff
The senior web developer hears that his friend is refreshing a local gym’s website, and he’s doing good work. He remembers that the junior web developer was a great help to him on other projects and issues, and he’s thankful for the help--a free up-front barter. Because the junior web developer is showing promise on his portfolio, the senior developer suggests the company inquire with the junior developer for the position.
Tips for Bartering
Bartering and trading of services and goods can generate great value without exchanging money. Some points need to be kept in mind before you should start offering your services in exchange for work or goods.
Understand the Value of the Exchange
The biggest hurdle to jump over is how people should value their services and goods. If money would be exchanged, services could easily be valuated to the cent. Many professionals understand the going rates for their services and know they can receive those payments.
However, in a barter, this becomes rather foggy. Here are some steps to help guide you through understanding the value of what you offer:
- Research the going rates for your services and goods on the cash market and keep that in mind before you enter into a deal.
- If you are exchanging services that cost you time rather than money, how much do you value your time and effort?
- Consider the skill involved during the process. Your unique skill set can offer a greater return value unlike that of the market value.
- Additionally, demand can create a greater rise in the exchange rate during the bartering deal. The person you’re bartering could be willing to offer their services at a much higher value for your services.
- Determine how the services are exchanged, the contract, and the basis for the exchange. Often these services differ greatly in how much time they require, so it’s good to set a date of exchange.
Focus on Value, Not Money
One major thing to keep in mind as you barter is: Focus on value, not price. The cash market valuation is a great guide to understand how much your services are worth, however, it’s important to remember that you’re not exchanging money in these barter deals.
The value here means a personal or professional value versus monetary value. Your time, especially personal time if these service deals are in your spare time, is extremely valuable. Many people undervalue their time and effort because there’s no dollar-amount associated with it. Just because you’re not earning a check, doesn’t mean you should forget that your time can have greater value.
How much do you value that personal time? What are you willing to exchange for that time spent doing something?
Consider Using a Barter Exchange Network
Barter Exchanges are dedicated networks where people offer their services and goods in return for other people’s services. They can be invaluable to many professionals as they create an environment to easily find services to trade, offer contracts and binding agreements, and even help you prepare tax documentation.
Online Barter Exchanges operate in a variety of ways. Often there is a membership fee to pay to enter, monthly fees to pay for the service, and transaction fees to pay. However, they can be a great value as the services you receive in return can be of far higher value versus the cash market.
Local Barter Exchanges vary in how they operate, but they can help you network with professionals in your area. They can even create a circle of barter deals. This circle can be described as doing service for someone, then that person offers a service to someone else who then provides you with a service.
Keep Taxes in Mind
Despite the lack of cash exchange, bartering as an exchange of goods and services is still considered taxable in many countries.
The USA IRS states, “You must include in gross income in the year of receipt the fair market value of goods or services received from bartering.” You can read further through this link.
If you barter through barter exchanges, they can help you prepare the valuation of your services and some tax forms. If you do this privately, we suggest you file the appropriate forms to keep on top of your taxes.