Why Bartering Doesn’t Work! 6 Reasons To Avoid Bartering Like The Plague

bartering

Oh, I know, I know: money is tight and if you swap services, you’ll avoid costly fees and get what you need anyway, right? Wrong!

As a business coach, I often hear dark tales of bartering gone wrong. In fact, it’s become part of my 7 Deadly Sins of Entrepreneurship. Avoid this move like the plague!

Advice to #Entrepreneurs: Avoid bartering like the plague! Click To Tweet

6 Reasons to Avoid Bartering Your Services

Bartering sets you on the path to ruin for the following reasons; it:

  1. Undermines your Value –My fave mantras is: “if they pay nothing, it’s worth nothing.” How do you charge what you’re worth when your current client is paying nothing? And, how do you later on justify your fees?If they pay nothing, it’s worth nothing Click To Tweet
  1. Moves You Down the Priority List – Somehow, your bartering partner places “paying” work above your needs and the next thing you know, your work is delayed.
  2. Less Than Stellar Service – The downhill avalanche exponentially builds so that late work turns into shoddy work. After all, you’re not paying for the work and have no right to complain, right?
  3. Eliminates Recourse – If you’re really upset about the untimely delivery of your promised service, what do you do? You can’t withhold payment because there isn’t any. And, if you’ve already delivered on your side of the bargain, what do you do?
  4. Plays Fast & Loose with the IRS – My CPA sources tell me that you’re supposed to report bartering as income, but I bet one of the goals of bartering is to avoid taxes! Clearly, taxes are outside of my core competency, but you go deal with the IRS.
  5. Ruins the Relationship – The poor experience of the business relationship often leads to the end of the relationship!

Let’s be clear: If you value your services and if you value the other person, you won’t barter. Instead, create a business relationship whereby you pay for their services and vice versa. I often smile when I think of 2 clients in particular: one $500 payment feels as if it’s gone back and forth 10 times!

BUT, we still have a great relationship. What’s your experience with bartering? Please share in the comments below.

7 Comments
  1. Great article. I’d be interested to hear your views on handling inquiries about pro bono work from non-profits. That could probably be a separate article, but sounds like some of your points here would apply.

    • Oh, thanks Craig. I think I will tackle pricing for non-profits. I get asked often to speak for free because it’s a non-profit, but I mention that the CEO still accepts a salary while doing good.

  2. Liz – I was curious about barter and spent 6 months with each of the 2 largest firms in the country. Tried one, then the other. Senior executives of the firms both claimed that sales training and consulting was a major need that was not being met.

    The truth was that 95% of the barter companies were small wanna-be-business-pros. Their first response to my services was to begin negotiating my fees!

    I thought the cool thing was that you can post online directly and through publications to reach all the barter firms. So you spend a lot of effort crafting ads and contacting your target market. NOTHING.

    I would point out that the IRS is closely monitoring these systems and they are all digitized now, so reporting trades as income is done cleanly and honestly. If an accountant thinks people do barter to avoid taxes they either don’t really understand it, or they are referring to one-off trades, outside the barter industry. This would mean 2 companies would have to collude to hide the transaction and with an IRS that has more than doubled in size to catch every penny they can, that’s not likely.

    BARTER NETTED OUT? IT WAS A BAD EXPERIENCE AND HUGE, MASSIVE WASTE OF MY TIME.

  3. Thanks, Dan for chiming it!

    I like that you mention the barter firms too as it’s not just face-to-face interactions,but exchanges that put companies together. Clearly, your experience was not positive.

    I too have been approached by these barter exchanges and have opted out; great input.

  4. Liz,
    Your summation is very on-target. Point #1 especially.

    I have looked at one of the barter exchanges at the request of a prospect but it seemed most of the businesses were pretty small and it would be too much effort to recoup our fees.

    • Interesting in that in ALL of the emails I received (most don’t post to my blog), not one single person chimed in on the success of bartering; food for thought.

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