Bartering is nothing new to bootstrapping start-ups. Small firms trade services or products with each other, which allows both to preserve their precious cash flow.
The recession has increased interest in bartering as a bootstrapping strategy for entrepreneurial businesses of all sizes. Out of the increased demand for bartering opportunities comes growth in businesses that offer a more formalized barter network.
From the Wall Street Journal:
Typically, a small business sets up an account at a barter company, similar to a checking account at a bank, for a one-time fee. “Trade dollars” earned for services rendered are deposited into the account and can be spent on any product or service in the network. Companies regularly find others willing to barter via the barter site’s online directory of services, email newsletters, referrals or by contacting a firm’s account manager.
On top of the setup fee, both parties pay the barter company a transaction fee of about 5% to 6% on each deal.
I think bartering is the way to go during these tough economic times. There is this cool website called FavorPals, http://www.favorpals.org, where one can barter services for services or items. The goal of this site is to promote “a world without money”. It is safe and secure and very easy to use. I have had good experiences using it. What is even more wonderful about it is that it is a site only dedicated to bartering and there are no fees or anything of the sort. It’s not only geared towards one on one trading but also organizations like charities can participate as well. It’s pretty much a 21st century twist on the ancient practice of bartering.
Here’s my dilemma on bartering – taxes!
The IRS says in their publications that the fair market value of the barter exchange that the barter is considered taxable income. (Arg!!)
Does anyone think that they (the IRS) will ease up on this income reporting requirement during this downtime in the economy?
It is just rough out there…businesses need alternatives…
We launched our barter exchange last month!
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Great article! Things are a little tough out there, but thank God for barter. I’m with one of the better barter cos out there: Merchants Barter Exchange. I like them most because they actually work. I’ve tried itex and ims and they always wanted more for the services, or part payment in cash, which didn’t work in my favor. I left them both with a very large balance I could not spend. I have NONE of those problems with Merchant Barter Exchange(http://merchantsbarter.com)
Jack, I found your comments interesting – my situation is the absolute opposite – I have a LOT of barter $’s with MBE and have been actively (calling my MBE broker weekly for new contacts to purchase from) and I cannot find any of the products or services that I need that are willing to do any work with MBE. I only get a couple of names and phone numbers each time I call or e-mail MBE and then I can’t get more contact info until I tell then what happened with the names they gave us (which has been they (“MBE members”)are not accepting new MBE work anymore). So if there is any way you can help me find businesses in MBE that I can do business with – I would be very grateful! I am currently seeking to have a web site developed (e-commerce). I hope you or someone else on this list can help me out with some contacts. I am also interested in services that can be done without living in the same area -either via internet or phone.
Sandie, I’ve not had any problems. I’d advise you to be persistent with you broker, they have always come through for me. I’m sure if you are a prompt payer and are in good standing they will get you what you need. Obviously I cannot give you any client information, as that is against their policy, I don’t want to lose a good thing here. Hope that helps.