Benefits of Bartering

If you're like most small business owners, you know where every penny goes. You don't have a lot of extra cash floating around, even for necessary purchases. But that doesn't have to slow you down. Barter -- the direct exchange of goods and services -- can be an excellent way to get what you want while increasing the visibility of your business.

According to the U.S. Department of Commerce, barter in its various forms accounts for about 30 percent of the world's total business. In the U.K., over 50,000 businesses actively use organized barter to supplement their cash transactions.

Bartering can benefit your company in many different ways. It can help you save cash on capital expenditures. It can help you advertise for new business. It can increase your sales by putting excess inventory to work -- which means your business becomes more efficient. Through barter, you can often obtain goods and services at better discounts and on more advantageous terms than you can with cash.

If you'd like to give barter a try, there are several steps you should follow.

First, determine what your barter leverage is by assessing the market for the product or service you wish to trade.

Next, draw up a list of the goods or services you need or want for your business (such as computers, photocopying equipment or cleaning services). Then approach the companies that provide them and propose a direct exchange of your goods or services for theirs.

Be sure that you and your trading partner are bartering at the same retail value level. You don't want to trade your goods at wholesale while the other guy is charging you a retail (or marked-up) price.

What if the company whose goods you want isn't interested in what you have to trade? Find out what the company does need, and trade with a third party to obtain it.

It may not always be necessary -- or even desirable -- to barter for items whose monetary value equals that of the items you have to offer. Depending on the perceived value of the goods or services and the margins you operate with, you might end up trading significantly higher or lower.