Bartering is defined as the exchange of goods or services for other goods or services, meaning no money exchanges hands. (The International Reciprocal Trade Association (IRTA) provides extensive information about trade and barter.) Hundreds of barter exchange groups operate in America, offering an efficient channel to barter for small business. Barter exchanges allow companies to have access to more goods and services in a quicker fashion. As expressed in “What They Still Don’t Teach You at Harvard Business School,” business guru Mark H. McCormack says, “I am convinced that most companies don’t maximize their barter possibilities. Instead of aggressively reducing costs by trading their services with those of their suppliers, they seem content to pay top dollar for everything.”
There are many acceptable and profitable ways to succeed in the business of bartering:
" Barter products that are overstocked or have an idle capacity to move goods and improve operations. This is especially beneficial if you have aging inventory or an outdated asset.
" Use bartering as a strategic tool to acquire needed services when capital is low or business is slow.
" Turn your excess inventory or services into print, TV, or other forms of media. Your company can maximize marketing and improve its bottom line while creating relationships with companies that can use your goods or services in the future.
Of course, bartering has its downsides. For starters, bartering does not offer a tax loophole to avoid taxation. According to the IRS tax website, “Income from bartering is taxable in the year in which you receive the goods or services. Generally, you report this income on Schedule C, Profit or Loss from Business, Form 1040.” Also, not everyone you barter with will possess the same business ethics or sense of time that you do. Avoid bartering with companies in financial trouble, and when possible, create an agreement prior to exchanging any goods so both parties are protected and responsible for their end of the bargain.