Written by, Samuel K. Burlum, Investigative Reporter and author of The Green Lane, a syndicated column Published on www.SamBurlum.com
Source: When cash is tight, and budgets are limited, what are Small Businesses to do when trying to accommodate all of their growth needs, while also trying to grow their client base? More companies and small businesses are considering the usage of Barter to help them with these shortfalls.
Small businesses life blood relies on cash flow in order to support its needs and make a profit for its owner. Not all businesses are so lucky to have constant clientele to provide ongoing patronage that will allow for a business to experience growth or advancement. Today’s risky economic climate has curbed many banks from funding small ventures due to the extremely high amount of potential risk of a business defaulting on their loan. Business owners must rely on other avenues of funding their business while conserving their cash for rent, utilities, inventory, and payroll.
Businesses can enjoy the many benefits in bartering with one another, when addressing growth solutions for that business. Businesses can target needs in the areas of marketing, site renovation, advertising, meals and entertainment for events, and other critical professional services using barter. Cash conservation seems to be at the top of the mind awareness however there are several other benefits to having a business to business barter relationship.
Barter income is treated just the same as any cash income, and barter can be used as a marketing tool. Most barter platforms, like Badger Barter, will provide for you at the end of the year a 1099B, which will reflect all the sales you have made using the barter system. Barter purchases which are tax deductible when using cash to make that purchase, are also tax deductible when purchased using trade credits.
When a business signs up for a barter system, they are usually interviewed by a Trade Consultant, whom helps you review all of your spending habits and your future sales projections to see which other businesses would be the right trade partners in the barter system. Even larger companies have begun to adopt bartering. It is estimated that over 65% of Fortune 500 companies engage in barter in one degree or another. Some barter platforms even allow you to apply for a line of credit, so your business has an opportunity to get the things it needs before it opens its doors to the public.
Business to business barter allows for each business to build a strong trust and long term relationship with one another. This new brand loyalty comes from a place where both parties mutually respect each other’s products/services, and understand how to properly engage in the barter platform. Both businesses are trying to reserve their cash, yet they are both willing to borne services that help each other grow. Business to Business Barter builds something that most cash exchanges can’t, and that comradery.
In an environment where it seems there is a cash register on every corner, businesses which offer barter and trade, can outlast businesses that offer the urgent “sale.” People who practice commerce with barter understand the importance and value brand loyalty, and would rather work with a fellow business that accepts barter, than one that is only about the hard cash in the till.
Businesses that offer barter often can have a habit of referring other businesses to the same client. Barter alliances are made when a client of one service is looking for another niche service provided by a similar type business. This usually happens under normal circumstances between attorneys that practice different areas of law; or physicians that recommend their patients to a specialist, but with barter something else takes place.
Businesses begin to work together to keep the wealth within the community, rather than see the potential customer head outside the network. The dog-eat-dog competition that occurs has a tendency to slightly simmer, knowing that all of the businesses within the barter network all have similar objectives. So businesses begin to work together in preserving cash assets; and begin to realize the true value of each other’s expertise when barter is in play.
Most barter platforms do limit the number of businesses within a specific category, to prevent “stacking” so businesses within the barter system have an opportunity to flourish. These exchanges are promoting their barter members, since participation is not always free. Barter trade platforms do charge a small fee for the services they provide, which sometimes can be paid with the barter credit itself. Usually these fees are minimal and are aimed at providing a support staff that is there to keep the barter network full of viable barter choices.
Samuel K. Burlum is an investigative reporter who authors articles related to economic development, innovation, green technology, business strategy, and public policy concerns. Burlum is also a career entrepreneur who lends his expertise as a consultant to start-up companies, small businesses, and mid-size enterprises, providing advisement in several areas including strategic business planning, business development, supply chain management, and systems integration. He is also author of The Race to Protect Our Most Important Natural Resource-Water, Main Street Survival Guide for Small Businesses, and Life in the Green Lane-in Pursuit of the American Dream.