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About The Author
Kim Phillips is an independent marketing consultant specializing in branding, communication strategy, creative writing and design, online content, email marketing and social media.
Why bartering is a really bad idea.
Posted in Business Practices - 1 Comment
Trade your massage therapist for an hour of counseling? Do the books for the guy who cuts the grass around your building? Exchange legal advice for a new website? At first blush, bartering professional services may seem like a smart idea: no cash required, and Uncle Sam is none the wiser. Here are some reasons it can be a very bad idea.
People value what they pay for. There have been numerous marketing research studies showing that people will often be more apt to buy something at a higher price than the identical product at a lower price. If you want to get rid of an old sofa, you could donate it to a nonprofit that will come get it, or (depending on your zip code), you could put it at the edge of your yard. Don’t put a “FREE” sign on it or it may sit there; put a price on it, and it will disappear right away. See more about this weird psychology at the “Getting Rid of Things” blog. If something is free, there’s a reason, and it’s usually not a good reason.
You’re worth more than that. Engaging in long-term, habitual bartering is an admission that you don’t really know what you’re worth and don’t have enough confidence in the value of your work to charge for it. You may not have “hard” costs to cover, like materials or the salaries of other people, but you put a lot of time (and perhaps some very expensive education) into gaining your professional skills.
Bartering puts you at a disadvantage. It’s hard to hold a vendor’s feet to the fire on the quality or timeliness of work if you’re not writing them a check. Bartering sets up a squishy, unmeasurable situation with not enough consequences for a bad job. You may think you’re getting the long end of the stick, but you may need the stick for other reasons.
Uncle Sam does care. You’re supposed to report bartering situations on your tax return. According to Kevin Harris CPA, “Contrary to popular opinion, bartering is considered by the IRS to be taxable income. To report such a transaction, each party should invoice for their goods or services, based on normal billing practices. Each party would then recognize income related to the goods or services given, and recognize expense related to the goods and services received. It may be true that bartering is difficult to trace; in an audit, the IRS will look at your overall operations. Any goods or services you are making use of, without supporting documents to show how they were obtained, can lead to questions about bartering.” For more tax info on the subject, go to IRS.gov and type “Bartering Tax Center” into the search field.
Don’t be that guy. Refusing to stoop to bartering doesn’t mean you shouldn’t share some love with your business buddies. It may not be worth the time to set somebody up on billing for a 10-minute consultation. If they ask you for something, either tell them your rate or just do it and hope they’ll return the favor. Rather than jump in with “hey, let’s barter,” make some good commercial karma. If there has to be some quid pro quo, ask for a mention in the recipient’s blog or a link on their website.
What are your thoughts on bartering?
Tags: bartering, bartering professional services
One Response to Why bartering is a really bad idea.
Posted On 2010/06/22 at 8:24 pm by Aileen Katcher :
Some 25 years ago, Holder Kennedy representated Barter International – a sort of barter bank. As I recall, we could put in x hours in pr consulting and get an equal amount of goods or services that another member put in. It was not successful long term.
When we started KVBPR, we adopted the policy of no bartering, for many of the reasons above. We are glad to trade checks with companies that we do mutual business with, but have stayed away from barter deals. Its hard to pay employees with bartered services.