The Five Most Important Things to Do Before Jumping Into a Bartering Arrangement

barter checklistBartering is the exchange of goods or services for the goods and services offered by someone else. Money typically doesn’t change hands, provided the value of the exchange is deemed equivalent. Bartering can be a good way to get experience when you’re just starting out, fulfill a need without a financial investment, expand your network and find new business.

While it can seem like an informal situation, there are potential damaging consequences that can occur if you don’t do certain things to protect the bartering arrangement. Here is a checklist of the most important steps you should take before beginning a bartering relationship.

Evaluate the Value

You want to make sure the arrangement isn’t lopsided, and that both parties are getting what they put into it. A mismatched barter can result in resentment, frustration and potentially even legal issues. To start, assign a dollar value to the goods or services that are to be traded. If there isn’t an even comparison, adjust the trade to make it comparable (i.e. trade 5 hours of a service A for 8 hours of service B).

Check References

Do your research into the person you’re considering bartering with, just as you would if you were hiring them to do something. Ask for references, check past work, dig into who they are and verify they have the skills and experience they are claiming. Just because bartering doesn’t involve money doesn’t mean it should imply discounted or less professional services, and you’ll save yourself a huge headache by verifying this in the early stages.

Use a Written Agreement

Again, just like any other business relationship, you should have a written agreement that explicitly outlines the terms of the arrangement. This is especially important when there isn’t a clear one-for-one exchange. Your agreement should outline the scope of the work on both sides, identify the deliverables, specify the duration or deadline for the work and spell out what happens if either side wants to end the arrangement before completion.

Keep Open Lines of Communication

Stay in the loop with your bartering partner to ensure that the trade is effective and that both sides are happy with the service they’re getting. If something isn’t working out as expected, or if you’re unhappy with the work you’re receiving, speak up and work toward a resolution. It’s also a good idea to schedule regular check-ins and milestones to make sure the bartered services don’t get dropped below paid work and forgotten.

Don’t Forget About Taxes

The rules for reporting barter transactions may vary depending on which form of bartering takes place and where you are located. According to the IRS, in the U.S. barter dollars are identical to real dollars for tax reporting, so you need to treat barter income as you would any other business activity. Keep good records and consult an accountant if you have questions or need advice.

Do you barter your services? What advice do you have?

Image credit: dlnny

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  • Lydi

    Thank you for the great tips, I should really keep that in mind for the next trades =). I barter since 1 year and saved so much money with it. I can highly recommend the site http://www.barterquest.com, because of the point system you can evaluate the value and every trade is fair. Above all it’s free and you can trade real estate there! Try it and get rid of your old stuff or swap houses for vacation!

  • Lauren @ BizX

    Thanks for a great post, Alyssa. Many of these problems you talk about (evaluating the value, using a written agreement, reporting for tax purposes, etc.) can be eliminated by bartering through an organized trade exchange, such as BizXchange (where I work). Bartering through an exchange simply makes the barter concept more powerful because it alleviates many of these problems associated direct one-to-one barter, including finding someone who has what you want and wants what you have at the same. It allows you to trade with thousands of members in your area who don’t necessary meet this “double coincidence of wants” situation. And it also makes it much safer.

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  • Robert

    There is an International Barter Co that Trades with around 70 000 members world wide. Bartercard started in Australia and now trades in 9 Countries . I am under the belief Bartercard is the largest organised trade bank in the world trading over 2Billion a year ( even bigger than any in the USA? ).
    If you go to the site barternews.com or barternewsweekly.com most of the worlds different organised trade banks are listed .
    If you want to consider bartering ,Barter with a card trade banks provide so as to keep your trading secure and accountable. Do your homework ,many of these smaller so called trade banks disappear overnight ,set up by people who have no idea (greedy?). There are plenty of old and established trade banks around ,I suggest you do not pick one with less than 600 members so as to have a variety of trading opportunities (find the biggest one local to you ,safest will have min 8to10000 members).
    If its free ,believe me its going to be risky .Expect to pay a small commission to transact with any credible trade bank and an upfront investment to join. The benefits are incredible and SME’s run by smart people have transacted millions and expanded their SME’s beyond expectation and into new markets .Most will offer you an interest free overdraft to get you started ,used wisely how can you go wrong? You should have a look at the web site bartercard.com . I admit I work at Bartercard on the sunny Gold Coast in Australia (you can find me at the South Gold Coast office if you need further barter education).
    Prosper and grow old ,enjoy every obstacle as an opportunity to learn.
    Yours in trading
    Robert