As a kid, did you ever trade the sandwich in your lunch for a pudding cup? Or a duplicate hockey card for a player you didn’t have in your collection?
Children, adults, merchants , governments and professionals have been trading for centuries. Before there was currency, one could barter their six eggs for two loaves of bread, and street vendors could exchange goods with each other to best suit the needs of their business. While bartering as a standard practice left the marketplace for a while, it’s making a serious comeback. These days, we’re seeing massage therapists trading for legal services, plumbers exchanging work with dentists, web designers swapping for accounting software, and the list goes on.
And it’s no wonder.
Consider this: If you’re a business owner, you know how important cash is to your success. The old adage, “cash is king” rings ever so true for the entrepreneur. Preserving it, growing it, saving it… it’s all critical to keeping a business running smoothly.
At the same time, businesses thrive on the power of relationships. Building a network, cultivating referrals and creating positive word-of-mouth are important steps for any business owner looking to succeed in their industry.
While there are plenty of conventional ways to preserve cash and build connections, bartering is opening up new ways for business owners of all walks to do it all in a single transaction.
The Benefits of Bartering
Bartering takes place when two people agree to an exchange of goods or services without exchanging actual money. In the business world, companies, freelancers, contractors and independent professionals may trade work effort or inventory for things they need. By bartering, they can unload excess hours or product, receive a product or service that is of value to them in return, and preserve precious cash that they can spend elsewhere.
What’s more, businesses of all sizes are seeing increasing value in human-to-human exchanges that give rise to growing networks, increased referrals and a strong sense of goodwill among their contacts.
If you’re a business owner in Canada and thinking of getting into bartering, there are a number of companies that curate trades between businesses by matching them up either online or in-person. That means you don’t have to know or seek out other businesses who might be open to trading — you can let others do this legwork for you.
Tradebank is a Canadian multi-directional barter exchange that brokers the day-to-day trading of their 3,000 members. When companies offer up a product or service for trade, they earn trade credits to purchase what they want or need from thousands of businesses within the network. Because Tradebank brokers the trade, businesses don’t need to search for one-to-one trade relationships.
SwapSity, on the other hand, matches entrepreneurs, freelancers and start-up founders with fellow business owners to create mutually-beneficial barter arrangements. They have an intense focus on small business, and place a great deal of value on the human connections that are initiated with the bartering process.
Barter Network, First Canadian Barter Exchange, and Canadian Barter Services are just handful of other exchanges that curate trades for businesses.
On the Ground with Canadian Business Owners
Even with these networks in place, most bartering, it would seem, still comes about organically through the regular course of day-to-day business. In spending some time with owners of a variety of business sizes, models and offerings, we learned a few key tips about one-to-one bartering:
- “Make sure the business you’re bartering with values what you’re offering the way you value it.”
While this may be tricky in a service-based industry, take some time to explain what you’re providing, how long it takes to perform the service, and what kind of expertise is required.
- “Set some ground rules in advance.”
Outline — and document — the specifics of your barter exchange, and be clear about what you’re getting and what you’re giving. Otherwise, it could be easy for the trade to become imbalanced.
- “Only barter for things you want or need.”
For example, if you’re offered a $20,000 hot tub for a $10,000 project, it’s probably not worth bartering if you’re not in the market for a hot tub. Take the cash instead.
- “Barter with companies you know, or at least understand the business you’re in.”
There’s a fine line between giving away something for free and trading services. Businesses in your network understand what you do, and appreciate the value of what you do, making it easier to negotiate an exchange.
- “Be open to it.”
Businesses can flourish on reciprocity and goodwill, so you want to be open to some kind of exchange. Before you say no, carefully evaluate the value and the terms being presented to you.
- “Remember, it’s all about value.”
Keep in mind, there are intangible benefits to trading. It’s less precise than the six eggs for two loaves of bread example. Rather, the key word is value. Many business owners told us they would consider completing a project for nothing tangible in return if there is value in cultivating the relationship or referral.
If you’re like most business owners, you’ll embrace the opportunity to earn more, save more, or otherwise keep more cash in your business. At the same time, given the chance to build a new relationship, grow your network or generate a referral, you’re likely to get on board immediately. Whether you’re open to traditional one-for-one exchange or see the value in open-ended reciprocity, bartering is an interesting proposition that’s gaining traction in the business world. The great news is, if you’re curious about getting into the trade game, there are many forums available to help you facilitate an exchange; and chances are, there are businesses out there that want what you’re selling. Who knows? Your next networking event could turn into a swap of services and a whole new way of doing business.
Bartering by the numbers
Did you know… between 20% and 25% of world commerce runs on barter? What’s more, an estimated 65% of Fortune 500 companies barter, accounting for approximately $20 billion in transactions a year. And while bartering has been typically reserved as a practice among countries and corporations, smaller businesses are joining the trade game.
This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.