by Brad Mix | May 17, 2023
Bartering has been around for centuries, and in today’s modern age, it has evolved into barter exchange programs for small businesses. Barter exchange programs are a way for small businesses to trade their goods and services with other businesses without the need for cash. These programs have become increasingly popular over the years as they offer many benefits to small businesses, but there are also some downsides to consider.
How it works
Barter exchange programs work by creating a network of small businesses that agree to trade goods and services with each other. A business can offer their product or service to the exchange program, and in exchange, they receive “trade dollars.” These trade dollars can then be used to purchase goods or services from other businesses within the network. For example, let’s say a small business that sells cosmetics joins a barter exchange program. They offer their cosmetics to the program and receive trade dollars in return. They can then use those trade dollars to purchase other goods or services from other businesses in the network, such as marketing or accounting services.
Top barter exchange companies
There are many barter exchange companies available to small businesses, but it’s important to choose the right one for your business needs. Each of these companies has its own strengths and weaknesses, so it’s important to research them and determine which one is the best fit for your business. The following are some of the top barter exchange companies to choose from:
- International Monetary Systems (IMS): provides a platform for businesses to trade goods and services with one another. They charge a membership fee and a transaction fee based on the value of the trade. https://www.internationalmonetary.com/
- Bartercard: a global trade exchange that allows businesses to barter goods and services with other members. They use a digital currency called “Trade Dollars” to facilitate transactions and charge a transaction fee based on the value of the trade. https://www.bartercard.com/
- BizExchange: a bartering website specifically for business-to-business goods transactions. They allow businesses to buy and sell goods using a digital currency called “BizX Dollars” and charge a transaction fee based on the value of the trade. There is no membership fee or monthly fee, but they charge a percentage of the value of each transaction to cover overhead costs. https://www.bizx.com/bizexchange
- The Barter Company: facilitates trade between businesses. They charge a membership fee and a transaction fee based on the value of the trade. https://barterco.com/
- ITEX: provides a platform for businesses to trade goods and services with one another. They charge a membership fee and a transaction fee based on the value of the trade. https://www.itex.com/
- Barter Network Inc.: helps businesses move unsold or overstocked products by giving them access to a platform where they can trade their goods for those offered by another company. They charge a membership fee and a transaction fee based on the value of the trade. https://www.barternetworkinc.com/
Benefits and Downfalls
There are many benefits to participating in a barter exchange program. Below are a few benefits to consider when deciding whether to participate in a program:
- It allows small businesses to conserve cash: instead of spending cash on goods and services, they can trade their own products or services for what they need. This can be especially helpful for businesses that are just starting and don’t have a lot of cash flow.
- Participating in a barter exchange program can help small businesses expand their customer base: when a business joins a program, they become part of a network of businesses that are looking to trade. This can lead to new customers and increased exposure for the business.
- Bartering can help small businesses build relationships with other businesses: by trading goods and services, businesses can create partnerships and collaborations that can lead to future business opportunities.
As many benefits as there are, we also have a couple of downsides to also consider:
- Bartering can be time-consuming: it takes time to find businesses that are willing to trade, negotiate the terms of the trade, and then complete the trade.
- It can be difficult to determine the value of a trade: unlike cash transactions, which have a set value, bartering can be more subjective. It can be challenging to determine the value of a product or service, and this can lead to disagreements and disputes.
What percentage of business should a company barter?
The percentage of business that a company should barter depends on several factors, such as the nature of the business and the amount of cash flow they have. Generally, most experts recommend that businesses should barter no more than 10-15% of their total sales. Small businesses with no employees that provide services are better suited to a have higher percentage of barter sales.
Tax Implications
It’s important to note that bartering has tax implications. When a business trades goods or services in a barter exchange program, it’s considered taxable income and must be reported to the Internal Revenue Service (IRS). Businesses must keep records of all barter transactions and report them on their tax returns. It’s important to consult with a tax professional to ensure that all bartering transactions are reported correctly.
Barter exchange programs can be a valuable tool for small businesses, allowing them to conserve cash, expand their customer base, and build relationships with other businesses. However, it’s important to carefully consider the benefits and downsides to choose the right network that best fits the business’s needs. Each of the barter exchange companies mentioned offers unique features, benefits, and fees that businesses need to evaluate before deciding.
Brad Mix
Consultants, Growth Acceleration Consultants, Manatee, Mix, SarasotaSpecialty: Capital Access, Startup Brad Mix has more than 20 years of experience in the financial services industry and as a business consultant. Prior to joining the Florida SBDC at USF, Mix provided consulting services to more than 2,500 businesses and assisted business owners in securing more than $100 million in capital and $60 million in government contracts. He has extensive experience with SBA loans, including 504s, Community Advantage loans, and microloans. In addition, he assists business owners in preparing business plans, financial projections, profitability improvement, business acquisitions, business valuations, marketing and capital solutions. He joined the Florida SBDC at USF in April 2020, after spending 20 years as a consultant and satellite manager for the Coachella Valley SBDC, located in Palm Springs, Ca. In 2005, he was awarded the California State Star Award by the California SBDC Network. He is a certified Associate Business Continuity Professional (ABCP).