How to use Barter in Your Business

How to use Barter in Your Business

Awhile ago, fellow writer Peter talked a little bit about barter, and how to use it when a client has no budget, as well as a few other tricks. We always think money makes the world go round, but if you're working with an individual, stand alone businesses, there's a lot more than money to work with. I've done quite a bit of bartering in the past year, and there's a few steps to make sure it's a win, win situation for both sides.

1. Determine the Value: This is the biggest portion of what the barter will consist of. Things with an intrinsic value typically don't work well in a barter situation. This intrinsic value on your side can work in your favor if you play it right. If you are shooting for a client that would add to your portfolio, that is worth far more than the items you'd be exchanging. The reality is, items and services that have a set price are the easiest to barter with. If you are working with a client with a set monetary budget that doesn't match your fee, substitute the rest with barter that equals your full fee. This is great, especially if it's something you plan on buying down the road.

Example: We recently bartered a full wedding for design services. Over $6k worth of services. We agreed to this because we believed it was worth the value of the services exchanged and they were things we needed. We are getting ready to launch three new websites, and also needed client print correspondence. These were things we could have done ourselves, but felt that the flow with our current brand was imperative. We had worked with the designer on our previous brand, and he approached us about the barter because he was getting married and knew we were in need of the other services. The key was that it is a wedding we are extremely excited to shoot. If it was a client that we weren't excited for the wedding, the barter would not have been worth the same amount intrinsically and worth the monetary exchange.

2. Timing: This is a touchy subject for both sides. In the wedding industry all money is received prior to the wedding date. Ninety-nine percent of wedding photographers do this, it's nothing unusual. So if we were looking to exchange services, we'd expect whatever we were to barter, to be received in full prior to the wedding. In the case of some services, it might be worth more to the other party to do half prior and half after. This is all dependent on each party, and is a case by case basis. 

In our wedding that we bartered, all the design and logos that we have bartered for are due before the wedding. We typically work with a three payment system with our clients. So if you are working with a deposit, you need to figure out if the deposit is worth waving. In our typical case, when we get a contract back, the deposit is due at the same time. In this case we did not put an immediate date on the deposit that we usually do. But, there are still three exchanges of goods, all prior to the wedding.

3. Contractually Sound: Your contract states a money for goods and services. Set up your barter contract with your lawyer. You don't need to have a different contract drawn up each time. Get a general contract that allows you to swap out the goods and monetary value. In this case, you also need to have the monetary value outlined in the contract should the other party not deliver. They should be responsible for the full fee, if they are to back out on their end. It would forfeit the barter on their side.

Our contract for barter, replaces the payment system as a barter system, with dates that the items are due, just as if it were a monetary payment. There is also a paragraph that outlines what were to happen if one client reneges on their portion of the agreement.

4. Join an Organization: This is not a must do, but there are organizations such as ITEX, IMS, and the IRTA. There are also area specific barter organizations. In Maryland and Virginia we have Barter Systems Inc. Do a bit of research on the organizations and see if they can help you. If you already have a couple companies you would like to barter with, start a conversation, the worst they can say is no.

We are not part of an organization, due to the fact we do a case by case basis. If we were to start building a house, or start a venture that we would need an influx of services, we would join because it would be beneficial for us to save the money we would other wise spend on those services.

5. Think Outside the Box: I know a lot of photographers barter sessions with each other. Which is an easy way to get your own family session, free of charge. But what if you need clothes, a hair cut, or even landscaping work? Barter! If it's a company that needs an updated set of photos for their website, outline it to them! Offer the services in exchange for the goods. Barter obviously doesn't pay the rent, but it can help in a multitude of other cases.

Last year, I traded photos for a crossfit membership for a set number of months. Which would have been almost $800 out of my pocket. In that case they approached me since I worked out there, and offered monetary compensation, in return I offered up the barter.

There are people out in the world who live 100% off bartered services. Tap into other things that you might also do, whether it is graphic design, web design etc. You might specialize in weddings or commercial photography, but you can still barter head-shots to a law firm in exchange for contract services. Be sure to check with your accountant on the taxes.

I'd love to hear some creative ways that you've used barter in your business! Post them below!

Sarah Williams | Instagram | Twitter | Facebook

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12 Comments

Be very careful to keep good records for tax purposes. Tax Evasion charges can be serious and bartering is too often seen as a way to evade paying taxes - a crime.

Sarah Williams's picture

We do. Everything is in our accounting. It's all documented, and we pay taxes on it all.

James Nedresky's picture

In my experience, I've found that it's not a very good idea to barter dollar value for dollar value, for example a $5000 cost of what someone might provide does not always equal $5000 of what the barterer might provide. Certain individuals set a very high price on their work only because the market will bear it. Others might not have that luxury. Leave the market dollar value out.

Sarah Williams's picture

Which is why it's not a common thing. You're typically bartering with people that you know their work or services.

Aaron Brown's picture

Great article, Sarah! All of my tattoos over the last 4 years have been bartered for photography. It's been a win-win. I get amazing ink; they get great portraits of their staff and photographs of the shop for website / social media use. Plus, this particular form of bartering has formed lasting personal and business relationships for us with many networking opportunities.

Also, check with your local income taxes laws.

It's not because you bartered 6k$of services (and provided for 6k$ of services) that "the man" will let you go easy.

Imagine you shoot a SUPER expensive wedding, and the groom builds you a house in exchange.... (exageration I know!!). You think the income guys won't come knocking? think again...

Great original article though!!

Sarah Williams's picture

Yea of course. I just don't mention taxes at all because I don't need someone accusing me of giving bad tax advice. Which, lets face it, someone on this forum probably would haha.

Screwed if you gave advice, screwwed if you don't.

The internet is a wonderful place. ;)

Peter House's picture

Great advice. :)

I love bartering if it's money I would have spent anyways.

I'm going to weigh in on the tax situation since I've been in business accounting for the last 10 years (though this is NOT tax advice, consult your local accountant, etc).

When documenting your bartering, you need to consider the IRS, whoever collects state income tax which varies by the state, and sales tax which varies by state and county. As far as the IRS is concerned, you have to document what you receive as income. However, these dollar amounts are really up to you within reason. I deal with construction companies and people barter all the time, and it's never a dollar for dollar exchange as if they were charging the general public. That's ok. You're allowed to give a discount (and when you discount services and do freebies, you can claim that on your taxes too... following certain "rules"). Unless it's something ridiculous, like as mentioned, bartering photographing a wedding for building a house. A dollar amount has to be assigned though. In my opinion it is better to use the dollar amount of the party who has the "fixed" costs to CYA, like if you were bartering photography for a gym membership that is the same cost to all members. If you use a good bookkeeping software, like QuickBooks, barter is a form of payment so it's very easy to keep good records. Really, at the end of the year (and depending on your legal structure), it washes out for the vast majority.

Bartering itself will not trigger an audit, however artists are audited more often because Uncle Sam wants to make sure we aren't trying to write off our hobbies. Keeping good records just protects you in case of an audit.

steven spaulding's picture

only barter i've done so far, is a few hair cuts in exchange for a few facebook photo's for a friend.

Deirdre Ryan's picture

I bartered with my eye doctor for new contact lenses and sunglasses, worked great for us both.