Bartering in the New Economy
Brilliant to Bust?
By Kelli Calabrese
The concept of bartering is not a new one, in fact its ancient and an original form of trade. I have done my fair share of bartering in the past and I view it somewhat like a marriage. It’s rarely ever an equal 50 / 50 split and as the seasons ebb and flow the values may shift. Over the years I have bartered services for things like accounting, catering, ad space and photography.
Recently I had a conversation with a savvy woman who has been a financial planner and visionary for three decades. She told me that in the not too distant future, bartering will be a common form of trade. Facing the fact that the deficit in 2020 is predicted to be 20 trillion dollars leads to me to believe she may be correct.
Last month I was speaking to a trainer named Sally who told me she had 30 clients in her boot camp program, but she was not making enough money. When I asked her if everyone was paid in full she replied a confident “yes”. I asked her to pull out her roster and go through each client one by one.
It turned out that 12 of the people in her camp were not paid, but were there on barter. A college student offered to baby sit her kids. Another said she would put a boot camp sign in the window of her business. Another offered her manicures.
As it turned out, Sally was not nearly taking advantage of all of the services. It added up to over 3,000 a month in lost revenue and when she looked at the value she was receiving the scales were sadly unfavorable. Clearly bartering can have its short comings, but there is an upside.
You may have heard the story of the 17 year old that started out with an old phone and bartered on Craig’s list for 2 years ultimately attaining a convertible Porsche or the guy who in one year and 14 trades went from a red paper clip to a farm house. Pre-schoolers naturally know how to barter at the lunch table, so how can this work for personal trainers?
The good news is that bartering when done right can be a valuable asset. Let’s face it; just about everyone wants what we have to offer – a fit body, longer stronger more energetic years and ultra health. Our services could be far superior when it comes to bartering – much like selling an air conditioner to a Texan in August.
With bartering services, there should be a start and end date as well as a mid point to evaluate if the relationship is working for both parties. Put an upper limit on the value of a service exchange and get the terms in writing. Exactly how many haircuts can you get for a month of training?
If you are making a net gain on your barter, that’s considered income according to the IRS. You and the person you are bartering with must list the market value of what you receive as taxable income. Exchanges require filing tax form 1099-B. On a positive note, you can list any expenses to offset some of its tax liability.
As with any decisions you make, you should have peace about them. It’s always a good rule to sleep on any important short or long term decisions. If you feel like a barter is not in your favor, don’t be afraid to say no. The best barter is when you both feel that you are getting the best end of the trade.