Bartering is bad for business.
I will even go as far to say that bartering only works when your business has no money and then it becomes a self-fulfilling prophecy.
You exchange service for no money and thus the cycle of free or no money continues. I wrote about Why Free is Too Expensive years ago, it has been shared hundreds of times and has resonated with many people yet over and over again I see people try to circumvent paying for services when they are trying to grow their own business.
While this may work in a one-off situation, it is not a habit you want to employ in your business. I believe it can be extremely harmful to your business and that you might not even understand why.
1. Bartering won’t put any money in the bank.
When you barter there is no exchange of money. In business, cash is king. If you don’t have any cash in the bank, you are limited by what you can do with respect to the growth of your business. All decisions are governed in business by money.
2. Bartering won’t equate to any sales volume on the books.
When you barter there is no transaction on the books. Usually, because neither party has any money to exchange. This is harmful to your business because it devalues the sales you have done in your business and does not reflect the actual volume of work done.
When you go to the bank and you want to get a credit card or a line of credit, the bank wants to see your business financials. If you barter, your financials will be skewed and your sales will be lower than they should be, and you will be cash poor. The bank is not going to give you money.
4. Bartering won’t help make your business scalable or “sale”able.
When you have a business that you want to scale or sell, you need cash flow to do so. If you barter you cannot measure the growth of your company accurately. Therefore you cannot value the business appropriately, making it much harder for you to put a valuation on your company and sell it. If you ever want to have a solid exit strategy you need to focus on the numbers in your business, and when you barter there are no numbers on the books.
5. Bartering doesn’t pay your OPEX or your team members.
You need cash to pay the bills, and money to pay your employees. When you barter you minimize your cash flow, and your cash position making it harder to transact what should be transacted in your business.
Final thought – really successful people don’t barter products and services. Successful business people look at the financial aspect of their business on a regular basis and make decisions based on what is right for the business, not what feels right for them in the moment.
Bartering happens from a place of scarcity. It rarely works and all it does it attract more people to you who don’t have money to pay.
I am all for reciprocity in business. I like to do business with my clients and when I do, it is all above board, and on the books. Remember, if you are just trading four quarters for a dollar, you don’t have a real business. You have a hobby.
Not comfortable with the numbers and still don’t get why managing the profits in your business is the first step to creating a solid business foundation? You may want to consider joining Profit Pods. A one-on-one coaching experience focusing on exactly what you need in your business in a group environment so that you get a community of support too.
Tell me, how do you handle it when someone asks you to barter your products or services?