According to Dictionary.com to barter means "to trade by exchange of commodities rather than by the use of money." In other words, you trade your ability to design and build websites for something you need from someone else. I think the most famous recent case of a spectacular barter, was when Kyle MacDonald used Craigslist to barter his red paperclip for various things, ultimately getting a house.


I'm not saying that you can or can't trade your skills for a house, but that does illustrate the power of bartering. Bartering is a great way for small businesses to save money.

But bartering can have a negative side. If you're not careful you or your barter partner can feel short-changed, and this can lead to resentment. Plus, if you have an on-going barter relationship, and something changes it can often be difficult or impossible to renegotiate a new deal.

Benefits of Bartering

The most obvious benefit of bartering is that you don't have to outlay any money for something you already need. If your business is cash-strapped like most are, this can be a huge benefit. But there are other benefits as well. Here are some of the reasons you might want to consider barter:

• No cash outlay
  As I said above, this is typically the number one reason for using barter. If you don't have cash, but need something, making a trade can get you that thing more quickly.
• Barter can generate goodwill
  If you're working with someone who needs your services as much as you need theirs, this can be a huge boon to both of you. They might even become an advocate of your work and you of theirs.

• Get more than you otherwise could
  This is not to say that you should be trying to cheat your barter partners. No, it's that the best barter exchanges are when both parties feel they got a good deal. In this situation the material value is more than you or your partner would have been willing to pay in cash.

Drawbacks to Bartering

• Taxes
  Just because you traded for it doesn't mean the IRS doesn't see this as income. According to the IRS website: "The fair market value of goods and services received in exchange for goods or services you provide must be included in income in the year received."
• Bad will
  If you or your partner feels cheated, it can result in a negative spiral that's very hard to combat.
• Changing the agreement can be difficult
  If you set up a barter arrangement to do website maintenance and then a year later you raise your prices for non-barter customers, it can be very difficult to renegotiate that deal with your partner.

How to Barter Effectively

The number one rule when setting up a barter arrangement is to write a contract. Make sure that the contract includes:

• Time or money equivalents
  Detail how much your Web design work is worth, how much you'll provide for the exchange and how much the barter item is worth.
• Renegotiation dates
  Unless the contract is for a specific amount of design work (4 hours or 4 pages or 4 PHP scripts, etc.), you should include dates when the contract can be renegotiated. For example, you might set up a maintenance barter that you renegotiate every 3 months.
• Be very clear
  Put in the contract exactly what is and isn't included in the trade. That way, your partner can't come back to you in 2 months and say "but I did ____ extra so you should give me another month of maintenance."
• Know how much your work is worth
  If you don't know how much your work is worth, the barter agreement will skew very much in your partner's favor. And they won't want to renegotiate later when you find out.
• Talk to other barterers
  If your partner has other barter agreements going, try and talk to them. You may be very annoyed to find out that they're trading $9/hour off graphic design work for a different partner when they're only giving you 30 minutes free.
• Remember that bartering is not working for free
  And make sure your partner remembers that too. You don't want them to later tell you "but I thought you just liked building websites" when they charge you for something they were giving you for free.
• Check out your barter partner
  Make sure that the business you're bartering with is legitimate and looks stable. You don't want to build the 4 Web pages and post them live on their site only to find them out of business and unable to build you the business cards you need.

Finally, you should never feel obligated to continue a barter if it's hurting you or your business. Barters should be mutually beneficial, not one-sided. If you feel like you're getting a raw deal, talk to your partner. If they refuse to negotiate, then leave. It's not worth staying with a partnership where you feel cheated.