Boost Your Budget by Bartering

How to ensure your trade is a win-win.

Our business video service company has been approached on more than one occasion this year to enter into a barter agreement with another company. On face value, bartering seems like a terrific solution, a time-proven method of taking advantage of your strengths and trading them for a service or product that you need from someone else. However, barter agreements need to be evaluated by both parties to measure the actual value that it serves each company.

We were recently approached to provide webinar services for a niche financial industry magazine. The magazine is holding several conferences over the next eight months and wanted to exchange our video services for advertisements and exposure in their magazine and at events. In short, we would be listed as a sponsor on their website and receive a full page, four-color ad for each event that we broadcasted. In return, we would provide, free of charge, a webcast of their conferences.

Initially, I was very excited about the opportunity to gain exposure to a large, niche market. That was until my partner, a wise, experienced entrepreneur put the brakes on my enthusiasm.

I was blindly focused on having our company's name and site viewed by a large number of people. The cost to us was minimal. I was willing to volunteer the time, we had the equipment, the only out-of-pocket expense would be the fees our server provider charges us to broadcast. Was it this minimal fee that we would pay that bothered my partner? No. It was the fact that this magazine was providing exposure that we had no way of valuing. It sounds great that your company could be exposed to a readership of high-wealth individuals, but they may actually not be the ones who even care about hiring our services.

I held a lengthy conference call with the president and senior conference manager of the magazine to discuss our agreement. They began by explaining exactly who their magazine catered to: Wall Street CEO's, major corporations, and many others in the finance world. The president really tried to drive home how much the advertising would help our company. In short: we are a young company and couldn't afford the exposure they would provide us.

True. But the question for us became, do I care to expose myself to your readership? Is this the audience we want to reach?

Further, this agreement benefited the magazine greatly. They get a hassle-free broadcast with no out-of-pocket cost. Once we enter the agreement, they have no incentive to ensure we are repaid in new business resulting from exposure in their publication.

In the end, my partner and I met in the middle. We decided to charge the magazine our costs: transmission fees and labor. In our proposal we expressed our eagerness to work with them, but reiterated the fact that we can't put a concrete value on what we would receive. I explained that we would be happy to renegotiate the agreement after the first conference and magazine ad should we receive business to justify our donated time.

Here are a few key points to consider when weighing whether a barter is right for you:

Giving and Receiving

Try to put an actual dollar amount on goods or services traded. This will allow for a true apples-to-apples comparison as you weigh the fairness to both parties and will help you ensure that your company is receiving something of value.

Ongoing or One-off?

How long are you expected to receive or trade services? Shorter time frames are often better. The economy is very unpredictable right now, so the smaller number of out-of-pocket commitments you have, the more solidly you stand. Try the agreement out, but make sure both parties will walk away feeling that they benefited.

Uncle Sam Doesn't Barter

Check with your accountant to determine whether you must pay taxes on any services or goods you might receive from the barter.

Short Term Gain for Long Term Pain?

Don't be short sighted during these challenging economic times. If entering a barter agreement could sacrifice possible future vendor relationships, it may not be worth it. Think about how the barter will impact the company long-term and proceed accordingly.

Good Marketing Opportunity?

A barter could be perfect for both companies. If it is, consider creating a press release to send to local media that highlights your prowess for finding an opportunity in these tough economic times.

Richard Morris is a principal of WPRNY, a New York-based video production company that specializes in event and business videos. For more information, visit www.wprny.com.

Originally published Sept. 1, 2009

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