I’ll Trade You

In Maestro’s Negotiations module, we discuss some of the myriad tools that are available to you during the process of turning prospects into clients. Assuming an opening offer has not been immediately accepted by the other party, concessions become a central pillar of the negotiation process. In fact, research shows that parties felt better about deals that included concessions as part of their processes than ones that didn’t. Today, we’ll talk about a particular kind of concession: bartering.

Bartering is something with which you’re probably familiar on a small scale. You might ask your super handy friend to help you assemble a piece of furniture and say, “Dinner’s on me.” You haven’t directly handed your friend money. Instead, you’ve done what Merriam-Webster defines as trading commodities. Your friend’s knack for house projects is a commodity. Pizza is a commodity. Deal: closed. Today we even have bartering apps. But what about bartering in a business context?

BARTERING IN THE BIG LEAGUES

According to an article in the Harvard Business Review, huge corporations, including Honda, Subaru, and Lufthansa, have all bartered. The article cites a finding by the International Reciprocal Trade Association (IRTA) indicating that more than 400,000 companies bartered in 2011. Is that still the case? On the one hand, according to the IRTA, the number of corporate barter companies has decreased in the past decade plus. Still, they say, “Despite there being fewer corporate barter exchanges in operation, the volume that the remaining corporate barter exchanges do annually is impressive—approximately 30% of industry volume.” And, according to the Barter Exchange of India, the COVID-19 pandemic raised the appeal of bartering.

Let’s take a look at one astounding example. In December 2021, Demi Skipper acquired a house. She didn’t inherit it from a family member, and she didn’t purchase it with money or even a mortgage from the bank. Instead, according to this CNBC article, she traded a trailer for it. The trailer hadn’t been hers forever either. It was the product of another trade, which had been the product of yet another trade. In fact, after seeing this TED Talk by Kyle MacDonald, Skipper had challenged herself to grow a bobby pin into a house via bartering. She tracked her journey on TikTok and Instagram. The CNBC article includes a detailed list of everything she bartered, and it’s honestly pretty impressive. A few of these trades surprised me (the Chipotle celebrity card for the off-grid trailer; the Ferla food cart bike for the 2006 Mini Cooper Convertible), but they highlight an important reality: a product holds different value for different people.

THE MAESTRO TAKE

Maestro founder and managing partner Will Fuentes told me he’s seen service companies barter quite successfully, trading the use of an enterprise’s product for an in-kind benefit. A small business can also propose a service in exchange for a membership or presentation opportunity. “Hey, give us a table at your conference,” they might say, “and we’ll create your marketing materials for the conference.” There’s a catch, though: it can be tough to agree on the value of a proposed good, says Will. Square’s analysis supports this finding: “It’s common for both parties to place a higher value on their own goods or services and a lower value on the other party’s items.”

Even this snag, though, doesn’t stop small businesses from bartering, according to the Entrepreneur Review; they’re all over it. One hidden perk of bartering, says Entrepreneur, is that it can introduce small businesses to customers they might not otherwise have encountered.

Whether it’s an individual in search of a house, a small advertising firm, or Subaru, bartering can be a legitimate and important part of making deals. If you had any doubt about its pervasiveness and value, just ask the IRS. They’ll tell you that you “must include in gross income in the year of receipt the fair market value of goods or services received from bartering.” So go get your house, your Mini Cooper Convertible, or your table at a conference, and let me know if you’re in the market for a never-used saucepan.

If you’re interested in a saucepan, please call Alicia. If you’re interested in our Negotiations module, click here or reach out to us at mastery@maestrogroup.co.