Wednesday, June 22, 2011

Barter or Buy? When Do you Draw the Line?....

Life as an Entrepreneur: Barter or Buy? When Do you Draw the Line?
Written By: LaNisha Rene CEO of LR Consulting Enterprise, LLC

Economics describes a “Barter” as an opportunity cost (the cost of any activity measured in terms of the best alternative forgone. The sacrifice related to the second best choice available to someone who has picked among several mutually exclusive choices. It has been described as expressing "the basic relationship between scarcity and choice). When you start or re-vamp your business, it’s important to understand that you will NOT get paid for everything you do when pertaining to your affiliations, branding, marketing, exposure, clients, sponsorships, or partnerships. Although sometimes you may need money to offset the value of the goods or services being traded, it’s primarily up to you to differentiate between what is a valuable opportunity. As you read further, you will learn essential tips and techniques that will help your decision-making process a smooth and easy one!

There are a few things you should do before “Bartering”. Compile a list of your goods and services you are willing to barter. Make a list of goods and services you need or want for your business. Know the approximate cash value of the things you are trying to trade and the value of the things you are seeking in return. All of this information can help you negotiate a successful “Barter” deal.

Everything in the WORLD of “Barter” is valuable but not always beneficial for both parties. This is why you must be savvy, optimistic, wise, and slow to saying YES when making the decision to enter into this type of agreement. Here are a few tips and questions you should be able to answer prior to determining just how beneficial this “Barter” will be for you and your business.
  1. Why do you need to “Barter” with this company or person
  2. How do you benefit from them
  3. How do they benefit from you
  4. Are they using you as an asset or liability
  5. Are you their competition? If so, protect your ideas, clients, and information, only agree to a “Barter” that will allow you to maintain your creativity for your company while helping your competition. You can protect yourself by suggesting ideas they can expand on themselves, rather than giving them ideas, there is a difference.
  6. How long have you known of this company or person, has it been at least 1 to 3 years
  7. What makes this company so special to the point they do not have to pay you for your services
  8. How long will this “Barter” be in effect? And yes, a “Barter” needs a time-frame or ending date
  9. Do you have a NDA (Non – Disclosure Agreement) created specifically for a “Barter” arrangement
Now that you have asked yourself the above questions, based on your answers, move on to solidifying your NEWBarter” agreement. It’s always great to meet with new teams or business owners to determine what your responsibility will be and then, of course, determine what you will receive in return.

DISCLAIMER: During the meeting, take notes and always ask after each stipulation or requirement “Are You Willing to Agree to This in Writing?” This is a valid question because once you include these key points in the agreement, if the party is honest and sincere about the “Barter” relationship, they will not change their wording or accommodations when they read the agreement. The best word to associate with “Barter” is Benefit; the purpose of a “Barter” arrangement is for both parties to benefit without paying for the services. However, as stated earlier in the tips and question section, there must be a time-frame or deadline in which the “Barter” agreement will no longer be valid. In simpler term, once both parties have met their needs, use what you have or what you have obtained and move on, unless either party is then willing to buy your products or pay for your services. Never drag out a “Barter” agreement, this is a short-term goal that should lead to compensation, or some form of business satisfaction.

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