Bartering can be great fun — especially when you find someone who has what you need and who needs what you have, right?
Most of us in business are familiar with how bartering works. But did you know you can also use it to strategically build your brand and your business?
Here’s how I did it (and a few lessons I learned along the way).
Fill Your Client Base with Ideal Customers
If you know who your ideal customers are (and you should), do a bit o’research and find out which people on that list might also have something you need (or, at least want).
In 2006, my little business was called Social Good Marketing. And my target market was very small businesses and nonprofits who were trying to make the world a better place. For me, this meant folks who were focusing on sustainability practices and/or social issues in their organizations.
I knew that the best way to attract those types of clients would be to have lots of similar clients from that sector. Especially those who could give a solid testimonial about how wonderful it was to work with me.
Even though I had nearly 15 years of marketing experience at that point — none of it was as a consultant. And none of it was working with small businesses.
Here’s where the bartering came in.
I found myself a lovely little spa and salon whose marketing messages seemed a bit fragmented. This salon also boasted that it used only organic products and that it heavily supported the efforts of a local nonprofit. (Their for-profit after-tax proceeds were all funneled to this nonprofit — a sort of social enterprise, if you will.)
In short, they fit my ideal customer profile.
We were introduced to each other by a mutual friend and I was delighted to also find out that the owner was well-liked and well-connected in the community. She had ties to several other “social good” types, and at the very least, was the type of person I wanted to network with.
It didn’t take long before she was lamenting that she needed help with her marketing, but just didn’t have the budget to get it done.
That’s when I offered to barter with her for marketing services.
How to Make Bartering Work For You
Allocate the Time
The first thing I did was decide for myself what I was willing and able to give away. How much of my time could I afford to trade? I had to pay the rent and my landlord wasn’t about to barter for marketing services, so I needed some actual cash to make my business work.
In my case, I was just starting out and had a pretty open calendar. But I also knew that I needed to set aside time and space for paying clients because they were going to show up pretty quickly (and they did!).
I set aside 10 hours per week — or 50% of my billable hours — for barter clients. In retrospect, I should’ve scaled that back to about 5 hours per week.
When things got busy for me, I had to re-allocate barter clients to my marketing hours (part of that non-billable time) — something I should’ve done from the very beginning.
Document the Agreement
I knew from past experience in the corporate world that communication is a tricky thing. And the only thing that helps people stay on the same page is to take notes that you both can sign off on.
For this client, I was willing to trade up to 75% of our work together. Once she knew this, she was able to decide how much of my services she could afford.
Then we discussed what she needed to accomplish. I asked her what her goals were, and what sort of resources she had for a coordinated marketing campaign.
Eventually, we were both able to see that even if we came up with a solid marketing plan, she didn’t have the necessary resources to implement it, so that would need to fall mostly in my lap as well.
In the end, we agreed that 5 hours per month of my time would be enough to get her going in the right direction.
The document we drew up included all the language that I use in a full-paying client agreement (scope of work, billing process, etc); plus, it dictated that up to 75% of those hours could be traded for any services at her spa at full market rate for both of us. We would keep an accounting of hours used/services rendered and compare notes each month. We also decided that it would be best to treat the relationship as if she were paying me with real money.
We didn’t broadcast the fact that we were bartering — mostly because we didn’t want to be overwhelmed with other folks asking us to barter, too.
What Happens When You Hit a Snag?
At first, I had no problems using up my credits at the spa. I got a massage once a week (yes, once a WEEK!) and my hair done once each month. That pretty much kept us going merrily along.
But after a few months, things began to get busy with my new business and I found it harder and harder to break away for a little TLC.
Initially, I used some of that credit to purchase gift certificates for friends and family (what a great birthday gift!). Then I realized that I could use gift certificates as incentives to get other new clients (“Sign up today and get $150 worth of spa services!”). That little trick worked better than I thought and actually exposed my spa client to lots of potential new business. We quickly changed our agreement to include a 50% discount for me if I purchased gifts for my clients and promoted her spa in my marketing.
However, about the six-month mark, we started to get a little lopsided with regard to how much credit I had (a lot) and how much the spa owed me in cash.
The owner — (remember she was well-liked and well-connected) — wasn’t necessarily great at running her spa business.
The marketing was working — she was getting lots of new clients in the door. But she wasn’t able to hold on to them. They weren’t coming back.
(Remember: great marketing is a waste of money if you can’t service the clients properly!)
Because I was one of her clients, I also noticed inconsistencies in service. The stylists and masseurs were coming and going like tourists. She couldn’t keep a good team on board long enough to train them. And legally, she wasn’t supposed to train them because they were all independent contractors — not employees.
So I called a meeting with her to discuss the challenges and see what could be done.
She was unwilling to hire employees, but she was willing to offer her independent contractors some free “professional development” in the form of marketing training — help them learn how to build their clientele.
We scheduled a series of 1-hour trainings and added another consultant to the mix — a customer service expert — and we worked as a team to address the issues.
The snag was smoothed out and we went on as before — just a little bit wiser.
How to Transition Out of a Barter Agreement
When we first made the agreement to barter, we never talked about how long the arrangement should last. If I had to do it over again, that’s definitely something I would address up front.
Even with paying clients, my ultimate goal is not to create a full-time job for myself, but rather to teach and empower them. My intent is that they grow their businesses and hire a marketing team (or at least a part-time staff person) to take on the roles and responsibilities that go with developing and implementing marketing efforts long-term.
When I saw that the client was beginning to rely too heavily on me (she was deferring most marketing decisions to me), I knew it was time for another meeting.
Once the owner heard my concerns, she was actually relieved. Turns out, she was also hoping to change our relationship and move toward more self-sufficiency.
So we worked on a plan together of how that could happen and then each month, I dropped my barter allowance with her by 20%.
This meant, that over the course of five months we would get to the place where she was no longer a barter client — a great motivation for her to move toward a less expensive (and more self-sufficient) way to get her marketing done.
Before You Barter: Ten Considerations
1. Know your boundaries. Decide ahead of time how much space on your calendar you have to give away. Bartering should be seen as a marketing activity! That means any time you trade for is marketing related and should be allocated as marketing time. Anything over and above your boundaries should be billed and paid for with real money.
2. Choose to barter only with someone who fits your ideal customer profile. This will help you build your portfolio of clients and relevant brand-building testimonials and references.
3. Make sure you barter for something you need. In my case, I didn’t need massages or haircuts. But I did need some valuable testimonials and references that would speak to my target customers. If you’ve already got those, choose to barter only for products and services you need to build your business. This particular client did a great job of introducing me to other like-minded business owners. She promoted me heavily to her mailing list and colleagues, and I gained more than a half dozen new (paying) clients from the deal. I also got a great testimonial to use in my marketing — one that specifically talked about my expertise with the green market and helping other “social good” businesses fulfill their missions. (Note: It’s a good idea when you ask for a testimonial from a client, to request that they speak to a particular element of your branding. Give them a few ideas and then let them know that you appreciate anything they have to say.)
4. Put your agreement in writing. Having a discussion about the details of your arrangement is key. But it’s even more important to document the deal on paper. You don’t need a lawyer to review this — it’s more to use as a reference whenever one of you “forgets” how your deal is supposed to work.
5. Plan with the end in mind. Decide up front how long the arrangement will last. Do you want to barter forever? Maybe you do. It all depends on your mutual goals. If the decision is to make this arrangement temporary, spell that out in your agreement as well as how you transition from barter to cash.
6. Keep a good account of what’s traded. Set up a payment type in your accounting system for barter. Make sure that all your records reflect what’s happened. Send an invoice to your barter client that reflects the trade and communicate monthly to be sure you’re both on the same page.
7. Treat the barter client just the same as you would a paying client. (After all, the IRS will.) Never put these types of clients on any sort of “second rung” in your service ladder. You will earn a piss-poor reputation that way. The idea is to shine just as brightly as you would in any other business relationship. Remember, a reference isn’t the only thing at stake! Bad news travels a lot quicker than a good testimonial ever will.
8. Consider adding cross-promotions and referrals to the agreement. Bartering doesn’t have to be strictly for services or products. If you and your bartering partner both have mailing lists, you can build on what you’re doing by trading “ad space” in your respective eNewsletters. There are literally hundreds of ways to approach this, so don’t be afraid to get creative.
9. Never barter with anyone you wouldn’t be proud to promote to your own list. Make sure they have a good reputation. Check them out on the Better Business Bureau site and ask around in your networking circles. If the person you’re considering a trade with doesn’t hold up their side of the bargain, you’re not going to be happy. Call a meeting right away if things look like they might go sideways. Explain your concerns in a rational manner (it might be just a one-time fluke) and ask the other person how you might resolve the issue satisfactorily for both of you. If it can’t be done, then break off the relationship immediately.
10. Consider using a third party to manage the relationship. There are lots of online services that help facilitate business trades. A few to check out are Barter Business Unlimited and Better Barter Systems.
If you’ve got a question about bartering or have ever bartered for services or products in your business, share your experience or lessons learned in a comment below. I’m all ears!
This post is part of the January Word Carnival — a monthly group blogging event specifically for small business owners. (It’s the most fun you’ll have all month!) Check out the rest of the fabulous carney work here.