Every other week, On Small Business reaches out to a panel of young entrepreneurs for answers to some of the most pressing questions facing small business owners. The following responses are provided by members of the Young Entrepreneur Council (YEC).
Q: Some companies barter or exchange services to avoid dipping into their cash reserves. What experience does your firm have with that approach, how did you arrange the deals, and do you believe bartering is an effective business strategy?
Corey Blake, president of Round Table Companies in Highland Park, Illinois:
“Last year, we bartered the creation of a full color graphic novel in exchange for a new website design from one of the top companies. The value of the trade was $50,000. We provided three months of writing services to create the graphic novel storyline (as a marketing vehicle for this company) and then five months of illustration. In exchange, they helped us to define, design, and then program our new website in Expression Engine over the course of six to seven months.
We hit one sticky spot when they were creating icon images for our site. We have illustrators on staff who could have more cost effectively handled that aspect and with higher quality. That required careful and honest dialogue to express and resolve the issue. Other than that, we led with respectful and open communication and felt well served in the exchange. Barters are delicate, but the fact that both sides shared core values helped us be successful in this endeavor.”
Guillaume Gauthereau, CEO and co-founder of Totsy in New York, New York:
“In the past, we exchanged services with another private sales site operating in another vertical. We used their buying team to source products and this allowed them to sell the products they sourced on multiple websites. The exchange was based purely on performance; in other words, there was no cost for buyers’ work, and we simply shared revenue on the extra product sold.
It was a win-win situation that enabled us to expand our buying team without spending additional capital. It also allowed us to test new product categories, giving us more data points to help us determine whether it would be profitable to invest in hiring buyers with relationships in a certain area. The exchange was a short-term solution but gave us an edge in a very competitive, fast-paced industry.”
Shradha Agarwal, Founder & Chief Strategy Officer of ContextMedia in New York, New York and Chicago, Illinois:
“We have also traded publicity and/or referral business to service providers in exchange for the services they provide to us. This is a win-win situation for both parties, as they get new business and credible references and we get a website, inventory or work space with smaller dents to our cash reserves.
One of our more innovative deals consisted of an up-front rent abatement for a long-term lease. In another instance, we used one of our equipment provider’s logo in our sales material, and we got a pretty neat discount in return.”
The Young Entrepreneur Council (YEC) is an invite-only nonprofit organization comprised of promising young entrepreneurs.
Do you have questions you would like to see answered by these young entrepreneurs? Share them with us in the comments below or via email and we’ll pass them along to the YEC for future series.