When starting out as a self-employed service provider, especially in a difficult economy, you are often faced with clients who need your services, want to hire you, but are unable to pay you in cash. In your eagerness to start doing what you really love to do, the temptation to lower your price or give your service away is irresistible – and dangerous.
The danger of giving away your service is that it tends to devalue what you offer in the mind of the receiver. As an alternative, consider non-money transactions such as barter (exchange of goods and services in kind) or pro-bono (as a gift, freely offered).
The advantage of creating a barter or pro-bono arrangement is that you can gain experience right away. Creating momentum around your business is very important, so the more clients you have, the better. The biggest disadvantage is that a barter or pro-bono arrangement can be a trap, because it is very difficult to grow a successful livelihood based only on barter or pro-bono, because there is no positive cash flow. And isn’t that why you’re in business anyways, to make a living doing what you love?
It is possible to create barter arrangements that work for you and for your client, if you are prudent and clear about what you want. Successful solopreneurs know that they deserve to be well compensated for the results they create for their clients. Here are ten tips to create and maintain a successful barter or pro-bono arrangement that results in a win-win outcome for both you and your client.
1. Barter is a commercial transaction where you accept goods or services in lieu of money.
This is the Golden Rule of successful barter. Barter is a commercial transaction, with all of the privileges and responsibilities attached to it. You simply accept that the client provide you with goods and services instead of cash. You are the supplier, you set a price for your offerings, and the client proposes to compensate you with goods or services of equal value to the cash price you set. You have the final say as to whether what is offered in barter is agreeable to you. You do not have to accept barter or pro-bono.
2. Be choosy, reserve barter or pro-bono for special cases or as a last resort.
For many people, spending money for an intangible result is the hardest act they can do. Make sure that your clients are not offering barter simply because they are not really ready to commit to results, or because they are trying to take advantage of you. If a client is not able or willing to pay money, it is a strong signal that they are not ready to make a real commitment to you, even though they might really need your help. There should be a very compelling reason for you to work with them for barter or pro-bono: a unique situation where you can gain a lot of experience (far more than usual), because working with this client would give you prestige, or because you can build your business on the references that this particular barter work would give you.
3. The client should offer in barter something that you really need.
Does the barter offer replace something or some service that you already use, saving you time, effort and money? If you regularly pay for massage therapy, and a prospective client offers massage therapy in barter for your services, then it is real barter, since you can redirect your money and see real savings. But if you don’t ordinarily go to massage therapy, then basically you are giving away your services for nothing (is that how much you value your services?). The most effective barter arrangements provide you with the goods and services that you need, in a way that works for you, first, and the client, second. If what you need is not what the client offers in the normal course of the client’s business, then it is up to the client to go out of their way to provide you with something that you really need (see point #4).
4. What the client offers in barter must represent a substantial commitment on their part.
The client should offer something that requires additional time and effort to create specially for you – it must represent a substantial commitment on their part. If your client makes pies and offers you free pie for your services, this is not a substantial commitment on their part, because they will not be as invested in creating results as you are. The barter must represent for them a visible, conscious commitment, but not extreme hardship. When they are providing you with the goods or services, the barter client must be mindful of the real purpose of the barter. Use your judgment. After all, you are giving up time, money and effort, and you are doing them a favor by accepting barter.
5. Keep the barter/pro-bono relationship business-like.
A big pitfall of pro-bono or barter arrangements is that the commercial nature of the transaction tends to get blurred, and emotions become involved. Create a written, signed contract and issue an invoice for the full amount. Have your barter client do the same. The two invoices should cancel out. Then exchange signed, cashable checks made out to each other on the same date (the date of payment). Issue receipts for the transaction, then cash the checks at the same time. Declare the value of barter transaction as income (for what your barter partner paid you) and expense (for what you paid your barter partner). Pay all applicable fees and taxes, this will keep the taxman happy and encourage you to evolve the relationship to a cash basis as soon as possible. You will perceive yourself to have a real business, not a hobby, and your business will grow much faster. Your client will be reminded of the nature of the barter. It will also be easier for you to maintain the professional-client relationship.
6. Measure your effort in the relationship proportionately to the value of the exchange to the client.
What the client offers in barter has value to the client, but not necessarily to you. Your time and energy is limited and valuable to you, but not necessarily to your client. You have to measure the real value of the barter goods in the client’s mind, something that the client would not normally think of. Don’t make the error of counting the retail value of the barter goods. A fairer assessment would be to consider the wholesale or bulk value of the goods. Make sure you don’t give more effort to the client than what they pay for. This does not respect the value you place on yourself, and it cheapens what you have to offer. It then becomes a lose-lose situation that can end in resentment or hurt feelings.
7. At the beginning of the relationship, set a time limit or conditions to the barter or pro-bono.
You are in business to create a livelihood for yourself, so sooner or later you need to convert the barter relationship to cash. At the beginning of the relationship, in the written contract, specify a time limit to the barter relationship (guideline: no more than 60 days), and specific results that must be attained to maintain the barter relationship. Make sure that the conditions lock the client to the results and the time period, considering even a cash penalty payable to you if the client terminates the deal early (remember, you want to make sure the client is fully committed to working with you). Make timelines short and results tangible and measurable. The client has to see the real worth of what you can provide. Finally, the barter agreement should allow you (and only you) to terminate the relationship at anytime or to ask for cash instead of barter at any stage of the transaction.
8. Make it clear paying clients come first, and barter/pro-bono clients second.
You are offering your livelihood to create results for your client. Other clients who are ready to pay money deserve higher priority and attention. You are doing the client a favor by accepting barter, and this arrangement should not limit the growth of your business in any way. Barter clients get the privilege
of your surplus time or resources that are not otherwise committed to your paying clients or to yourself. Don’t overextend yourself for your barter clients. Actually, this tip should read: yourself first, paying clients second, and barter/pro-bono clients get what’s left.
9. Keep control of the situation.
Barter clients are not regular clients. Barter is NOT a two way street: the client is offering goods or services in kind for your services, instead of paying by cash. You do not become a customer of the client because you accept barter. Failing to remember this cheapens the relationship and works against you. Make sure the barter does not get out of hand: you deserve to be well-paid for the results that you create. This is a favor you extend to the barter client. As soon as you see that the barter client is not as committed to the relationship as he/she was at the beginning, you should seriously consider ending the relationship.
10. Create low-cost opportunities for participation for clients who do not have enough cash to pay your full rate.
Create options that can help lots of people at once, in ways that don’t require as much investment of your time, money and energy. Options such as teleclasses, free introductory workshops, group coaching, newsletters, etc can still help people who don’t have, or are not ready to commit, money for your most valuable services. Clients who spend time in your group activities also become longer term and more valuable customers, since they will get to know you and understand how you operate and what you have to offer. Reserve your most valuable time and energy for clients who are willing to fully commit their time, money and effort to have you help them create powerful results in their lives. Creating a “tiered” structure of offerings will ensure that the right people will come to you at the right time, ready to pay you what you deserve for a successful livelihood. And if this does not satisfy the client, say no and look elsewhere. There are always people who value what you offer and who are ready to pay you the rate you deserve!
Davender Gupta is a business leadership coach and Certified “Book Yourself Solid” Coach whose mission is to guide passion-driven solopreneurs, professionals and people with Big Ideas to accelerate their Vision from Passion to Profit. Join the discussion on his blog frompassiontoprofit.com and his main site coachdavender.com He welcomes your questions by e-mail at firstname.lastname@example.org or by phone, toll-free, at 1-888-788-8844.
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