Barter

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Identification

This process tactic is used to offset a need for funds and is often seen at the end of a negotiation, when cash is generally assumed in modern economies. Parties need to know and account for “goods” versus “goods transactions.” Whether this is a legitimate tactic or a form of manipulation depends on the representations made at the beginning. There may be a gain or loss and a step up or step down in depreciation, so before you negotiate a barter transaction, consult your certified public accountant. Taking physical possession of an item carries with it shipping, insurance, maintenance, and storage, and even a pure barter transaction has tax implications. Cash fits nicely into a bank.

Example

This tactic is used in negotiations with unclear or ambiguous terms, e.g., “We will make it work.” Often this tactic is used after the parties have invested a great amount of time in the negotiation. The buyer may say, “I can only give you $60,000 in cash. For the balance, I can give you the old truck I am getting rid of. It is valued at $40,000.”

Solution

Do you walk away, or make the deal? It depends. Ensure that the barter item is useful or marketable, or have the other party liquidate it. For example, spot rates on metals apply to industrial quantities. A small amount of a rare metal may be unmarketable unless steeply discounted. It is often best to counter by having the other party sell the item and give you its value in cash. If the barter item is offered at a huge discount, (greater than 70%), it may be acceptable only if it is a need, not a want. You may think, “I always wanted a sailboat,” but do you have time to maintain and enjoy watercraft ownership, or the funds for a harbor and insurance?

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