Three Ways of Determining Value for Contra Dealing

Just like with regular, cash-based business arrangements, contra deals can be conducted in a number of ways. Aside from the type of services and products which are exchanged, their value can be determined in different ways. Here are the three most popular methods of doing so.

Hour for Hour

Trading hour for hour is probably the least popular way of conducting business bartering, but it’s still worth knowing about. Each party simply works out how much they charge for a certain service per hour, and then trades accordingly. So, a lawyer charging £150 an hour will trade an hour’s work for two hours of work from of someone who charges £75 an hour. This is a relatively straightforward arrangement which works well between two parties who work at similar rates. It’s also easy to work out a deal.

Pound for Pound

Similar to the hour for hour system, working purely in terms of rates is a very simple way to work out a contra deal. You simply determine the amount which you would normally invoice, and then use that value for trading. Since it’s essentially the same as a regular business arrangement, but doesn’t interrupt your cash flow, this can be an easy way to determine value for anyone new to contra dealing. Like hour by hour, it works best when parties charge similar rates, though this can make it difficult for smaller businesses to gain the interest of larger ones.

Project for Project

The generally preferred method of determining value for a contra deal, a project for project arrangement allows you to come to less traditional engagements, without being restricted by varying rates. Project by project arrangements are a good way to broker more innovative deals – such as being introduced into a business network – since these tend to lie outside of the normal way in which a company charges rates. It also works well for businesses with complementary skills – a photographer and designer, for example, would be likely to benefit from a project by project determination.

The right way of determining value will shift depending upon your current needs, so it’s a good idea to think about each one before you try to make a deal.