Contra deals, or business barters, are an exchange of goods or services between two parties. No money ever changes hands, although there are still tax implications to consider, and as well as opening new lines of business, such deals can enable even the small business to be able to access products and services that they do not necessarily have the available cash flow to cover. It isn’t just small businesses that can benefit either, with reports of some of the world’s largest companies utilising these cashless deals.
The process of bartering is nothing new, and while cash was meant as a means of foregoing the bartering system, it has come full circle for a lot of transactions. Businesses from around the world are bartering their services with one another, in order to benefit themselves, be able to expand into new markets, and to forge new allegiances with existing companies and businesses.
Examples Of Successful Contra Deals
Successful contra deals have been reported throughout the world, and in many different industries. In April 2014, three of the world’s largest pharmaceutical companies agreed to a barter exchange of assets worth billions of dollars. Novartis, GlaxoSmithKline, and Eli Lily & Co have effectively shed under-utilises areas of their business in order to gain drugs, research and development, and more beneficial assets for their organisation. This is an exceptionally sized contra deal, but they exist in all forms and sizes.
Many companies have signed up for business barter websites, or to utilise the service of barter brokers. This can afford businesses the same benefits, while taking away much of the actual bartering that would otherwise take place.
Factors To Consider Before Bartering
There are factors to consider before bartering. While money will not usually change hands between the two parties in a barter deal, most will still require investment, so businesses should ensure that they are receiving true value. VAT and other taxes will also still apply to the deals done, and you should consider the true value of the assets that you give away – if a company is giving away a portfolio of business, for example, there may be greater benefit in selling that pipeline.
Business barters can prove extremely useful, beneficial, and profitable, but it is important that any business considering enter into such a deal has carefully considered their options.