Beware of Overextending

Buying goods and services through barter is fine, but you still need cash to operate. If you don't control your trading, you can get into a cash crunch. Kathy Stuart, who owns Port of Subs, a restaurant, has her barter exchange "sell" up to $500 a month in script, which works like gift certificates and allows her to limit her barter business to no more than this amount. Len Gerstel of Gerstel Office Furniture only barters his lower priced items, because he doesn't want to take on hundreds of trade dollars in individual transactions.

Approximately five or six percent of chiropractor Walter C. Towle's practice comes from trade, while Ken Hodges of Gilchrist Flower and Gifts willingly trades about one-eighth of his sales. Most participating firms do five to 15 percent of their total business in trade. Be careful if you find that more than 25 percent of your business comes in trade. You may run out of money, even though your company is highly profitable.

Resource:
Electronically reprinted from http://www.sba.gov/gopher/Business-Development/Success-Series/Vol8/barter.txt