Getty
Retirement often starts like a vacation. You’re all excited and eager to begin the journey. Each day represents the beginning of a new venture.
Until it doesn’t.
For some, it becomes a pleasant, reliable schedule. For others, it’s Bill Murray in Groundhog Day. The incessant repetition begs for something completely different. That’s why you’re better off going into retirement with a handful of casual hobbies. You can rotate between them to keep things different.
What if you want something more than just the pleasure of collecting things? What if you’d really like to build something? You can certainly volunteer for Habitat for Humanity, but, for many, building something doesn’t mean physical. It means something akin to building a business.
If you fall into that group, why not turn one of your hobbies into a “small” business.
Mind you, “small” is a subjective term. What’s small to you is large to another, and what’s small to another is large to you. Pick a size that you’re comfortable with, not what someone else is comfortable with.
Here’s the problem with starting even a modest business when you retire: Where do you get the money to fund the cash flow required of the business? Face it. You’re already under pressure to keep your retirement expenses in check. With a retirement business, you’ll only be adding new expenses.
But this apparent problem may also contain a solution—a solution older than money itself. What if there’s a way your retirement hobby-turned-business can lower your retirement expenses?
Bartering has been around since ancient times. It’s only been in modern economies that society has created some sort of currency to act as the exchange medium used to pay for goods and services. It may make sense, then, to trade for goods and services used in retirement rather than use any portion of your fixed income.
To do this, you’ll need to have something to trade. You can certainly trade your existing possessions. This can be accomplished either through direct swaps or via platforms like eBay. This is like selling your baseball card collection to fund your retirement. It’s a great strategy, until you run out of baseball cards.
There is an alternative. You can develop a small business that produces products or services that can be traded for goods and services you desire. A growing number of small businesses, whether run by retirees or not, are doing this right now.
Brandon King, CEO of Noticestry in Mendon, New York, has been bartering his company’s services for the past five years. As trade for offering work on websites and social media management, he receives personal services, food and opportunities to promote his business.
He is not alone. “Advertising, printing and the service sectors are big trade volume producers,” says John Strabley, CEO of International Monetary Systems in New Berlin, Wisconsin. “In addition, people seek services such as building contractors, handymen, plumbers, electricians and landscapers as well as business professionals such as dentists, optometrists, CPA’s and attorneys. The hospitality industry is very heavily involved as well. These include restaurants, hotels and resorts and entertainment venues, industries that have been hit very hard during this pandemic.”
Strabey ought to know. His company serves as a third-party platform for businesses seeking to barter their goods. Under the brand name “IMS Barter,” it’s currently available in 40 cities across the country. “Of the mix of our 16,000 business clients, 80% of them are small businesses doing less than $2 million annually,” says Strabley.
You might be more familiar with the concept of a direct swap between people and businesses. It’s convenient and it has the advantage of the two parties knowing each other. That makes negotiating the trade and enforcing its stipulations easy.
Still, it’s a lot harder to find the perfect match than you think. How often has someone offered to trade you something but you don’t want that something? Likewise, how many times have you sought something in trade only to find the counterparty doesn’t value what you have to offer?
“Most often both parties do not have a ‘like in-kind need’ for one-another,” says Strabley. “For instance, a dentist in Chicago may want a vacation in Jamaica, but he’s unable to trade his service with them. Also, there is a lack of accountability and a higher risk that the participant won’t deliver on a promise.”
If you’re retired and running a small business, you might be interested in acquiring things like food, financial services and even vacations. You’re less likely to provide something that these companies see as worth trading for. Yet, the companies that do value your product or service might not offer you what you want. Having a go-between facilitates multi-party trades where each party gets something they want.
These opportunities occur more frequently than you might imagine. They open the door to business networking in ways small businesses rarely have the occasion to do. “We have been able to meet a lot of great other local and national businesses on trade as well as vacationing in some amazing places,” says King. “The most unique was dune buggies in Vegas.”
Third-party bartering platforms provide immediate access to businesses in an established network of active trading partners. Small businesses can use them as channels and marketing vehicles for introduction to clients. They also offer the benefit of independent arbitration to mediate disputes if and when they might arise. Perhaps more important for small business owners (especially if they’re retired and don’t want to overburden themselves with bookkeeping), a shared platform allows for financial tracking and accountability.
If you’re thinking you can escape taxes via bartering, think again. “Some would say the disadvantage of using a third-party bartering platform is the tax consequences, because we annually report trade as revenue,” says Strabley. “Contrary to some popular beliefs, barter is not a nifty way to cheat on income tax returns. We function as third-party record keepers and are the custodians of financial reporting of barter income through a 1099B form. There are not inherent advantages or disadvantages to barter transactions. Barter is a marketing and cash management tool, not a tax tool.”
This is not to say that bartering is for everyone and that mistakes aren’t made in bartering. Strabley advises that problems can occur when business owners “don’t manage their barter portfolio to the same degree as their cash management strategies. Barter should only be 3% to 5% of a business’s annual revenue. Therefore, you should allocate an hour a week on such ventures.”
When it comes to managing retirement expenses, consider how bartering can help. “The role of the barter model is to create new sales to offset both business and personal expenditures; thus, conserve cash,” says Strabley. “This is a necessity during these trying times, especially for small business owners. Many are in survival mode, and preserving cash is more than a necessity than ever before.”