Something in the world of floating have you stumped?
Float On was built on a culture of bartering. Trading stuff to make sure as many could float as possible. It helped generate lots of goodwill in the community and helped spread word of mouth in the early days. It also led to things like the Art Program, trading floats for art, which has been replicated by float centers all across the world.
Graham and Ashkahn share their thoughts on barter and why it’s been so successful for them and why they keep doing it even 8 years later.
Listen to Just the Audio
Transcription of this episode… (in case you prefer reading)
Graham: All right. Graham. I’m Graham.
Graham: Right over here.
Ashkahn: Over here is Ashkahn. Feeling good today.
Graham: And our third guest, the question. Give it up.
Ashkahn: Oh, nice. I panicked for a second, because I was like, “No, no. We don’t have a third microphone set up.”
Graham: It’s okay. We’ll lend our mics to the question. Today’s is, “I’ve heard you guys are into barter. I love barter! Any tips?”
Ashkahn: What are you going to give us for it?
Ashkahn: That’s a barter joke.
Graham: It was pretty good.
Ashkahn: Yeah, we’re into barter.
Graham: Yeah. We like it. It’s cool. Let’s talk about how cool barter is, and then get into some tips that we have.
Graham: Because, my biggest tip is that you should really consider doing it.
Ashkahn: Yeah, yeah. I think it’s cool, because you get stuff in exchange for floats. If that doesn’t sound cool to you, then I’m not sure how I could explain this in a better way. You give someone floats, and they give you back stuff that you want.
Graham: I mean, I think it has this nice factor of also allowing more people to float, because if they don’t have money in their pocketbook right now actually come in and hop in the tank, maybe they have stuff or maybe they have a service that they could lend you that would be worth it to you for a float. Making it more accessible is kind of what I think floating should be all about. I just like the philosophy of accepting barter, as well, from the customer perspective.
Ashkahn: It’s cool. We do barter, and we barter for things that, maybe, the two of us are not necessarily going to use, but we have a whole shop full of people, and someone might be really excited about it. Or, if no one in our shop is excited about it, we can give it to members or our customers. It’s not like we’re ever getting stuff that we just don’t know what to do with. There’s always going to be some way to give it to someone or do something cool with it.
Graham: Yeah. What are some cool examples of things we bartered with throughout the year? I mean, things like food and beverage, right? We’ve set up barters with different breweries and gotten beer for parties and things like that.
Ashkahn: Yeah. We used to barter for tea that we would serve our customers.
Graham: Yeah, and the muffins and pastries that they would eat, as well. Used to barter for ongoing cleaning services.
Ashkahn: Yeah. Some video work. When we made that RESTroom video, the guy who did all the video work owed us a video, because we gave him like 10 floats for Christmas presents that he needed the year before. That was just a barter exchange that paid off for us.
Graham: Yeah, we’ll put that in the show notes, too, the RESTroom video, in case you haven’t seen our small stint at float tank manufacturing. I, one time, bartered for a cane sword and for a swordsmith to sharpen the cane sword. Which is pretty good.
Ashkahn: Artwork. We’ve gotten a lot of art. Someone actually once just showed up to our shop, having flown in from somewhere else with this piece of artwork. She told me the story. She’s like, “I flew here. I just heard you guys traded art for floats, and I wasn’t sure. But I made you this painting, and I carried it here from Arizona on the plane. Is that right?” I’m looking at it, I’m like, “Yeah, absolutely. Get in the tank. This thing’s awesome.”
Graham: Yeah. We’ve had people actually barter songs with us for floats. The point here is … Again, we didn’t even talk about things like massage, acupuncture, all those other wellness services that so obviously make a nice one-to-one barter with floating.
Ashkahn: Right. It’s good, because those are great people to get floating, too. They’re going to be telling people all about it.
Graham: Which is awesome. I mean, the reason that a lot of this stuff works, especially for us, is because a lot of our cost comes in being open at all. We have really high overhead costs, especially in staffing, just having our doors open to the public. Then the individual cost per float to us is relatively low, so as long as you’re at less than like 70, 80% percent capacity, bartering with even a decent amount of floats, as far as your schedules goes, doesn’t have a huge impact. You’re not taking away tanks from full-priced paying customers, or anything like that. Just like the nature of the beast of the business model of floating yields itself really well to, I think, barters that don’t break our own bank or put a burden on our business, or anything like that.
Ashkahn: Yeah. It’s a good business for it.
Graham: All right. There’s the cool stuff and the little teaser to get you all excited about maybe bartering yourself. The other side is that there’s financial obligations that we have in the world, especially to people who take our taxes. There’s many different ways that barter exchange are dealt with. I’m sure internationally gets even crazier and can differ area to area and state to state.
Ashkahn: We really only know the U.S., but the cool thing is there is a way to legally do all this. You can barter and you can put that barter in your taxes when you submit. There’s an actual, official process for this entire thing. Bartering doesn’t have to, by its nature, be under the table, or whatever. There’s a little bit more formality that comes with the official process, which in some cases can make things a little bit more difficult when you’re doing some kind of looser, more abstract barter.
But basically, you just claim the barter as if it’s income. The way that you do that is the term that they use is something called the fair market value. For a really simple case like a massage. This is maybe a massage therapist that already has an up and running business, that has a website, that has sessions that already have set prices. You’re basically trying to say, “What is the monetary value of this thing you’re getting as a barter?” In some cases, it’s extremely clearly defined. If they’re selling it to a bunch of people for a set price already, that’s the fair market value of that item. That’s what you would claim on your books as what you were getting, the fair market value. Basically, instead of getting $60 of income, you’re getting $60 of income as a massage.
That’ll add to the income on your balance sheet, which if you have nothing else to offset that, it could lead to paying some taxes on it. That’s basically the kind of part that comes with the income going on your books.
Graham: Yeah, the Man wants his money. This is all stuff you should talk to your CPA about. They can really help you get this all in line and make sure that they’re keeping the right paperwork for it, and that you know exactly what to actually claim and declare and things like that. All in all, it’s not actually too crazy a process. It involves a little bit more bookkeeping, a little more money out the door to taxes, but if you’re doing everything totally right. I mean, at that point, you can actually advertise that you do barter and accept it.
There’s nothing, again like Ashkahn said, under the table about it. This is all on the level, which is also totally what I advise you to do. Doing everything above board. I always think of it as like the tax on us for being such a weird business inherently, is that the more that we do stuff that is actually in line, that we kind of get rid of that gray area of running a business, then just the better for us and for a reputation as an industry.
Ashkahn: Yeah. Really the tricky thing that comes with bartering is, as you’re trying to figure out more complex transactions, there’s just less information out there. It’s a small enough part of what the IRS is dealing with, but there’s not like this robust literature on all of the nuance of tracking barter, as much as we can tell. There’s a couple CPAs and lawyers out there that really focus on this and figure some stuff out. But at the end of the day, there’s kind of a bigger gray area there than there is in a lot of other sections of tax code.
I mean, even with the fair market value thing, if you’re trading someone a hundred floats for a hundred of something, where’s the fair market value then? Because, you wouldn’t sell someone a hundred floats for full price, right? We do all these bulk discounts and memberships, and that’s all part of the free market and the fair market value of our products.
Graham: Let’s say the massage was $40, but the float is $60. Which do you treat as the actual value of it?
Ashkahn: You’re not doing an even exchange. Again, we don’t have all of the answers to those questions, exactly. In some cases, just because this stuff gets technical and we don’t know it. In other cases, just because there aren’t clearly defined answers to some of those questions out there.
Graham: Yep. It really can change depending on the area you’re in, as well. There are national laws about bartering, but different states can have their own rules and regulations, as well, around it. Always be sure to check in in your area, even if you do trust absolutely everything that we’ve said up until now, which God help you.
Ashkahn: It’s really cool. It’s really fun to do. We’ve had a lot of success bartering with people and people have been very thankful. We’ve been super thankful to be able to barter for some of the stuff that we’ve gotten as a business. It’s been really helpful to us over the years, too.
Graham: Yeah. One of our earliest utility sinks and the installation.
Ashkahn: When you get into that, when it clicks. When it works for both people involved and both people feel like they’re getting a really cool benefit from it, then it’s a really great way of doing business. Then there is an actual way to do it all totally legit.
Graham: And you should.
Ashkahn: And you should.
Graham: Yeah. It’ll be fun. You’ll enjoy it.
Ashkahn: Yeah. Yeah.
Graham: Just barter for some CPA help if you don’t know how to get through the next few steps.
Ashkahn: Which when I’m trying to do that, I’m like, “Hey, maybe we could just trade you floats for you telling us how to trade these floats with you.” But no one’s taken us up on it yet.
Graham: Cool. Yeah. I’m going to tell you guys. This is a secret. I don’t usually let people in on this one, but go open a browser right now and type in FloatTankSolutions.com. Then type in a slash and then a podcast.
Ashkahn: Then what happens?
Graham: You go there and you see what happens.
Ashkahn: What’re they going to see? You’re not going to let them know?
Graham: I’m contractually obligated to not let them know.
Graham: You had me sign that paper just a few hours ago. I don’t know why you don’t remember this.
Ashkahn: Paper said to not talk about the paper, okay?
Ashkahn: All right. Bye.
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