(UPDATE: 9/11 – Two years later and the economy is in a much different place.  Is bartering increasing even more?  There are potentially more goods and services available [sweat equity] then cash. Are you considering bartering in your law practice?)

UPDATE: 9/09) I recently had a phone call from a reporter asking about the viability of bartering for legal services in this economy.  She referenced my post from 10/31/08 discussing this very topic, long before the legal market imploded.  It was a viable option for me when I started out and it remains a viable option today for those just starting out.  Here is the original post with additional commentary on the bottom.

Will Bartering For Chickens Come Back in Vogue?

I’ve gotten to seriously thinking about this.  Will bartering for legal services come back or simply become more prevalent given economic times are going to get more and more challenging?

The first people didn’t buy goods from other people with money. They used barter. Barter is the exchange of personal possessions of value for other goods
that you want. This kind of exchange started at the beginning of humankind and is still used today. From 9,000-6,000 B.C., livestock was often used as a unit of exchange. Later, as agriculture developed, people used crops for barter. For example, I could ask another farmer to trade a pound of apples for a pound of bananas.

(The History of Money)

Unemployment is expected to increase dramatically. But the number we don’t hear about very often is the rate of ‘under’ employment…meaning six figure hedge fund managers asking if you’d ‘like a shake with those fries?” Credit is drying up.  People and small businesses still need legal services but may not have access to traditional currency as payment.  What they do have are possessions or services of value.

When we first opened our law office we bartered our legal services for other services (and declared the value for tax purposes!).  Got carpeting, painting, construction services because we didn’t have ready cash as a start up.  But now the tables have turned.  People will need legal services but won’t have the cash.

For instance, many bankruptcy lawyers are saying bankruptcy will be good…. for a while. But there will come a point when the clients who need bankruptcy the most won’t be able to afford the fees as their credit is ruined and they won’t have access to credit or ready cash and are unemployed or underemployed.  Home equity lines will have been closed by the lenders and borrowing against a 401k won’t be possible because of the diminished value.

If you really think about it will lawyers have to consider bartering service for services or goods, again? Doing an accountant’s divorce in exchange for a decade of accounting services? Or free daycare from a newly created day care center in exchange for a small business incorporation and periodic legal advice. It’s quite possible situations (or opportunities) like these could arise out of necessity.

I’m just writing about it because it wouldn’t hurt to investigate the IRS rules and Rules of Professional Conduct on bartering for legal services because there may be (many) moments in the future you will have to consider this as an option.

In follow-up commentary to this post one commenter offered up the following:

Barter exchanges enable their members to trade with each other and assist with marketing the products and services of members to all of the other members. You can typically expect an increase of 10% to 15% in new business referred by a barter exchange, which will all be from new clients that you normally would never have had.

A law firm would charge their standard billing rate, get paid in barter dollars and then use those barter dollars to offset cash expenses.

I have worked with over 15 law firms and other professional services companies over the years and there never seemed to be any issue with a law firm or sole practitioner participating in a barter exchange.

There are typically several local exchanges in every city and there are numerous online exchanges such as www.barterpro.vbarter.com. And, there’s software available to start a barter exchange.

Perhaps there should be an exchange for the legal community. Anyone looking to start a new business? Take a look at www.virtualbarter.net!

“There are barter groups where you pay a fee to belong and they assist in assessing the value of services, recording the tax implications, and even allowing a round robin:  I do your will, but don’t need plumbing services.  So I earn “credits” to use for landscaping services from a third member.  That seems to address the “valuation” issue, as well as the tax consequences, if the organization is trustworthy.  I think it’s a great way to network and start a new business, or supplement cash paying clients.”

If anyone knows of these barter groups as described by Margaret Keavney, please let us know in the comments section.