October 9, 2024 | 3 minute read
Written by
Rieva Lesonsky
President and CEO
GrowBiz Media
Rieva Lesonsky is president and CEO of two companies focusing on small business and entrepreneurship—GrowBiz Media and SmallBusinessCurrents.com. She’s a nationally-known speaker, best-selling author, award-winning journalist, and authority on entrepreneurship who has covered the industry for more than 40 years.
Through periods of economic uncertainty, small businesses can get creative with cost-saving strategies. Partnering with other small businesses for cost-sharing is one way to save money.
Cost-sharing is “a process wherein two or more entities work together to secure savings that one alone would be unable to obtain,” according to the Inc.com Encyclopedia. For most small business owners, health insurance is probably the most familiar example of cost-sharing—micro-businesses with one or two employees can better afford health insurance by joining a group plan comprised of many small businesses.
But there are other cost-sharing partnership possibilities to help small business owners save on operational costs. Here are a few ideas:
With more business owners and employees working from home, you may find other businesses looking for access to your business’s high-speed internet, computers, or even your office’s copiers. By offering your business equipment to others in need you may be able to barter other services or charge a small fee to help defer the costs of your Wi-Fi and other utilities.
Finding and sustaining new customers might seem like an insurmountable feat during these crazy times, but by reaching out to fellow owners in the same boat you may find the process not as difficult.
Cost-sharing on flyers, direct marketing brochures, social media campaigns, and more could open a new target market.
Many business owners are struggling to find new suppliers. By cost-sharing, you and your partner businesses can save by ordering discounted bulk orders while also discovering new supply chain sources in your local community.
There are several ways to join forces to get your products in the hands of customers. And while the arrangement may only be temporary, once you set up the partnership, you might find it works for you on a more permanent basis. Food businesses, for instance, are finding it cheaper to sign up with delivery services like Postmates, Grubhub, Uber Eats, and DoorDash rather than hiring extra delivery help. You can also “cost-share” with customers by making more of your business self-serve and DIY. Salons, for example, can package to-go hair treatments instead of doing the service themselves.
In times of uncertainty, people often step away from being competitive and embrace the concept of “coopetition”— cooperating with your competitors. It shouldn’t be hard to find other businesses to start a cost-sharing partnership with. Call or email your city’s business development office, post a message on your website or social media platforms or ask your current suppliers for partner recommendations.
The key is to make sure the agreement is clearly defined, meaning the terms are detailed and there is an end date to the agreement. Like any contract, everyone’s obligations and responsibilities should be spelled out and as well as courses of action should the partnership need dissolving. Ask your attorney to look over the agreement in case there are scenarios or events you haven’t covered.
It’s a good idea to also have your accountant look over your cost-sharing agreement to see if the IRS would consider the partnership a bartering arrangement.
The bartering the IRS cares about is for the exchange of goods or services in the commercial sector. If you use a bartering exchange, the exchange is required to report the transaction and can guide you through the correct reporting process. If you set up the bartering transaction yourself, you must include the transaction as gross income. You can find more information on the IRS website.
Important Disclosures and Information
Bank of America, engages with Rieva Lesonsky to provide materials for informational purposes only, and is not responsible for, and does not guarantee or endorse any of the third-party products or services mentioned. All third-party logos and company names mentioned herein are the property of their respective owners and are used under license from Rieva Lesonsky.
Bank of America, Merrill, their affiliates and advisors do not provide legal, tax or accounting advice. Consult your own legal and/or tax advisors before making any financial decisions. Any informational materials provided are for your discussion or review purposes only. The content on the Center for Business Empowerment (including, without limitations, third party and any Bank of America content) is provided “as is” and carries no express or implied warranties, or promise or guaranty of success. Bank of America does not warrant or guarantee the accuracy, reliability, completeness, usefulness, non-infringement of intellectual property rights, or quality of any content, regardless of who originates that content, and disclaims the same to the extent allowable by law. All third party trademarks, service marks, trade names and logos referenced in this material are the property of their respective owners. Bank of America does not deliver and is not responsible for the products, services or performance of any third party.
Not all materials on the Center for Business Empowerment will be available in Spanish.
Certain links may direct you away from Bank of America to unaffiliated sites. Bank of America has not been involved in the preparation of the content supplied at unaffiliated sites and does not guarantee or assume any responsibility for their content. When you visit these sites, you are agreeing to all of their terms of use, including their privacy and security policies.
Credit cards, credit lines and loans are subject to credit approval and creditworthiness. Some restrictions may apply.
Merrill Lynch, Pierce, Fenner & Smith Incorporated (also referred to as “MLPF&S" or “Merrill") makes available certain investment products sponsored, managed, distributed or provided by companies that are affiliates of Bank of America Corporation (“BofA Corp."). MLPF&S is a registered broker-dealer, registered investment adviser, Member SIPC, and a wholly owned subsidiary of BofA Corp.
Banking products are provided by Bank of America, N.A., and affiliated banks, Members FDIC, and wholly owned subsidiaries of BofA Corp.
“Bank of America” and “BofA Securities” are the marketing names used by the Global Banking and Global Markets division of Bank of America Corporation. Lending, derivatives, other commercial banking activities, and trading in certain financial instruments are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Trading in securities and financial instruments, and strategic advisory, and other investment banking activities, are performed globally by investment banking affiliates of Bank of America Corporation (“Investment Banking Affiliates”), including, in the United States, BofA Securities, Inc., which is a registered broker-dealer and Member of SIPC, and, in other jurisdictions, by locally registered entities. BofA Securities, Inc. is a registered futures commission merchant with the CFTC and a member of the NFA.
Investment products:
