Written by Richard San Juan for Gaebler Ventures
Bartering is an exchange of goods or services without the use of monetary exchange. Before currencies came into existence, bartering was the usual means of commerce. It is still being used today, albeit limitedly, by some individuals and small businesses.
Learning the art of bargaining may be a key success factor in ensuring your entrepreneurial success.
Cash is tight when you are starting or running a business. But, many goods and services can be obtained for no money whatsoever - simply by bartering.
A long time ago, barter was once prevalent as a means of paying for goods and services between small businesses. When monetary currencies emerged in the economies of established nations at the time, they quickly replaced bartering and played more of a significant role in the buying and selling of goods and services.
However, bartering is still relevant today as it was then, since there are more small businesses now than at any time period in history. Thus, it could be argued that bartering is actually playing a greater role in modern times. This is especially true for small businesses in certain sectors.
When small businesses start out, there are obvious wants and needs. Many small business owners and entrepreneurs look for products and services that will be used to sustain their business or organization. However, some of the products and services may be too expensive to invest in or purchase.
Usually for a small business or a startup, budgets are very tight, especially if they have very little capital investment. This is where the option of bartering comes into play. By pursuing the option of bartering for those same products or services, it gives them flexibility in how to repay the value of the goods or services to the seller.
If barter indeed happens, you'll be able to get what you need for a significant discount of its regular cost from the seller since you'll be paying the value with some of your own services or goods. Thus, the purchase can be easily fit within the target budget for the company.
Bartering is not only a form of commerce but also a type of guerrilla marketing because instead of needing a financial investment, it requires energy and innovation to come up with a trade proposal involving your products of equal value. This is especially useful in business-to-business marketing.
Moreover, barter enables small businesses and startups to address the all important cash flow situation. Allowing small businesses to use their own goods or services as trading chips for the goods or services offered by other businesses, helps the business community as a whole perform more sophisticated exchanges.
Barter is not a tax loophole, however. Before you jump into bargaining make sure you understand the tax laws regarding bargaining.
So what's triggering the boom in bartering?
Before the advent of computers and the Internet, many complex barter exchanges took too much time and often led to contentious disagreements. Sometimes, the trade never happened; leaving both parties having gained nothing. However, as the Internet played a more significant role in e-commerce, it has facilitated the emergence of small businesses and startups into our society and has automated many aspects of the bargaining process.
This development has brought barter once again to the forefront as barter has become much simpler, much faster and within the reach of any small business.
To be sure, the return to barter as a common way of conducting business is helping economies worldwide to grow. Small businesses around the world are learning to conserve cash, search for new customers, and convert their excess time, goods, or services into some value which can then be turned into other things they need.
Richard San Juan is currently pursuing an MBA degree with an emphasis in Finance from DePaul University in Chicago. He is particularly interested in writing about business news and strategies.
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