Small Business: All About Barter

Barter in its purest form is simply the exchange of goods without the involvement of money.

Barter in its purest form is simply the exchange of goods without the involvement of money. Long before money was printed, people "purchased" goods from each other by trading items. If Farmer Frank needed bread, he would bring Baker Betty some eggs or milk and they would trade. Everyone got all his or her needs met in this manner. Life was much simpler then.

Over time, trade became inconvenient. Diamond Dave, who mined for diamonds was not interested in hundreds of gallons of milk, he wanted the value of the diamond in a spend-able currency. Gold and other precious metals were exchanged for goods in place of goods being exchanged for goods. They became the items on which value of a products where based. Once that was determined, fractions of a piece of gold had to be calculated, so silver, paper, and coins of lower value were created. Paper eventually became the currency of choice, because gold and farm products were just too difficult to carry.

Although it is nice to have the convenience of cash to spend on items, sometimes cash can be difficult to come by. In a tight economy, a diamond salesperson may have a difficult time getting cash for his luxurious items. Meanwhile, he may be in need of food for his family. He would gladly trade a diamond, which Farmer Frank can give to his wife, in exchange for its value in groceries. Diamonds however, are much more valuable than milk and eggs. This is where barter agencies come into play. Diamond Dave needs about $200.00 dollars in groceries; meanwhile, his diamond is worth $2000.00. Barter agencies serve as banks where the value of the traded diamond goes into Dave's account, and he can get his $200.00 in groceries from Farmer Frank. With the remaining $1800.00, he can "purchase" shoes from Cobbler Carl and coats for his family from Seamstress Sally. Meanwhile Farmer Frank can "purchase that diamond for his wife because he has provided groceries for Baker Betty, Diamond Dave, Cobbler Carl, and Seamstress Sally.

If you should decide to join a barter agency, be sure to shop around. Look at local agencies that will be able to provide everyday services like a beautician, a mechanic, and a home repair service. Compare them with larger national agencies that can provide travel destinations, and high-end items. Choose your agency based on your needs and the item you have to sell. If you provide a service, work with a local agency. If you provide goods like diamonds, you have a better chance of moving your inventory with a national barter agency.

Make sure your barter agency is worth the cost. All barter agencies have fees and surcharges for each transaction ranging from 1% to 7% for both sales and purchases. In addition, your barter agency may charge a monthly fee. If you own a small business and do not find a need to barter often, opt for an agency with low fees. Large companies however, may choose to pay more to work with a barter agency that caters to a certain class of personnel and high-ticket items.

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