In his landmark 1776 book, Wealth of Nations, Adam Smith called money one of the three great inventions, including the written word and mathematics. Smith’s assessment of currency was, and still is correct because the use of money has helped markets grow and expand more efficiently. But there is something still in use in the marketplace today that humans used for millennia before there was money: barter.
In its simplest form, barter is the exchange of goods and/or services between two parties without the involvement of money. Think of the prairie doctor who took a chicken home after delivering the baby. A modern-day example would be a business consultant who barters part of his fee for something a client sells.
Clearly, in the past hundred years the proliferation of money and financial tools and resources has relegated barter to the minor leagues of the marketplace. Nevertheless, it has been going on, primarily between parties who know each other and have a mutual need for what the other sells.
There are three things that have prevented barter from being more prevalent than it is: 1) that “know each other” thing, 2) the timing of the parties’ requirements, and 3) the relational value of what each party has to offer in barter. Enter a few entrepreneurs who created barter networks which become the transactional nexus between parties in order to minimize or eliminate these three barter constraints.
Recently, on my small business radio program, The Small Business Advocate Show, I interviewed such an entrepreneur, Steve Bolles, founder and president of Merchants Barter Exchange. In this interview, Steve talked about some of the reasons that barter could be just the right tool for small businesses experiencing cash flow challenges or other issues in this recovering economy. Plus, we talked about some of the details that are required to pull off a successful barter, including through a barter network and, of course, the tax details. Take a few minutes to listen to this conversation and, as always, be sure to leave your own thoughts. Listen Live! Download, Too!