Finance From A-Z: Barter System

Term: Barter System

Definition: An organized method of trade whereby participants exchange goods or services instead of money

What does this mean to me?:
Bartering has been in existence as a method of exchange longer than “money”. Although bartering is more of an economic term it still has relevance for business and finance.

Often during start-up entrepreneurs struggle with sources of money. If they would stop and consider all available resources they actually have lots of value stored up in bartering. Using a barter system can be an ideal method to quickly accrue resources, especially when initial cash is limited.

Case Study:
In 2005 I had a client (we’ll call him Sam) that once exchanged services for a brand new MacBook Pro Laptop. Sam was in desperate need of a computer upgrade in order to improve customer service and responsiveness. Normally, Sam’s revenue price point didn’t allow him to generate the $3,000+ he needed to purchase the laptop. Also as a new business he wasn’t able to obtain vendor credit. It would have taken him several months in order to make enough sales to raise that much excess cash.

However, Sam had a high-end client (we’ll call him Dave) that needed specialized expertise in web-design and Trans-media development. Normally, Sam charges a reoccurring monthly fee which is standard for his type of service but, by bartering he received the value in a lump sum.

Also, Dave had vendor credit and didn’t use all his available cash. So, Dave purchased the Laptop on credit and gave it to Sam as payment – resulting, in bartered services for a New Laptop.

The message here is – when looking for resources consider bartering as an alternative. There are networks for bartering that you can research. Just Google Bartering Networks and check out the options. Click on this link to get you started.

– Manch Kersee
J.R. Dexter, Inc. “Business Decision Support”