You Should Learn To Barter and How It Can Help Increase Your Cash Flow

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Bob Bagga, President & CEO of BizX
Forbes Business Council

 

What do businesses in 2021 have in common with ancient humans from nearly 10,000 years ago? More than you might think. Roughly 8,000 years ago, Phoenicians began bartering goods with individuals in other cities, near and far. With Babylonians, weapons, spice, salt, tea and even human skulls were exchanged. Later, in the Middle Ages, Europeans traveled around the world to barter crafts, furs, silks and perfumes.

Barter emerged on a large scale in the 21st century during the Great Depression with the trading of goods and services being arranged through bank-like groups; if items were sold, the buyer’s account would be debited and the owner would receive credit.

While none of this is likely to come as a surprise, what you may not realize is that there is roughly $12-14 billion exchanged annually in barter or trade transactions worldwide. In particular, barter has reemerged in the past few years with a 21st century, digital twist. With excess capacity still being an unfortunate reality for countless hotels, restaurants and other businesses in the Covid-19 era — and businesses always looking for creative ways to find new customers — I believe the concept of barter couldn’t be timelier.

Understanding Barter In The 21st Century

Barter formats in this day and age can vary, consisting of everything from Facebook friends looking to swap soap, paper towels and sugar, to Fortune 500 companies like Pepsi, Boeing and Toyota using it, to foreign countries exchanging land and goods, to major organizations like Habitat For Humanity, iHeartRadio and the San Francisco 49ers being a part of digital bartering communities.



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While barter has been around forever, it’s mainly been informal. Many companies and organizations do use it as a regular part of their business dealings. The International Reciprocal Trade Association noted that participating businesses transacted approximately $12-14 billion globally in 2021, with that number expected to grow year after year.

A modern barter community, however, actually manages the exchange, so it’s recognized as revenue and expense that adds to your top line. From my experience, a system like this is tightly controlled, transparent and sophisticated. In most barter transactions, there is what we call a “double coincidence of wants.” Both parties have to have exactly what the other party needs or wants, proving to be ineffective in the long run. For example, a hotel can trade empty room nights for a $20,000 advertising campaign.

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