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There are many reasons why people barter but the simplest answer lies in the following question:
Is it cheaper to pay $1000 cash for something using cash out of your pocket, or make a purchase worth $1000 out of new income (a sale that you would otherwise not have)?
Any smart person knows the answer to this obvious question – it is better to pay for something out of new income, not current cash. If you can get something now, and pay for it by selling something in the future – instead of using your already hard earned cash you are ahead.
Everyone wants to conserve cash and generate more wealth and, in a highly competitive market, every business is on the look-out for something that will give them a competitive edge.
People might not always be rich in terms of money but they may still be wealthy in terms of assets. As confusing as it may sound it is the truth.
Even during recessions and other times of economic difficulty we still require products and services to live our lives, but, as we are short of cash we tend to cut down our expenses. In turn, manufacturers, service providers and primary producers have fewer sales and they too, end up with less buying power.
Have you ever noticed though that when cash may not be available that wealth is still all around us? Even in times when cash is tight, products and services are still abundant. Painters, accountants, lawyers, mechanics, carpenters etc. still have their skills. They might not get as much work as they previously did, but their service is still there. The same goes for products.
We might be going through recession in world economy but a farmer still grows crops on his land. The land is still there, the tools are there and so is the ability. Even manufacturers still have the machinery and equipment to build products even when they don’t have cash paying customers. They might be facing loss as the market is slow but wouldn’t it be better to barter than layoff their staff and labour?
Everyone wants to conserve cash and generate more wealth and in a highly competitive market every business is on the look-out for something that will give them a competitive edge.
Advertising and marketing offers one solution and membership in entrepreneurial associations and groups offer another. Growing business may also engage in co-branding, product line expansion and diversification.
Unfortunately each of these involves spending cash and none guarantee that any cash invested will be returned to the business owner in the form of new sales. The world is littered with examples of businesses which have invested current (or borrowed) cash in order to grow – and failed as a result.
Bartering represents an amazing offering for businesses – allowing them to “trade what they have – for what they want”.
When a business can convert its surplus capacity into something of value – either expense already budgeted for or investments aimed at company growth – the business will succeed.
By utilizing the margin in a product and service, barter allows companies to always purchase at a discount. If the manufacturing cost of an item is $10 but you can trade that item at its’ retail value of $16 for printing, the $16 dollar print job only cost you $10.
In situations where companies have strict budgets or have spent their financial allotment, the purchase of services like media and travel can be bartered for thus not exceeding budgetary restraints and in turn increasing purchasing power. Many companies use barter to augment their advertising budgets which in turn bring them additional cash clients.
If the inventory was one that was previously going to be liquidated at 10% of value, it is easy to see why the popularity of barter is growing worldwide.