Barriers to Entry for Small Businesses

Is your business David to someone’s Goliath? A Dingy to someone’s Steamer Ship? Is there a Dragon guarding the entrance to the Kingdom you want to own, or a jester dangling the keys just out of your reach? Well, in business, the fancy-dancy term for these kinds of challenges is “Barrier’s to Entry”.

What’s a “Barrier to Entry”? Anything that stops a newbie (whether a single shingle guy or a fortune 500 company) from entering a niche or business. This could be another company which is already well established in your niche, or it could mean that there’s a significant cost to get a company up and going, also known as “sunk costs”.

Maybe it’s not equipment, maybe it’s a special skill or license you need. If you want to own a beauty shop, you’re going to need a cosmetologist license and if you want to own a real estate agency you’ll need a Broker’s license, not just a Realtor’s license.

There are also things called “economies of scale” that, to my mind anyway, go hand in glove with barriers to entry. Economies of Scale is a big, complicated way of saying that buying in bulk is always cheaper. It’s why Wal-Mart tends to put mom and pop general stores out of business the moment they build a mega-store anywhere close to a small town.

Now, with all that said, how do you as a small business owner combat these barriers to entry? By exploiting your uniqueness. As entrepreneurs, we have to be nimble, quick-footed and creative business people. And we usually have to do it on a shoestring! Our ability to be creative problem solvers is our biggest asset in overcoming barriers to entry.

If your barrier to entry is a Goliath, then how can you create customer loyalty to the extent that customers are willing to go out of their way to buy your product? Customer loyalty is how Whole Foods stays in business. They found a niche and grew a loyal, almost fanatical, customer base. I know people who drive 30 minutes out of their way, with kids in the car, in order to buy their vegetables from Whole Foods. Nope, not kidding. Thirty minutes out of their way with screaming kids in the car!

Now THAT’S customer loyalty!

If your barrier to entry is in the form of equipment or licensing, then how can you get over, around or through it? Creative financing? Buying used instead of new? Co-opting the equipment? In the case of a license, maybe night school? Hiring an expert or consultant until you can get the required license or experience? LOL, patience? Hey, patience and planning are legitimate business practices!

So, what about you? How are you going to be different? How are you going to inspire fanatical customer loyalty? How are you going to blast through your barriers to entry and nail that Goliath in the eye to be the awesome small business owner I know you can be!

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