Friday, July 13, 2012

What Are Two Common Barriers That Prevent Firms From Entering a Market?

by Vince Rogers

Many people dream of starting a new business. Many of us will succeed in getting that new business off the ground. Unfortunately, many of these businesses will fail. For those businesses that never get off the ground; there are a number of “Barriers to Entry” that prevent these enterprises from launching
 There are many barriers to entry into a market that new companies can face such as:
·         Lack of Access to Proprietary Technology
·         Government Regulations or Bureaucratic “Red Tape”
·         Zoning Issues
·         Existing Customer Loyalty for Competing Products
 However there are Two Common Barriers That Prevent Most Firms from Entering a Market. This is true whether you’re trying to open a typical fast food franchise or an innovative high tech start-up. They are Lack of Access to Sufficient Startup Capital and Lack of a Solid Business Plan.
 It is often said that the number one reason for business failure is lack of access to sufficient operating capital.  Lack of Access to Sufficient Startup Capital is the number one reason that most businesses never get off the ground. If you don’t have personal savings to fund your Business, then you will have to acquire it from other sources. The most common sources of business financing are:
·         Family
·         Friends
·         Banks
·         Venture Capital Firms & “Angel Investors”
Financing from most of these sources will come in the form of loans that will have to be repaid. Venture Capitalists or “Angel Investors” will seek to acquire some percentage of ownership interest and control. However, sometimes aspiring entrepreneurs simply can’t obtain the necessary funding to start their business. In many of those cases, the one thing that they often fail to accept is that their concept or idea just may not be ready to be a real business.
If you can’t acquire the funding to launch your new business you might want to consider the obvious – your concept may not be strong enough to be an actual business yet. The second most prominent barrier to market entry is Lack of a Solid Business Plan. Having a great concept without a solid business plan can be a significant barrier to business success.  A well written business plan helps to guide you through each step of the process in formulating your business. If you are seeking to get funding from sources such as Banks, the SBA, Venture Capital firms or even your relatives, you’re going to need a high quality written business plan
If you don’t have enough money to fund your business from the concept stage through initial operations it is highly unlikely that your business will be able to get of the ground. If you don’t have a solid business plan you won’t have the roadmap you need for business success. Also, without a well written business plan it is unlikely that you will be able to acquire the additional capital you may need to succeed. 
This article is a companion to the  “Business Success” Video Series presented by Vince Rogers for
Learn about the Keys to business Success with help from the Principal Change Agent atVince Rogers & Associates 

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