Common Barriers To Business Entry
Barriers to entry is defined as obstacles that will stop a new competitor into entering a particular type of business.
Every business has some degrees of difficulty to start. Some businesses have low barriers to entry, while others have high barriers to entry that includes special certification, education or high capital investments.
Some of the most common barriers to entry are:
(1) Education, skills and training. Generally, professional, technical and scientific services require higher education, specialized skills and actual job experience. Examples of these businesses include accounting, bookkeeping, website design, graphics design.
(2) Government regulations, certifications and licensing requirements. An example is government license requirements for plumbers, electricians, etc. permits for restaurants, inspection standards, etc.
(3) Capital requirements. Some businesses have high start-up costs, eg. leasehold improvements for restaurants. Some business have low start-up costs. However, there is hardly any business that has no start-up costs. There is still a minimum amount of capital necessary to start a business. This is required to pay for business license and jumpstart marketing or advertising expenses.
(4) Networking contacts and alliances. Established businesses have built relationships with clients and suppliers who are loyal clients and bring referral businesses. New businesses will need to start from scratch to build contacts and alliances.
