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What are the entry barriers for startups?

eduardo.fernandez
31 October, 2016

Due to the recent economic recession, we are seeing more and more cases of entrepreneur initiatives. We could say that this is a way for people to do things their own way. It’s a new situation that is creating a wave of innovation and creative ideas that benefit all of society in general. However, there is one question that still remains as the key to begin this journey: what are the current entry requirements for the market?

Not everything is sunshine and rainbows during the entrepreneurs journey. In this day and age we will find entry requirements that may deter our initiatives if they are not taken care of.

This is why we would like to offer eight typically found entry requirements that most entrepreneurs will face along the way. Education and consulting are key to overcoming and making the journey easier:

  1. Finding your market reference. This is one of the first entry requirements that you may find when creating a company. It’s essential to understand that not all of the market will be available to you, and that you need to segment your clients. This is why you need to understand the market that you wish to venture into.
  1. Take a look at the demand, then create your product. This point is tied into the first one due to the product and the market being intimately connected. Many entrepreneurs, however, believe that their products are the best and immediately start by looking for a market that is willing to pay the price that they set. This is a recurring problem that creates consistent entry barriers and should really be taken into account. You must first look for needs that aren’t being fulfilled properly and create an offer that will satisfy those needs.
  1. Focusing on your competitors. Some propositions made by the entrepreneur may encounter a few issues when facing the real market. For example, you may find yourself facing a “red sea” where competition is rampant and vicious. They will no doubt do whatever they can to make it difficult for new companies to enter the market.
  1. Legal aspects. When it comes to entering a new market, it’s essential to become aware of any laws and regulations that affect said market. There can be many government restrictions in place that you are not currently aware of which may create more complications than any of your future competitors.
  1. Investment. This is the most feared stage of most entrepreneurs. Normally, investors will require a minimum contribution, which is usually around 30% to 40%, so that the entrepreneur is fully committed with their project. This is why this stage is sometimes considered the hardest entry requirement. However, now days, there are many ways to obtain a secure investment that does not require too much sacrifice. Some micro donations can be enough, depending on your capabilities to attract an audience that has an interest in seeing your startup project.
  1. Economies of scale. This point is crucial when it comes to being competitive as most startup companies won’t have access to economies of scale that make purchasing prices lower. This can become a handicap, as your competitors will have access to such facilities, so you must find a way around this without increasing your prices initially.
  1. Learning curve. Once a company has a direction to go in, you will find yourself facing the problem of your employees learning curve. This can be overcome by creating multidisciplinary teams that will enable your company to grow faster.
  1. The need to pay to appear on search engines. This is the first requirement you will want to look into in this day and age. It is no longer enough to have a good product, you now need people to know its name. This is why you want to appear in the first page and at the top of everyone’s search on the Internet. The use of SEO is essential, but it takes more that good practice. You will need to pay in order to be viewed by your potential clients.

We have seen that there are many requirements that make the entry of startups and entrepreneur a bit more difficult. Accessing investment funds is essential, but now days you can find way to meet this demand by a large majority. The main thing to tackle at the beginning is understanding your market and how you will enter it. With these practices you will guarantee a significant risk reduction when launching your new business.

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