Its referred to as barriers to entry. These are anything that prevents new startups from occuring. These can be natural or contrived.
As somebody who finally started their own business after 25 years of effort and a lot of luck I know these well.
The largest barrier is usually initial capital. Banks don’t give out loans to startups without assets. So if you have overall negative personal assets like large student loans, renting, car loans, etc you are fucked in getting a bank to fund your startup. I can’t get a line of credit for at least a year, probably 2. At least not one at a reasonable interest rate that doesn’t eatup all of my profit. I ended up taking a draw against expected revenue from a vendor who believes in me.
Health insurance (U.S), literally the reason I didn’t start my business 10 years ago & 5 years ago when I had 2 opportunities.
Business insurance: it took me 5 months to find somebody that would cover me.
Laws and regulations that create barriers to entry. These can be minor annoyance like fees and paperwork or major regulatory hurdles depending on the industry and country.
Infrastructure to conduct the business. I need highly specialized warehousing for 4 months of the year. I ended up renting from a company that is in a similar business as me that runs on a different cycle (they are empty when I need space). Building my own would require a loan… See above.
Available resources: Do competitors limit your available resources by market manipulation and anti-competative behavior. This is a huge one in industries dominated by oligarchies.
There are many more of these that are around.
Most of these can be alleviated by a fair sharing of revenue. 10 years ago I increased the companies net profit from $500K to $10million. They gave me 5% pay raise and $10k bonus out of a “Theoretical” $200K max.
Thank you, very useful to have someone who has done it in the thread. Would you agree that being born into one of the wealthy families in America would dramatically reduce the difficulty and risk of everything you’ve described above? All that stuff sounds so much easier if you’re rich enough to pay others to do a bunch of it, and rich enough to still be fine (even still rich, usually!) if it doesn’t work out.
Its referred to as barriers to entry. These are anything that prevents new startups from occuring. These can be natural or contrived.
As somebody who finally started their own business after 25 years of effort and a lot of luck I know these well.
The largest barrier is usually initial capital. Banks don’t give out loans to startups without assets. So if you have overall negative personal assets like large student loans, renting, car loans, etc you are fucked in getting a bank to fund your startup. I can’t get a line of credit for at least a year, probably 2. At least not one at a reasonable interest rate that doesn’t eatup all of my profit. I ended up taking a draw against expected revenue from a vendor who believes in me.
Health insurance (U.S), literally the reason I didn’t start my business 10 years ago & 5 years ago when I had 2 opportunities.
Business insurance: it took me 5 months to find somebody that would cover me.
Laws and regulations that create barriers to entry. These can be minor annoyance like fees and paperwork or major regulatory hurdles depending on the industry and country.
Infrastructure to conduct the business. I need highly specialized warehousing for 4 months of the year. I ended up renting from a company that is in a similar business as me that runs on a different cycle (they are empty when I need space). Building my own would require a loan… See above.
Available resources: Do competitors limit your available resources by market manipulation and anti-competative behavior. This is a huge one in industries dominated by oligarchies.
There are many more of these that are around.
Most of these can be alleviated by a fair sharing of revenue. 10 years ago I increased the companies net profit from $500K to $10million. They gave me 5% pay raise and $10k bonus out of a “Theoretical” $200K max.
Thank you, very useful to have someone who has done it in the thread. Would you agree that being born into one of the wealthy families in America would dramatically reduce the difficulty and risk of everything you’ve described above? All that stuff sounds so much easier if you’re rich enough to pay others to do a bunch of it, and rich enough to still be fine (even still rich, usually!) if it doesn’t work out.