What’s a Barrier to Entry?

You know, it’s one of the factors that affects how your business is valued.  It sounds logical…’how hard would it be for someone to get in your space?’  The harder it is, the more valuable your company should be.

(http://www.investorwords.com/425/barriers_to_entry.html)
 

I recently read a story about a visit to the Great Wall of China.  We have all seen pictures of it… a massive structure on uneven terrain; guard towers spaced along the expanse; almost a highway in the sky.  Easy tourist access.  That’s what we often see:

http://tinyurl.com/ns6zntr

What made me think of how it compares to valuation is the location of the wall.  It’s not built on a level plain where it would have been easier to build and more comfortable.  The ‘touristy part’ is the easiest section to show off.  But much of it was built on the highest mountain peaks…6,000 feet above valleys where the enemy would have just as much getting there as breaching it.cliffImagine the work to construct that structure with primitive tools and a lot of labor.  But the intent was to defend the homeland by keeping the invading hordes out.  Isn’t that what we want for our businesses?

If you create a business that is easy to replicate, AND you are successful, you’ll have competitors coming out of the woodwork.  If you are not successful, then never mind.

The moral from this:  Don’t necessarily pick the most comfortable route to build your business.  It may be indefensible from encroachment and ultimately diminish the value of your life’s work.

©Allen Business Enterprises, LLC

Cliff Allen – callen@allenbusinessenterprises.com

 

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