Cost Of Entree

hello my name is Gary Shotton and I enjoy being a part of this and being able to talk to you as a part of inspiring better business ivb talks comm today we’re going to talk about the cost of entry and at first you might think what are we talking about cost of entry let me give an example when you are going to a sporting event or a concert a musical event there’s a cost of entry when you’re first starting there’s a cost to get started and at first you can think man I’ll get into something that doesn’t take take much money to get started in and that could be something like mowing grass you just have to have a lawn mower or that could be something like cutting hair you just have some scissors and maybe some trimmers and have a chair those things don’t take much money to get started in and so you can be all excited I can get into business right away and making money but let’s think about it a little bit where are you headed with this low cost of entry first of all it was easy for you to get in so that means anybody else that wants in the same exact industry that you’re in it’s also easy to get in and if it’s easy for everyone to get in and there’s a whole bunch of people in that industry or in that business then guess what you’re gonna have a whole lot of competition it’s probably going to be more difficult to actually make a profit because of the competition but if you can look at it and at least have a plan so that you can separate yourself from those that cost God in cheap or easily and make yourself different then you’re separating yourself from your competition I’ll give you some examples in a little bit so the point we’re making his think about where you’re headed every time I think about ever owning a business from the very point that I own or start or buy a business I’m immediately thinking about how can I sell it maybe fifteen years later but that is on my mind from day one you should do this as well because at some point you want to gonna one out and it’s all a lot of this is going to be due to the competition you have and how exclusive that you’re in in your business wellness so the key points here are low cost of entry in lots of competition high cost of entry are high cost of operation less competition those are facts now let’s give some examples when I first came to my town where I live now I needed a job my business I had a had a job and I moved from it to a new town expecting to have a similar job with good pay but it didn’t happen their economy dropped and so immediately I said what can I do to make some money this was emergency this was deaths not desperate but this was a critical just to get by and you could call it a lifestyle because I was able to immediately start moving people because I had moved using a borrowed trailer pulled behind my personal car and that’s how he would transfer to my personal goods to this new town so I just put an ad in the paper that said let me help you move and I started moving people extremely low cost of entry in fact I didn’t even buy what we call an appliance dolly for quite a few jobs I didn’t actually buy blankets for several jobs because I used some old blankets we had and so I’m in it dirt cheap but guess what there’s a lot of other people that can get in that same business just as easy as I did now over time I was able to except myself from the others and I started adding myself as a dealer for a rental company and then I became an agent for an Internet interstate company and then I actually started moving people internationally so you wanted to move to Germany we moved some people to Germany you want to move to Zambia we started moving people to Zambia but that was down the line so I started separating myself from the local mover the person that’s just moving households from one house to the other in the same town let’s talk about this machine shop now machine shops are typically and my machine stop shop has a very high cost of entry some of my machines when I first bought it the entire company is to two million dollars plus two and three-quarter million by the time I built the building that I needed to start in addition to what was already there so the cost of entry was pretty high who has the ability in my case to borrow that much money not that many people now somebody else could start with just one machine but that’s a slow go that’s a process of starting with one machine and guess what with one small machine you’re not going to have very good or big customers the big customers want to deal with bigger suppliers like myself but immediately I looked at this situation this is almost a thorn 14 years ago and I said I want to separate myself from this little eight the little job shops the little people and so I started purchasing bigger equipment slow but steady I bought some equipment that cost five hundred thousand dollars my first purchase was almost four hundred thousand and then later on was a five hundred thousand dollar for one piece of equipment and later on my major purchase that I ever made was seven hundred and fifty thousand dollars for a very large machine that could do very large parts why did I do them well because it separated me from those other people that had a low cost of entry those people that are doing little jobs cheap jobs for the little companies I wanted to be bigger and stronger so I had bigger and stronger companies that work for me and I have less competition you’ll always have competition never think it you’ll not have competition just wait a while and somebody will join in and be competing with you if you’re profitable but the process was that I was able to grow myself into something that I separated myself and in my town right now there’s probably ten or less machine shops that have some capacity that would be my competition but with most of my customers there are only one or two other people that are actually working for and trying to do the same business I’m doing in my town let’s talk about my dad my dad had a higher cost of entry it was back many many years ago but he had to buy a tractor he had to buy equipment he didn’t have the land he wanted to buy the land that was a higher cost of entry he had to rent the land he actually rented from somebody else that owned the land it was a percentage of the crop a percentage of the cash crop and he actually rented for 20 years and he gained ground he gained income and finally after 20 years he was able to buy his first piece of land and then he bought a lotta land he bought more and more land he’s going and he’s separating himself and guess what at the end of his life and at the end of his era as owner of our farm and ranch that that had value was the land not the old equipment not that anybody could movement could farm the ground that would take over just like he did all they needed is a tractor and some basic equipment now what about somebody that has a is a hairstylist well if you’re the one that has the shop like you have the booth and we have a lot of other ladies or men working in your booth and they’re renting a booth that’s how it works so if you’re the independent owner that’s just renting a space at the shop low cost of entry so you’re not going to have a lot of edge on the hundreds of other people that are cutting hair or just are doing styling for ladies in the hair or men but at the person that actually gets the building and it creates the lease and has more stalls and more chairs and does they have the advertising now they raise their size and it’s harder for other people to compete with them I got I love a great example of what we call the food vendors the little machines where you put a quarter in and you get some candy or you put a dime in and you get some gum I know of a story in my town back in the early 80s when I was just moving here this other man his name is Paul I’ll just leave it at that and he started he told me for seven years he had vending machines where he put in the candy that the the cough drops the lifesavers the things that and for seven years he just drove around in his car and he started plugging and filling these on a regular basis and he started gaining mentum and now he started buying bigger machines and bigger tend are not just candy machines obviously liquid like sodas and pop but also making sandwiches and other things that people would eat in a vending machine guess what the last time I heard him talk he was doing one hundred and ten million dollars in revenue in a four-state area because he was not only doing vending machines he’s now doing catering it at an inch Wow he took what was a low cost of entry and grew it into something it’s hard to compete with him coffee candy sandwiches and he’s making a ton of money so think about your business are you going to be able to compete if you got in low if you got in with less money it was cheap getting in then probably other people can get in to compete with you if you did that fine think about how you could separate yourself it’d be like a race you’re running around the lap of a long-distance race how can you get farther ahead separate yourself from your competition and you’re going to be better off you’re going to be able to make profit you’re going to be able to at the end of your lifecycle with this business sell it sell the business if that’s what you want or pass it on to someone and it has value you want profit while you’re going but you want value at the end of your ownership well I hope this helps we’re here as a part of inspiring better business thank you for being a listener to this please let us know please pass the word thank you