Ch.5: Exploiting a Low Barrier Entry for a New Entrant
My very first class in this MBA program was my Entreprenuership class, and it was in this class where I first took real notice of the topics of low or high barriers to entry. In my last class, Marketing Management, I took on the portion of identifying barriers to entry in our group project. I feel like I have developed a really good base for it after these two classes. As a two time business owner and entrepreneur myself, I find this topic to be very important in identifying possible challenges one might face in first establishing a business. This blog post will discuss an industry with low barrier to entry as well as how a new entrant would best exploit this low barrier.
According to a study in 2013 on low barrier industries that compared the ten most common ones considered by entreprenuers, the highest ranking overall was Professional, Scientific and Technical Services (Gershon, 2013). The study took into account the relatively low startup costs and number of business births in these sectors.
For the purpose of this blog I am going to speak on the industry of Professional services since that is the specific field in which I currently work. More specifically, I will focus on the private practice mental health professional industry. I will speak to my own entrance into this industry and the barriers that I did have to exploit.
For the purpose of this blog I am going to speak on the industry of Professional services since that is the specific field in which I currently work. More specifically, I will focus on the private practice mental health professional industry. I will speak to my own entrance into this industry and the barriers that I did have to exploit.
I started my first private practice, Kitchens Counseling Services, as a LPC (Licensed Professional Counselor) in 2011, after my hand was forced to do so. I was working as a contract therapist for someone when we lost our primary contract to a larger agency. I even interviewed for this exact position at this agency and was not hired. I am sure my 6 month pregnant belly probably had something to do with that. I was only able to secure a PRN position for another local agency for whom I had previously worked. It was at this time that I was confronted with the idea that I may not find employment for awhile and my best bet might be to start the private practice that I knew I wanted to eventually start .
I had the credentials, and honestly that may be the biggest hurdle there is. Aside from that I had to get a state business license, malpractice insurance, find a suitable business office, and then get the clients. The biggest fear for those jumping into private practice is finding the clients and then going through the "dry time". Most people don't start out with full caseloads. I started with two. My church was very gracious and allowed me to use their parlor, which equated to a very nice large office with couches. It was ideal for what I needed until I could get my own place. Paneling with insurances was also another big hurdle. That takes time from the moment you fill out the applications (which can be tedious themselves), sometimes up to 6 months. Until then I used a sliding scale based on reported income. It takes a lot of patience, more so than upfront costs. Without having to pay for an office, I only had to invest less than $500 and go without significant pay for a while. I did start paying rent towards an office later that year and that added $300 a month. Again, that is a significantly low rate and not a huge barrier for a new entrant.
Many individuals often share office space, which is something I do with a second location that I have. This is a smart approach for those who really want to incur the lowest possible overhead. With the Covid-19 variable there has been a slight change with how therapy is being provided to clients. Many therapists are only seeing clients via telehealth. I myself am seeing about half of my clients this way, but I give them the option to come in person and use my office regardless. Many therapists are making the transition to only working from home permanently. This provides some a really low level of overhead costs.
This past year I also started another practice, Puzzle Collaborative, that also offers others services in addition to counseling. I am bootstrapping from my already existing private practice so the entrance barriers are very low. One way for an individual to get into this industry at a minimal investment is to do contract work, which is the type of employees that I employ. I provide the office space and billing. They provide the clinical skills, credentials, and malpractice insurance. It truly is an ideal situation for a new entrant.
Low barriers to entry are often one of the biggest enticements for new entreprenuers when choosing specific industries and business ideas. I personally wouldn't have jumped into this industry if the barriers to entry were too tedious or difficult. I am very glad they weren't and now 9 years later I am happy to see that things are moving along to starting another business.
References
- Gades, S. (2018, August 01). Photo by Samantha Gades on Unsplash. Retrieved July 08, 2020, from https://unsplash.com/photos/BlIhVfXbi9s
- Gershon, L. (2013, March 29). Study: Industries with Low Barriers to Entry. Retrieved July 08, 2020, from https://www.creditdonkey.com/barriers-to-entry.html
- Kitchens, J. C. (n.d.). Kitchens Counseling Services. Retrieved July 08, 2020, from http://www.kitchenscounselingservices.com/
- Kitchens, J. C. (December, 2019). Puzzle Collaborative. Retrieved July 08, 2020, from https://www.puzzlecollaborative.com/
- MacInnes, D. (2017, March 14). Photo by Danielle MacInnes on Unsplash. Retrieved July 08, 2020, from https://unsplash.com/photos/IuLgi9PWETU
- Preez, P. (2019, March 06). Photo by Priscilla Du Preez on Unsplash. Retrieved July 08, 2020, from https://unsplash.com/photos/F9DFuJoS9EU
Comments
Post a Comment