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Types Of Economic Moats To Help You Make Money

There are many factors you should consider when choosing those best-of-breed businesses that have great growth potential and are capable of generating substantial profits for you over the years. So, how important is it that a company has a well-established economic moat? The short answer: crucial.

An economic moat refers to the notion that the business has some durable competitive advantage, not unlike a moat that protects a castle from attack. The wider the moat the easier it is to fend off attackers.

Finding a business with a wide moat is key to finding a successful business to own; the wider the moat, the more predictable its future 20 years down the road. Having a competitive edge, allows for a company to have a degree of predictability.

As an investor, you are looking for not only sustainable growth rates but also consistent growth in cash flow, equity and sales over a 5 to 7-year period of time. With increasing cash flow, profitability for both the business and you the shareholder arises.

With increasing cash flow, a best-of-breed business can whether the ups and downs of the economic business cycle paying off debt when needed or investing capital for expanding into new markets.

Wide moat companies are also protected from inflation since their monopolistic position enables them to raise prices at will.

Here are seven types of economic moats to look for in a potential business:

Brand a product or service youre willing to pay more for because you know and trust it. Companies like Disney and Nike have good brand moats.

Secret – a patent, copyright or trade secret that makes competition difficult or illegal. Examples of these companies are 3M, Pfizer and Apple.

Toll – having exclusive control of a market through government approval or licensing thus being able to charge a toll for accessing that product or service. Such businesses as PG & E, a utility company and Time Warner a media business fit the mold.

Switching – being too much trouble to switch to another provider due to the high monetary and time costs. Microsoft and H & R Block are two good examples.

Low Price – products priced so low no one can compete because they enjoy massive economies of scale due to a huge market share. Both Home Depot and Wal-Mart are examples of businesses that have used pricing to establish an economic advantage.

Network Effect – the ability to quickly dominate a network of end-users by being first in the market. EBay was the first online auction business to dominate the North American market.

Unique Corporate Culture – a way of doing business that would be difficult to duplicate in another business environment. Southwest Airlines benefited from this type of economic moat in the early years.

You need not find a company with multiple moats to consider it to be a potential investment candidate. It should have one moat that seems hardest to cross and one that is sustainable long-term. Once again, the establishment of a viable economic moat shows up in the fundamentals. Companies with consistently high growth rates of over 10% per year in sales, equity and free cash over many years are the ideal candidates.

How To Make Your Fortune With Door To Door Sales

A lot of people look down their nose at door to door sales but actual measurement shows it is a very effective way to sell.

Knocking on doors to sell is no more of an interruption than any other form of advertising. Even TV and radio advertising interrupts your shows or music. Like ll other advertising and sales, if you product or service is needed by the customer, they are glad you came by. If they don’t need what you are offering, they view you as a pest and an interruption. For example, if your toilet started dripping and flooding just before a pluming company knocked on your door, would you be glad they came by? Sure you would. That’s why raising interest quickly is so important in door to door sales.

A Great Way To Get Through

Door to door sales will get you through to a decision maker. You won’t get voice make, receptionists or other gatekeepers to stop you. If the door opens, you got through and you have a few seconds to raise interest and tell them how you can help them. Door to door sales allows you to get through to people you would never reach any other way. Door to door sales also gives you immediate customer feedback. If too many people don’t like your approach, your price or your product, you can change it quickly.

Undivided Attention

When someone answers the door, you have their undivided attention for a few precious seconds. There is no other form of advertising that provides this golden opportunity. TV commercials interrupt the show. Many people leave the room. Newspaper ads are an interruption for people trying to read the news. Telemarketing calls are taken while people eat, watch TV and do all kinds of things. Only door to door sales gives you their undivided attention.

Impulse Selling

Door to door sales gets impulse sales. Most other forms of advertising require a person to think now and act later. For example, TV ads require you to remember the name and number of the advertiser and decide to call them later. The same is true of billboards, radio ads etc. Only door to door sales puts a salesperson with an order form in front of a customer you have convinced to buy right now. That is the miracle and the magic of door to door sales.

No Cost To Try

Unlike all other forms of marketing, door to door sales costs nothing to try. If you can knock, you can sell. This allows small startup companies to compete with the big dogs and can bring in immediate cash to new businesses.

Easy To Evolve

Unlike other kinds of marketing that may take weeks and thousands of dollars to change, door to door sales is easy to evolve and improve. You can change your presentation, your price and your approach before you knock on the next door. The cost of this market research is zero. Give it a try and see who salutes it.

Used By Respectable Companies

Some people fee that door to door selling is only used by swindlers but some of the largest companies use this medium successfully such as AT & T, Time Warner and many others. Be proud if you sell door to door. You are in a good group of sales companies.

Door to door is as American as the front porch and as friendly as meeting your neighbors. It is a great way to market, and it should be a part of every salesperson’s sales tools.