Analyze the Feasibility of Your Business Idea

Put your ideas to the test before you try to implement them.  This will help you determine the things to take into account when you create your business plan.  Find successful entrepreneurs, and people who are knowledgeable about your field.  Ask them to evaluate your business ideas and tell you what they think.  They'll know the problems you are likely to encounter. You may be willing to face those obstacles -- or you may not.  These efforts will lead you to an idea that has a solid chance of success. 

Your feasibility study can be a formal document that leads to a business plan that will help you recruit potential partners, investors or lenders.   Your study requires in-depth consideration of the following issues:

1.       Your Business Vision.  Ask yourself these questions to help clarify your vision: 

• What business are you in? What do you sell (products, services)?
• What are the reasons a customer would do business with your company?
• How is your business unique? Why will your goods or services appeal to customers?
• How will your products and services be designed, manufactured and delivered to customers?

2.       The Management Team.   Consider how your business will be managed on a day to day basis. Consider hiring and personnel procedures.  It’s hard to go it alone so consider putting together a management team?  Teams are more impressive to lenders than individuals.  Potential lenders and investors will want to know:

• Who will manage the business? 
• Does your management team have experience in the industry?
• What skills or qualifications does the team have? 
• What skills or qualifications are missing from the team? How will you bring the missing skills and qualifications to your business?

3.       The Market.  What do you know about your target market? You’ll have to conduct market research. Consider both the negative and positive perceptions that customers have about you, your business, and its products or services? Identify the consequences of those perceptions.   You can ask potential customers how much they'd pay for your product or service. Their answers will give you a sense of how strong the market is.   Answer these questions:

• Who are your target customers? Where are they located?
• What are the lifestyles and demographics of your customers?
• What are your customers needs and wants?
• What unmet needs do your customers have? How will your business meet those needs?
• What problems does your product or service solve for your customers? 
• How big is the potential market? Is the market growing?
• What are the costs required to reach the target market?

4.      The Competition – You can learn a lot about your business by looking at how your competitors do business.  How will competitors respond when your firm enters their market? What are the primary differences between your company and your competitors? What are the driving factors to choose your business over another?   Answer these questions to learn from your competition and focus on your customer:

• Who are your major competitors?
• Is your product or service superior?  What is your primary competitive advantage?
• How are competitors approaching the market?
• What are the competitor's weaknesses and strengths?
• How can you improve upon the competition's approach?

5.       The Costs.   Take the time and money to invest in preparing financial projections.  Take into account the collection period for your accounts as well as the payment terms for your suppliers.  A cash flow projection will show you how much working capital you will need at all times.  Test your assumptions and determine your break-even point. You need to know:

• What it will cost to start and run your business?
• Where will you raise the money?
• How will you make money?
• What is your break-even point?
• How much profit potential does your business have?    

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