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Starting your business / Feasibility Analysis for a New Business Idea

Before plunging into a business, it is best to test out ideas and to ask the hard questions to start with so as to avoid problems and costs later on. However great an idea seems, its best to take a step back and ask yourself a few basic and broad questions to get you thinking in the right direction.

• Does this business address a recognized need in the marketplace? And how do I know?
• Can this product or service be produced at a profit?
• Can this business compete with other similar businesses?
• Does this business match my dreams and goals?
• How much time can I invest in operating this business?
• How much money can I invest in this business?
• Do I have, or can I acquire, the skills necessary to run the business
• How will this business affect my family?

Now, its time for a more in-depth approach.

The feasibility analysis is meant to take much of the guesswork out of the business idea. It is aimed at seeing if the concept is viable. It's best to conduct it at the early stages before too many resources are allocated.

Four Main Stages of Feasibility Analysis

1. Writing a concept statement - This should include:
• A description of the product or service being offered
• The intended target market
• The benefits of the product and needs it is meeting
• A description of how it will be sold
  
2. Concept testing
• Make a few, sell a few, gauge response and reassess
• Is there a demand for more, how's the pricing, need for different packaging, color ? Can you deliver? Can your wholesales. Is it as good or better than similar products?
• Testing assists in estimating market share, and assists in real development of the product not just the idea.
  
  
3. Market / Industry Feasibility - Assessment of the appeal of the product or service in the market
• Meets an important need to the customer
• Generally the best markets are the ones that are growing – electronics/ home improvements/ services
• Young rather than old markets
• Not crowded markets – not too many competitors
• Is it timely to launch the product or service, - e.g. tourist related when tourist market taking off. Marcom services when Hitech sector in growth phase
• Identifying a niche. Niche markets are the best place to start for small companies
• What is the competition doing?

4.    Organizational Feasibility

 This is concerned with the organization's business's skill's and resources capacity to bring the product or service to the market successfully.

• Management ability – are the skills there and is the passion there to get the business going. Is the management team familiar with the industry and the market? And dose it have the technical expertise to get the business concept off the ground.

In addition do they have the resources in terms or finances, space and  legal structure.

5.  Financial Feasibility

• What are the financial resources required for the launch period and beyond?
• What are the income forecasts and likely expenses?
• What is the breakeven point and expected rate of return?
• What is growth likely to be?
• What is the business model where are revenues likely to come from and will they be sustained?

These are the five factors that should be addressed before you launch a new business concept. It's worth putting in the effort and work before you commit a lot of resources. Any preparatory work will be of great benefit later down the track.