“Although [an unsuccessful feasibility study] may appear to be a failure, it’s not. The failure would have been if you had invested your own and others’ money and then lost it due to barriers you failed to research in advance.”
David E. Gumpert, How to Really Create a Successful Business Plan
- Will this idea work?
- Should I go ahead with it?
- Does it make sense from an economic and operational standpoint?
The business feasibility study is an important part of developing a successful business. By doing a feasibility study you are taking the idea and moving it to the next level. It will help you to see if the idea is realistic and profitable. One of the best tools to start with is a SWOT analysis, where you identify Strengths, Weaknesses, Opportunities and Threats. Through this process, you can calculate the potential and then move forward to the next step with confidence. As you work through the process, things will become more defined.
A feasibility study should cover the following areas:
The concept of the service or product: Your idea needs to be developed into a concept. Start by creating a detail document about the venture. It should be written in a clear, detailed style that is easy to understand. The document should help to calculate the value, uniqueness and primary features of the product or service. Future opportunities and growth should also be considered.
The potential market: Is there a niche market for the concept? Who is the customer? Is there a need in the marketplace for the product or service? What percentage of the market share will be captured with this product or service? At this stage, you should conduct research on growth and future demand. Conducting a survey can also help uncover how others view the product or service. Focus groups are a good resource. At this time, you should also compile research on the competition.
Risk assessment: What problems may occur and how you are going to deal with them? It is important from a legal standpoint to do a risk assessment. This will help to develop a good structure that will be able to deal with both present and future problems.
Budget (cost vs. profit): What are the direct and indirect costs? What will be a mark up and if so will this cover all the costs? Will the company need to hire new employees? What will be the start up and set up costs? What are the capital costs? Will financing be needed to start and retain the new venture?
Technology and organizational requirements: Is this a new invention? On what technical level is the product or service? What technology is needed to produce or deliver the product or service? Who will oversee the development of the product or service?
The results of a feasibility study will help to determine whether the venture is a sound business idea. The next phase will be business plan development.
Be objective and realistic throughout the process. And remember, there is really no such thing as an unsuccessful feasibility study.
Here are links to a few resources that may help you in this process:
- A Free Online Business Course with Step-By-Step Instructions from About.com
- Evaluating the Feasibility of Business Opportunities from OMAFRA
For more information about any of Halton Region’s Small Business Centre resources and services, and how we can help direct you to the right resources, contact us at 1-866-4HALTON (42-5866), www.haltonsmallbusiness.ca, firstname.lastname@example.org or visit us at 1151 Bronte Road, Oakville. Don’t forget to follow us on Twitter @haltonecdev and Facebook at www.facebook.com/HaltonSBEC.