Many entrepreneurs decide to go into business and then search for the ideal business concept. There is nothing wrong with this approach, but it does raise the question of how to determine which business opportunity is right for you and whether the business idea is worth pursuing. The formal business planning process provides for this type of analysis. It is a process that helps the small business owner to remove the ‘rose colored glasses’ and investigate the business idea based on hard facts and realistic analysis. The planning tool used to determine the viability of a business opportunity is called a feasibility study.

The objective of the feasibility study is to minimize the degree of risk that a business owner is about to assume. Upon completion of a feasibility study, you should be able to conclude whether the opportunity has profit potential and is therefore worth the investment of your time, effort, and funding. If the study shows that the business idea is financially viable, much of the information collected can be used in formal business planning documents.

A word of warning, hold back your enthusiasm for a business idea until you after the feasibility study has been completed. Don’t spend a hundred, don’t sign anything, don’t start anything. Heeding this one warning could save you a lot of money, time, and pain.

A detailed feasibility study should include:

The Business Opportunity

Begin with a description of the business opportunity in as much detail as possible.

legal restrictions

You should investigate whether there are any legal restrictions on conducting this type of business. This could include regulatory requirements for specific qualifications or licenses. Home based businesses usually require permission from the local council to operate from home. There’s no point in jumping into a business that requires qualifications or licenses you don’t have.

Market and Clients

You must conduct market research to determine the size of the market for your products and services and to profile the characteristics of both the market and your competitors and potential customers. You should also assess whether you can offer something unique, better, or different than what your competitors are offering, and determine likely purchase quantities and price points for your products. Your market research should also include identifying any issues that may affect the market or industry in the near future.

operational problems

Operational issues such as the location of the business and the type of facilities required need to be investigated and addressed. Examine the required space immediately and assess whether it will be adequate given your projected business growth over various time frames. He asks how you will identify the most appropriate location and type of space.

You also need to consider how you will finance the required space. Will you be buying, renting or taking a long-term lease?

Examine the logistical aspects of running the business, such as how will you handle, transport and store goods in and out of your business? What distribution channels will you use? Do you need transportation such as a car, van, truck, or forklift? What other plant and equipment is needed to start operations and what is needed during the life of the business?

Management skills

This examines the management aspects of the business. Ask what types and level of skills are required to run this particular business. Who will manage the business? What roles are required and who will fill those roles? This includes marketing, finance, sales, information technology management, etc.

Essentially, you need to examine the skills required by this business opportunity and compare them to your own skills. Do you have the skills required to start this business? If not, can they be easily purchased? Are you interested in acquiring these skills?

organizational skills

This examines the skills required by the business. Ask how much additional staff will be required to operate this business idea. Will you need to recruit new workers? If so, what skills and proficiency levels will be required. Do you know how to recruit these staff members and can you effectively induct and train these new recruits?

Do you have sufficient knowledge about the legal aspects of hiring personnel? Are you aware of regulations related to wages and salaries, taxes, workers’ compensation, workplace safety, and equal opportunity? Do you know where to go for this information?

Financial problems

This takes a detailed look at the financial issues related to the business idea. This includes all the important questions of what capital is required to start the business and how you will raise the required capital. What is your estimate of profitability after deducting all costs, including taxes? How much do you need to live per year? How long will it take to break even?

You also need to examine your own skills in relation to managing finances. Are you able to keep your own accounting? Can you manage cash flows? Do you know where to go for expert financial advice?

Sales and Marketing

This looks at what you hope your sales and marketing strategy will be. Examine how much time and money will be allocated to the sales and marketing function and determine what the most cost-effective promotional methods should be. It also asks who will be responsible for this function.

recommendations

The above is not an exhaustive list of questions to ask when conducting a feasibility study, but it does give you an idea of ​​what it should be. When you have done your research and found answers to the key questions, you will be in a position to perform a SWOT analysis. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. It allows you to take all the information you have collected and make a general assessment of the viability of the business.

Carrying out a feasibility study sounds like a lot of work, especially when you’re itching to get started, but if you want to save yourself a lot of time, money, energy, and pain, take the time to assess whether the business idea is really worth it. your investment A feasibility study can help you examine a large number of business ideas and allow you to weed out those that are not worth it and help you identify the one that is most likely to succeed.