FEASIBILITY ANALYSIS
FEASIBILITY ANALYSIS
- Feasibility analysis is the process of determining if a business idea is viable. Many entrepreneurs make the mistake of identifying a business idea and then jumping directly to developing a business model.
- A feasibility analysis is an assessment of a potential business rather than strictly a product or service idea.
- Feasibility analysis is investigative in nature and is designed to critique the merits of a proposed business.
Completing a feasibility analysis requires both primary and secondary research. Primary research is research that is collected by the persons completing the analysis. While secondary research probes data that is already collected. The key objective behind feasibility analysis is to put an idea to the test by:
- eliciting feedback from potential customers
- talking to industry experts
- studying industry trends
- thinking through the financials
- scrutinizing it in other ways
Product / Service Feasibility Analysis
is an assessment of the overall appeal of the product or service being proposed.
- Product / Service Desirability
You should ask
the following questions to determine the basic appeal of the product or
service:
-Does it make sense? Is it reasonable? Is it something real customers will buy?
-Does it take advantage of an environmental trend, solve a problem, or fill a a gap in the marketplace?
-Is his a good time to introduce the product or service to the market?
-Are there any fatal flaws in the product or service's basic design or concept?
A concept test involves showing a preliminary description of a product or service idea, called a concept statement, to industry experts and prospective customers to solicit their feedback. After the concept statement is developed, it should be shown to at least 20 people who are familiar with the industry that the firm plans to enter and who can provide informed feedback.
There are also a growing number of online tools that help entrepreneurs quickly and inexpensively make contact with prospective customers and complete other steps in the feasibility analysis process.
-
Product / Service Demand
Talking Face to Face with Potential Customers
The only way to know if your product or service is what people want is by talking to them. The idea is to gauge customer reaction to the general concept of what you want to sell. One approach to finding qualified people to talk to about a product or service idea is to contact trade associations or attend industry trade shows.
Utilizing Online Tools, Such as Google AdWords and Landing Pages, to Assess Demand
A landing page is a single Web page that typically provides direct sales copy, like "Coming soon - Please Enter Your E-mail Address for Updates." Google will provide you analytics regarding how many people click on the ad and how many follow through and provide their e-mail address.
Library, Internet, and Gumshoe Research
While talking to prospective customers is critical, collecting secondary data on an industry is also helpful. A gumshoe is a detective or an investigator that scrounges around for information or clues wherever they can be found. The importance of library, internet, and gumshoe research doesn't wane once a firm is launched. It's important to continually assess the strength of product or service ideas and learn from users.
You should ask
the following questions to determine the basic appeal of the product or
service:
-Does it make sense? Is it reasonable? Is it something real customers will buy?
-Does it take advantage of an environmental trend, solve a problem, or fill a a gap in the marketplace?
-Is his a good time to introduce the product or service to the market?
-Are there any fatal flaws in the product or service's basic design or concept?
A concept test involves showing a preliminary description of a product or service idea, called a concept statement, to industry experts and prospective customers to solicit their feedback. After the concept statement is developed, it should be shown to at least 20 people who are familiar with the industry that the firm plans to enter and who can provide informed feedback.
There are also a growing number of online tools that help entrepreneurs quickly and inexpensively make contact with prospective customers and complete other steps in the feasibility analysis process.
-Does it make sense? Is it reasonable? Is it something real customers will buy?
-Does it take advantage of an environmental trend, solve a problem, or fill a a gap in the marketplace?
-Is his a good time to introduce the product or service to the market?
-Are there any fatal flaws in the product or service's basic design or concept?
A concept test involves showing a preliminary description of a product or service idea, called a concept statement, to industry experts and prospective customers to solicit their feedback. After the concept statement is developed, it should be shown to at least 20 people who are familiar with the industry that the firm plans to enter and who can provide informed feedback.
There are also a growing number of online tools that help entrepreneurs quickly and inexpensively make contact with prospective customers and complete other steps in the feasibility analysis process.
Product / Service Demand
Talking Face to Face with Potential Customers
The only way to know if your product or service is what people want is by talking to them. The idea is to gauge customer reaction to the general concept of what you want to sell. One approach to finding qualified people to talk to about a product or service idea is to contact trade associations or attend industry trade shows.
Utilizing Online Tools, Such as Google AdWords and Landing Pages, to Assess Demand
A landing page is a single Web page that typically provides direct sales copy, like "Coming soon - Please Enter Your E-mail Address for Updates." Google will provide you analytics regarding how many people click on the ad and how many follow through and provide their e-mail address.
Library, Internet, and Gumshoe Research
While talking to prospective customers is critical, collecting secondary data on an industry is also helpful. A gumshoe is a detective or an investigator that scrounges around for information or clues wherever they can be found. The importance of library, internet, and gumshoe research doesn't wane once a firm is launched. It's important to continually assess the strength of product or service ideas and learn from users.
Talking Face to Face with Potential Customers
The only way to know if your product or service is what people want is by talking to them. The idea is to gauge customer reaction to the general concept of what you want to sell. One approach to finding qualified people to talk to about a product or service idea is to contact trade associations or attend industry trade shows.
Utilizing Online Tools, Such as Google AdWords and Landing Pages, to Assess Demand
A landing page is a single Web page that typically provides direct sales copy, like "Coming soon - Please Enter Your E-mail Address for Updates." Google will provide you analytics regarding how many people click on the ad and how many follow through and provide their e-mail address.
Library, Internet, and Gumshoe Research
While talking to prospective customers is critical, collecting secondary data on an industry is also helpful. A gumshoe is a detective or an investigator that scrounges around for information or clues wherever they can be found. The importance of library, internet, and gumshoe research doesn't wane once a firm is launched. It's important to continually assess the strength of product or service ideas and learn from users.
Industry / Target Market Feasibility Analysis
An industry is a group of firms producing a similar product or service. A firm's target market is the limited portion of the industry that it goes after or to which it wants to appeal.
- Industry AttractivenessThe top three characteristics of attractive industries are:
-Are young rather than old
-Are early rather than late in their life cycle
-Are fragmented rather than concentrated
The top three characteristics are more receptive to new entrants than industries with the opposite characteristics. The degree to which environmental and business trends are moving in favor rather than against the industry are important too.
-
Target Market Attractiveness
Target market is a place within a larger market segment that represents a narrower group of customers with similar needs. The challenge in identifying an attractive target market is to find a market that's large enough for the proposed business but yet is small enough to avoid attracting larger competitors at least until the entrepreneurial venture can get off to a successful start.
-Are young rather than old
-Are early rather than late in their life cycle
-Are fragmented rather than concentrated
The top three characteristics are more receptive to new entrants than industries with the opposite characteristics. The degree to which environmental and business trends are moving in favor rather than against the industry are important too.
The top three characteristics are more receptive to new entrants than industries with the opposite characteristics. The degree to which environmental and business trends are moving in favor rather than against the industry are important too.
Target Market Attractiveness
Target market is a place within a larger market segment that represents a narrower group of customers with similar needs. The challenge in identifying an attractive target market is to find a market that's large enough for the proposed business but yet is small enough to avoid attracting larger competitors at least until the entrepreneurial venture can get off to a successful start.
Target market is a place within a larger market segment that represents a narrower group of customers with similar needs. The challenge in identifying an attractive target market is to find a market that's large enough for the proposed business but yet is small enough to avoid attracting larger competitors at least until the entrepreneurial venture can get off to a successful start.
Organizational Feasibility Analysis
is conducted to determine whether a proposed business has sufficient management expertise, organizational competence, and resources to successfully launch.
- Management Prowess
A proposed business should evaluate the prowess, or ability, of its initial management team to satisfy itself that management has the passion and expertise to launch the venture. Two of the most important factors in this area are the passion that the solo entrepreneur the management team has for the business idea and the extent to which the management team or solo entrepreneur understands the markets in which the firm will participate.
A potential new venture should have an idea of the type of new venture team that it can assemble. A new venture team is the group of founders, key employees, and advisers that either manage or help manage a new business in its start up years.
- Resource Sufficiency
The second area of organizational feasibility analysis is to determine whether the proposed venture has or is capable of obtaining sufficient resources. To test resource sufficiency, a firm should list the 6 to 12 most critical non financial resources that it will need to move its business idea forward.
A proposed business should evaluate the prowess, or ability, of its initial management team to satisfy itself that management has the passion and expertise to launch the venture. Two of the most important factors in this area are the passion that the solo entrepreneur the management team has for the business idea and the extent to which the management team or solo entrepreneur understands the markets in which the firm will participate.
A potential new venture should have an idea of the type of new venture team that it can assemble. A new venture team is the group of founders, key employees, and advisers that either manage or help manage a new business in its start up years.
The second area of organizational feasibility analysis is to determine whether the proposed venture has or is capable of obtaining sufficient resources. To test resource sufficiency, a firm should list the 6 to 12 most critical non financial resources that it will need to move its business idea forward.
Financial Feasibility Analysis
is the final component of a comprehensive feasibility analysis. A preliminary financial assessment is usually sufficient.
- Total Start-up Cash Needed
This first issue refers to the total cash needed to prepare the business to make its first sale. An actual budget should be prepared that lists all the anticipated capital purchases and operating expenses needed to get the business up and running.
- Financial Performance of Similar Business
it is estimated a proposed start-up's potential financial performance by comparing it to similar, already established businesses. There are several ways to doing this:First, there are many reports
available, offering detailed
industry trend analysis and reports on thousands of individual firms.
Second,
simple observational research may be needed to obtain sales data for similar businesses.
- Overall financial Attractiveness of the Proposed Venture
A number of other factors are associated with evaluating the financial attractiveness of a proposed venture. In the feasibility analysis, the extent to which business opportunity is positive relative to each factor is based on an estimate rather than actual performance.
This first issue refers to the total cash needed to prepare the business to make its first sale. An actual budget should be prepared that lists all the anticipated capital purchases and operating expenses needed to get the business up and running.
it is estimated a proposed start-up's potential financial performance by comparing it to similar, already established businesses. There are several ways to doing this:First, there are many reports available, offering detailed industry trend analysis and reports on thousands of individual firms.
Second, simple observational research may be needed to obtain sales data for similar businesses.
A number of other factors are associated with evaluating the financial attractiveness of a proposed venture. In the feasibility analysis, the extent to which business opportunity is positive relative to each factor is based on an estimate rather than actual performance.
A FEASIBILITY ANALYSIS TEMPLATE
First Screen
is a template entrepreneurial firms use to complete a feasibility analysis. It is called First Screen because a feasibility analysis is an entrepreneur's (or a group of entrepreneurs) initial pass at determining the feasibility of a business idea. The final section of the First Screen worksheet, "Overall Potential," includes a section that allows for suggested revisions to a business idea to improve its potential or feasibility. The value of the First Screen worksheet is that it draws attention to issues such as this one and forces the founders to think about alternatives.
is a template entrepreneurial firms use to complete a feasibility analysis. It is called First Screen because a feasibility analysis is an entrepreneur's (or a group of entrepreneurs) initial pass at determining the feasibility of a business idea. The final section of the First Screen worksheet, "Overall Potential," includes a section that allows for suggested revisions to a business idea to improve its potential or feasibility. The value of the First Screen worksheet is that it draws attention to issues such as this one and forces the founders to think about alternatives.
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