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Free Book: How to Determine the Feasibility of Your New Business Idea

 

How to Determine the Feasibility of Your New Business Idea

A Step by Step Guide to Small Business Feasibility Study

How to Determine the Feasibility of Your New Business IdeaThis guide is a complete fill in the blanks template system that will help you predict problems before they happen and keep you from losing your shirt on dog business ideas.

This guide is a checklist for the owner/manager of a business enterprise or for one contemplating going into business for the first time. The questions concentrate on areas you must consider seriously to determine if your idea represents a real business opportunity and if you can really know what you are getting into. You can use it to evaluate a completely new venture proposal or an apparent opportunity in your existing business.

Table of Contents

1. Preliminary Analysis
2. Requirements For Success
3. Desired Income
4. Preliminary Income Statement
5. Market Analysis
6. Competition
7. Sales
8. Supply
9. Expenses
10. Venture Feasibility

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Sample Content

Perhaps the most crucial problem you will face after expressing an interest in starting a new business or capitalizing on an apparent opportunity in your existing business will be determining the feasibility of your idea. Getting into the right business at the right time is simple advice, but advice that is extremely difficult to implement. The high failure rate of new businesses and products indicates that very few ideas result in successful business ventures, even when introduced by well established firm. Too many entrepreneurs strike out on a business venture so convinced of its merits that they fail to thoroughly evaluate its potential.
This checklist should be useful to you in evaluating a business idea. It is designed to help you screen out ideas that are likely to fail before you invest extensive time, money, and effort in them.

Preliminary Analysis
A feasibility study involves gathering, analyzing and evaluating information with the purpose of answering the question: "Should I go into this business?" Answering this question involves first a preliminary assessment of both personal and project considerations.
General Personal Considerations
The first seven questions ask you to do a little introspection. Are your personality characteristics such that you can both adapt to and enjoy business ownership/management?
1.  Do you like to make your own decisions?
2.  Do you enjoy competition?
3.  Do you have will power and self-discipline?
4.  Do you plan ahead?
5.  Do you get things done on time?
6.  Can you take advise from others?
7.  Are you adaptable to changing conditions?
The next series of questions stress the physical, emotional, and financial strains of a new business.
8.  Do you understand that owning your own business may entail working 12 to 16 hours a day,  probably six days a week, and maybe on holidays?
9.  Do you have the physical stamina to handle a business?
10.  Do you have the emotional strength to withstand the strain?

11.  Are you prepared to lower your standard of living for several months or years?
12.  Are you prepared to loose your savings?
Specific Personal Considerations

1.  Do you know which skills and areas of expertise are critical to the success of your project?
2.  Do you have these skills?
3.  Does your idea effectively utilize your own skills and abilities?
4.  Can you find personnel that have the expertise you lack?
5.  Do you know why you are considering this project?
6.  Will your project effectively meet your career aspirations
The next three questions emphasize the point that very few people can claim expertise in all phases of a feasibility study. You should realize your personal limitations and seek appropriate assistance where necessary (i.e. marketing, legal, financial).
7.  Do you have the ability to perform the feasibility study?
8.  Do you have the time to perform the feasibility study?
9.  Do you have the money to pay for the feasibility study done?
General Project Description
1.  Briefly describe the business you want to enter.
_______________
_______________
2.  List the products and/or services you want to sell
_______________
3.  Describe who will use your products/services
_______________
4.  Why would someone buy your product/service?
_______________
5.  What kind of location do you need in terms of type of neighborhood, traffic count, nearby firms, etc.?
_______________
6.  List your product/services suppliers.
_______________
7.  List your major competitors - those who sell or provide like products/services. _______________
_______________
8.  List the labor and staff you require to provide your products/services. _______________
_______________

Requirements For Success
To determine whether your idea meets the basic requirements for a successful new project, you must be able to answer at least one of the following questions with a "yes."
1. Does the product/service/business serve a presently unserved need?
2. Does the product/service/business serve an existing market in which demand exceeds supply?
3. Can the product/service/business successfully compete with an existing competition because of an "advantageous situation," such as better price, location, etc.?
Major Flaws
A "Yes" response to questions such as the following would indicate that the idea has little chance for success.
1.  Are there any causes (i.e., restrictions, monopolies, shortages) that make any of the required factors of production unavailable (i.e., unreasonable cost, scare skills, energy, material, equipment, processes, technology, or personnel)?
2.  Are capital requirements for entry or continuing operations excessive?
3.  Is adequate financing hard to obtain?
4.  Are there potential detrimental environmental effects?
5.  Are there factors that prevent effective marketing?

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