Consider the excitement and energy when starting your new business, either from scratch or through buying an established business. Now consider what happens when something doesn't go according to your expectations. This could be a reality for your new business if you do not undertake a feasibility study to realistically plan for your business success. Here are some initial questions that a feasibility study will help you address:
Consider your business market: does a market already exist for your business? If so, who are your competitors? What other businesses are already operating within this market and who will be your main rivals? Also consider how strong are your main competitors? If there is no current market, do you believe you will be able to create one to sustain your business?
Is your market static? Or is it undergoing growth or decline? Consider doing some research into your market dynamics so you know the direction your market is moving in.
How will you finance your entry into the market and your business until such a time as it is financially sustainable? What legal obligations are required for the type of business you are considering?
And finally you want to make sure you understand all of the skills required to operate a business in this area successfully. Do you have those skills already? Can you acquire them? Or can you hire in consultants or contractors that can provide those skills?
These questions are crucial to address when considering the feasibility of your new business and form the basis for your feasibility study.
Alternatively, if you are considering buying into an existing business, specific questions on the established business need to be addressed, such as: why is the owner selling? How are similar businesses currently performing? How good is the current business location physically compared to its competition? For example if the business is reliant on foot or street traffic for its customer pool, are there better locations? Have you had a good look around your respective selling area? Have you analysed, considered, evaluated and discussed what you are getting for the price you are paying? You will need to dig down to understand the real position of the business you are buying into.
When you are doing your feasibility study you can plan it under the following headings:
Revenue - your reasonable estimation of revenue your business will achieve. Plus the worst and best case scenario in respect to this estimation.
Competitors: a list of your competition currently existing in the market.
General Business Environment and/or Economic Impacts: you should describe the current environment your business will be starting in and also what you see the likely trends as being.
Your Business' Unique Selling Point: a clear understanding of what your business will differentiate itself with in the market - what will make people pay attention to your business over other businesses in the marketplace. This may be cost, quality or expertise, for example.
Cash Flow Analysis: formulate your cash flow analysis, showing when you expect money to come in and go out of your business and the associated amounts. This will allow you to understand your business cash needs and timeframes and help you plan to manage your cash. Often start-up businesses fail because they run out of cash - plan against this.
By completing your feasibility study prior to entering a new business, you will be putting down on paper the key facts about the business you are planning to undertake. This will allow you to have an objective look at the state of play and make a rational and more objective decision as to whether to go ahead or not at this point in time.
By taking out the emotional excitement from you decision to start a new business, by undertaking a feasibility study, you stand to give yourself the best opportunity for business success and minimise the heartache of wasted time, effort and money.
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