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Is your business feasible?

Guest post by: Rene Truter

Article Overview: Before you can start a business you must be reasonably sure that the business is feasible. One also needs to be certain of the resources required to start the business and then continue managing the business profitably. This article will guide you through the process of conducting a feasability study.

Is your business feasible?

What is a feasibility study?

A feasibility study is a due diligence or evaluation process that enables you to determine whether the business you want to start will be financially viable, in other words if this business will generate profits. It also gives you the opportunity to assess the cost of starting the business and sustaining it for at least the first year.

It's probably the most important exercise you will do in the whole process of starting a business. If your business is not viable, you'll know before you've spent any money andwill have saved yourself a lot of heartache and debt.

A feasibility study is not limited to starting a new business.You should also doone when buying an existing business. Thebusiness should be able to afford the funding requirements placed on it,producethe income required to live and be able to operate as a profitable concern.

The feasibility study isalso essential if you need to apply for finance and you'll need to formulate a feasibility questionnaire relevant to your business or industry as, this will lay the foundation of your assessment.

Questions to ask

First and foremost you must determine the nature of your business. What are you selling and where will you operate from? Will you manufacture your own products orbuy from a supplier. Other aspects to be addressed within this framework include:

• Evaluate your target market
• Who else is selling this type of product or service?
• What price will you charge?
• What are your competitors' prices?
• What will make you different from your competitors so that people will buy from you and not them?
• What will be your basic promotional mediums? Pamphlets, adverts in newspapers, sign boards, sales staff, etc.
• What will that cost you?
• How much turnover do you expect to make every week or month and are your products/services seasonal?

The second section that should be covered refers to what you need to run your business. For instance:

• Do you need a license or permission to operate your business?
• How much space do you need for your offices/factory?
• Will you rent or buy premises? Costs?
• Check how much electricity and water you will need and what the costs will be.
• Machinery, equipment, vehicles, furniture, computers and telephones - what do you need and what are nice to haves? What are the costs?
• Research your suppliers of your products. Compare prices and look at storage requirements.
• Where do your competitors purchase stock from?
• Are your suppliers reliable?

The third aspect you must address is how will you run your business? You need to answer questions like:

• Who will manage the business from day to day?
• What qualifications are required?
• What salary do you need to pay them?
• What other key positions need to be filled and who will fill them?
• Will you allow family to be involved and who will they be? Set out strict guidelines for all employees, including family
• Develop clear job specifications and salary structures so that you know how much your labour costs will be

Most important of all in this whole process: DON'T GUESS!!!

Take the time to make those phone calls and research every aspect of your business thoroughly. There's nothing worse than getting a very nasty invoice for services, stock or other costsand you haven't budgeted for it. It will drain your cash flow.

There are so many questions you need to ask and these do notcover all the aspects that should be researched, but it does give you a guideline as to the kinds of questions you should be asking and answering.

As an entrepreneur you will be investing your very valuable time and skills, perhaps giving up formal employment and then taking on financial risk to achieve your dreams. You owe it to yourself to make sure that you are reasonably certain of your investment decision.

Copyright© 2010 Business Partners Ltd. All rights reserved.

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Article Tags: due diligence, feasibility study, feasible, startup



Related Forum Posts
Re: How long should a Business Plan be? - It is not how long, but how feasible is your business plan. If you read Evan's ebook on Business Planing like the Masters, you will see on the bonus materials how some masters wrote only a few pages and investors fund their ventures
Re: Alexa Ranking Goals - Hi Mal, Good to see you on this thread! Getting your site from its current ranking to below 1 million is perfectly feasible. If you keep plugging away you'll be there well before the end of the year. DH
Re: Analysis/Paralysis - Of Course... - Thanks Martin. You see, I've been playing with a couple of business ideas over the last few months and while I've been taking proactive steps towards seeing if any of them are even feasible... I often find that I'm discovering ways in which my ideas "won't" work (or won't be profitable enough) because of competition, price points or whatever. However, I'm not sure if I'm just imagining excuses or if I have legitimate roadblocks. Maybe I just need to commit to one idea and "go for it" as you say.
Raising Capital - I would rather a loan than a partner. However, sometimes that's not always feasible due to lower credit scores, too much other debt...etc. When you absolutely do not want a partner or investor to have a stake in your business or invention and you can't turn to family or close friends without their wanting a piece of the action too, then in that case, you could set up some sort of drve that could get donations that can come from any outside source. Of course that is contngent on how much you are trying to raise. You would also have to be truthful and get people to donate on your behalf and tell themwhat it's for...you would be surprised how many people are willing to donate to hel an entrepreneur!
Re: Time to get rich in real estate? - I have a good friend who owns a home and works for himself. He was planning to get a loan to buy a second house and the plan was to rent out the first - at a profit of course. But, then one evening a couple of months ago, the building where his shop is located caught fire. His portion of the building was spared from the fire, although he did a lot of cleaning and some replacement to get rid of smoke and water damage. Problem is that the building needs quite a bit of work to be feasible for the business. He wants to buy the building where his shop is and has now figured out that this is not the time to buy a second house. Things are not going real smoothly, but it shows how quickly things can change. Chris


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