Doing a feasibility study will help you determine whether your new business idea is worth pursuing. While developed by a group of SCORE consultants for new business start-ups, this process also works for expanding businesses with new products or services.
Start by writing answers to the following eleven questions. Keep your answers short. You can fill in the blanks and refine your thinking later.
What do you want to achieve by starting your business?
You must be specific about the income you want to make, remembering that you won’t have any employer-provided benefits. You also can include personal factors such as working with your family or in a field you enjoy.
What products/services are you selling?
Describe what you are selling and emphasize what makes them special, unique and desirable in one or two sentences. This requires you to write a 10-second commercial.
What makes your business special, and why you are confident that it will be successful?
Use no more than 75 words to describe why people will buy from your firm rather than your competitors.
What customers are going to buy your products/services?
Describe who you expect to become your customers.
Where (geography) are you going to sell?
Where are your potential customers? How close are they? Do they live/work/drive by your business? What facts/numbers do you have to demonstrate that there are enough potential customers in this area for you to be successful?
Of course, the Internet throws a twist to this question, as most businesses will be using this as a channel if not their core distribution.
Which competitors are you fighting for your potential customers money?
Who else is selling products/services similar to yours in the same market? Why will your customers purchase from you rather than your competitors? List your key advantages vs. each of the top 4-8 competitors. This works best in a simple chart.
What pricing strategies will you use to determine how much you will charge?
You must relate your pricing strategies to what your competitors are charging for similar products/services in your market. You also need to decide:
- How much to discount,
- How often to discount, and
- On which lines of products to offer discounts.
What marketing efforts will you use to get customers to find you and persuade them to purchase your products?
Advertising, public relations, sales people, Internet, social media, promotions, events, and direct mail are just a few to consider.
Your marketing plan probably will be longer and more detailed than the feasibility work.
How can you get a reaction to your products/services?
Can you develop and try to sell a prototype or trial offer? Before spending a significant sum, how can you get real world knowledge?
How much can you contribute?
Can you self-fund your new business? If not, all financial resources will want you to contribute a significant amount to be sure that you are committed.
What are the numbers?
- How much funding do you need,
- What’s the cash flow, and
- Will your business meet your financial objective in the first question?
Your answers to these questions are the basis for projecting your business’s revenue and a significant amount of your costs. Typically, these questions take a total of only 4-6 pages plus half-dozen spreadsheets to answer.
If your decision is positive, then you’re ready to start developing detailed business and marketing plans, and looking for financing if necessary.