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:
For new businesses you need to ask yourself: is there a market for your new business idea? Who is already in that market and what competition are you going to face? If no market currently exists, will it be possible for you to create a market and create the demand to sustain that market? If there is already competition, then what is the level of that competition and who are your main competitors? - how strong are these competitors?
You also want to do some research to measure whether that market is static, growing or shrinking.
How will you go about financing your business? Are you aware of all the legal obligations of 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.
When looking at buying an established business there are questions to consider like: why are the owners selling? How are similar business performing? What is the location of the business like competed to its competitors and is it reliant on passing foot/street traffic? It is vital to consider these questions, analyse and understand them so as to be able to evaluate the asking price against your prospective business worth. You will need to dig down to see if the figures you are seeing really stack up before buying an existing business.
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: you will want to make a list of all the competitors you are aware of in your market area, the ones that currently exist in that location.
General Business Environment and/or Economic Impacts: a description of the current environment and market trends your business will be entering into.
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 an analysis that will look at when and how much cash will be coming into your business and going out of your business. This will allow you to plan for peaks and troughs and protect you from that fatal new business killer of running out of cash.
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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