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Feasibility and/or Viability? – Business Maths

A feasibility study is as important for those looking to grow as for those in business start up mode.  It is designed to identify the make or break issues that ensure a successful return on investment or … determine a potential failure.  `i am currently woking on a feasibility study for one of my clients which to be honest takes a bit of work.

There are three key areas to consider in a feasibility study:  the market, the organisation and the finance.  The difference between a feasibility study and a business plan lies in the depth of detail. 

The Market

Having identified a gap in the market – the feasibility study starts here.  Who will the offer attract, is it growing, shrinking or stagnant? Moreover, is there a market in the gap that you have identified?

What might be the demand for your proposed products or services? 

What are the demographic characteristics of your target market?

Where do they buy these services at the moment? Who are the direct and indirect competitors?

There are two aspects to the market analysis – the secondary (data collection) and the primary (target audience refections). Don’t ever ignore the primary research in favour of the easier collection of secondary data.

The Organisation

Proving sufficient demand for your offer may also rely on how you intend to offer the product or service. Things to consider are:

What is the best business model to deliver the opportunity you have identified?

What qualifications are needed to manage this opportunity?

Do you have them in your business now and what are the organisational needs for future growth?

The Finance

The maths is important – the final part of the feasibility analysis is to focus on the finance. Your income projections are a BEST GUESS.  I am often asked “how can we possibly know what income this offer will generate?”  We don’t know the real answer but thorough secondary and more importantly primary research will give you the answers to inform your BEST GUESS. If you don’t do that part of the feasibility study thoroughly, you won’t be able to do the financial analysis. The project start up and operating costs are not so difficult to determine through secondary research.  Make sure you include all the internal and external expenses in running the business. 

How are you going to fund this project?

What is the profitability?

What is the return on investment?

Over what period of time?

Feasibility

A feasibility study, may well provide the reasons not to proceed; It may enable the exploration of  other new options to be thoroughly investigated. Above all it is concerned with providing qualitative and quantitative information that helps effective decision making. 

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