Feasibility Analysis for New Business Creation

Feasibility Analysis

• Feasibility analysis is a process to determine if a business idea is viable.
• It involves assessing various aspects of the idea, including the product or service, the industry/market, organizational resources, and financial projections.

Content

• Feasibility analysis itself is a key part.
• Product/service feasibility considers if the product/service is desirable to potential customers and if there is market demand.
• Industry/target market feasibility evaluates the attractiveness of the industry and the target market segment.
• Organizational feasibility assesses if the organization has adequate management skills and resources.
• Financial feasibility evaluates the financial viability of the business idea.

New Business Creation Process

• Recognizing a business idea is the first step.
• Testing the feasibility of the idea is next, to see if the idea is good.
• Writing a business plan follows.
• Launching the business is the final step.

Product/Service Feasibility

• Key questions to assess product/service desirability:
  • Does the product/service make sense and excite customers?
  • Does it leverage an environmental trend, solve a problem, or fill a market gap?
  • Is the timing right to introduce the product/service?
  • Are there any critical flaws in the product design?
• To test desirability, create a concept statement and get feedback from 10+ industry experts.
• Product/service demand needs testing:
  • Will customers be willing to buy the product/service?
  • How much would they be willing to pay?
  • Determine if there is existing demand for similar products.
• To test demand, use a buying intention survey of 20-30 potential customers to gauge their willingness to purchase and the price point they are comfortable with. Review purchase statistics from industry literature and/or the internet.

Industry/Target Market Feasibility

• Industry attractiveness factors:
  • Is the industry young?
  • Is the industry early in its life cycle?
  • Is the industry growing?
  • Is the industry not yet overcrowded?
  • Does the industry have high operating margins?
• Test industry attractiveness by considering Porter's Five Forces: threat of new entrants, threat of substitutes, rivalry among competitors, bargaining power of buyers, and bargaining power of suppliers.
• Target market attractiveness factors include assessing market size and buying power, market trends, and potential for growth.
• Use market size categories of TAM, SAM, and SOM to determine the size of the market.

Organizational Feasibility

• Key elements for assessment:
  • Management prowess - assess the passion, expertise, networks, and critical personnel (founders/partners) involved in the organization.
• Resources sufficiency - whether resources/infrastructure such as office space, lab space, manufacturing locations, and skilled personnel are available/sufficient.
• Key considerations include IP protection and government support.

Financial Feasibility

• Key testing aspects:
  • Total startup cash - determine total funds required for launching the business and outlining the funding sources
  • Evaluating the financial performance of similar businesses - use established business reports and research data
  • Assess overall financial attractiveness - compare the expected ROI to the investments required