In all my how-to-start business articles, I always make emphasis on why it is paramount to conduct a feasibility study before setting out to start any business of your dream. Not doing this is one of the silly mistakes entrepreneurs make and like expected, cost them a hand and a leg.
A feasibility study is an important process you shouldn’t skip especially if you’re desperate for success. Like Sydney M. Brewer said, “A man who is prepared has won the battle. Even the Christian holy book made mention of planning before delving into any project –
Suppose you want to build a tower, won’t you first sit down and estimate the cost to see if you have enough money to complete it?
Planning is a prerequisite for success in business; and that is done by conducting a well detailed feasibility study. If you refuse to plan for success, then you’re planning to failure.
Before I started my first partnership business here in Nigeria, my partners and I took a month, planning every step and process. We were brainstorming together and honestly, it helped us on the long run. Planning ahead made us to see the bigger picture, including seeing our strengths and weaknesses. It wasn’t fun at all. My stressed mind always scream at every roadblock. However, I was able to grasp the importance of conducting a feasibility study before starting any business.
WHY SHOULD YOU CONDUCT A FEASIBILITY STUDY?
There are bounteous reasons why you should conduct a feasibility study before starting your business. In this article, I’m going to tackle the three core benefits.
1. To determine the profitability of the business – This is obviously the main reason why you should never embark on any business until you have run some background check. Determining if the business is profitable or not is the essence of a feasibility study. There are lots of profitable business articles on this site you should look into. However, your geographical location can say otherwise hence, the reason for a feasibility study.
This will warrant taking a closer look around your environs. Is there a market for the proposed business? Will the business strive in your immediate environment? How big is the market if there’s any?
2. Helps to identify flaws, challenges, weaknesses, opportunities and threats – Every business comes with their ups and down no matter how easy it is to start. Conducting a feasibility study helps you to identify these weaknesses and threats. It will probably help to tackle them or better still, adapt to them.
3. A feasibility study will help determine the amount of capital required – In most of my business articles, I think I failed when it comes to giving a definite start-up cost for any business. This is because lots of factors have made estimation very hard. The cost of starting a business vary from one geographical location to another, even within a county. Conducting a feasibility study will help you know the overall cost of starting the business.
HOW TO CONDUCT A GOOD FEASIBILITY STUDY
1. MARKET ANALYSIS
This should come first when setting out to run a feasibility study. Enter the market and see if your proposed business really have a market. This is where you know if your goods or services are in demand or not. Ask yourself the following questions;
- My proposed business, how big is its market?
- Who are my target customers?
- What’s the level of competition?
- Which medium should be used to market my goods and services?
This will help you know your market more and how to convert potential customers to loyal customers.
2. LOCATION ANALYSIS
There are lots of location base businesses. What this means is that the location of a business can greatly affect the success of a business venture, unless you’re running the business online. Don’t just erect a structure anywhere simply because it is unoccupied. A feasibility study will make you analytic for a moment, it will help you discover the perfect location for your business and how to go about securing it.
3. MANPOWER ANALYSIS
If your business is the type that can’t be effectively run alone, then you’ll need to draw out a plan on how to go about employing skilled labour or staffs. Your study will determine if you’re to employ an expert in a particular field, or to upgrade your skills to meet the required standard.
4. FINANCIAL ANALYSIS
When conducting a feasibility study, one thing that must not be overlooked is the overall expenses and income, and also the financial flow strategy. This will be dealing with estimation and projections. The fact remains that a feasibility study will give you an overall overview on how much you need to start your business. Knowing the cost of starting that business will help you prepare ahead.
5. ORGANISATIONAL PLAN
This is the stage where you determine the type of business to register and how to acquire all the necessary license, permits etc.. Also, you will have to define the kind of qualifications potential employees must have to work in your business.
6. RISK ANALYSIS
Like I always say, starting a business without planning is like embarking on a war without scouting the enemy. It’s like delving into an ocean without checking if it is safe or not. All businesses come with risks. A good feasibility study should be able to disclose all the risks involved. This will help you start with confidence cause the risks are no longer strange or alien.
A good feasibility study will help you on how to draw a well detailed business plan. If the process of conducting a feasibility study sounds like rocket science to you, don’t worry. In this case, I will recommend you meet an expert who will help you out. All you will lose is just a token. If you have further questions, use the comment box.
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