If you have a fabulous idea for a new business or an expanded product line for your existing venture, take some time to think things through before you invest a lot of time, money, and emotion in moving forward. Why? Research has shown that roughly one out of every 50 business ideas is commercially viable.
How can you find out if your idea will generate revenue, be accepted by the consumer, and be profitable?
The best method is a feasibility study.
Although there are many types of feasibility studies, and some you can be do by yourself, it is best to employ a professional consultant to assist you. The person conducting your feasibility study should be an independent, third party consultant without a vested interest in your project or concept. That enables them to retain impartiality and look at your idea from two main perspectives: 1) Will the product or service be accepted by the consumer, and to what extent?; and, 2) Will the product or service be profitable and generate a positive return on your investment, and when?
Having someone doing the business and market research independently removes the emotional aspect of your project or idea. You have come up with the concept, sketched out ideas, thought about names, and become emotionally attached to the idea. This is good, but should be reserved for after you’ve determined whether the concept is commercially viable.
What does a feasibility study consist of?
1) A major aspect of your feasibility study is determining if there is a viable market for your product or service. You need to know more than who is likely to purchase the product. You need to understand where those consumers are in terms of their buying power, repeating purchases, personal preferences, and the media that will influence their buying decisions in a positive fashion, among other information.
2) A second major aspect of a feasibility study is the financial viability of your idea. What will be the costs associated with producing the product or delivering the service, including manufacturing, staffing, packaging, selling, administration, and marketing, among others? What will the market bear in terms of pricing? At what point, if any, will the business break even and start generating profits.
The key to the financial perspective is being realistic in determining the projections. Similar to thinking “everyone” needs your product or service is the thought that you can sell 20,000 widgets for $25 apiece when the industry has been successful selling them at $15 each. You may stick with that projection, but will have to justify the $10 per unit difference to someone, including the consumer.
3) Other aspects of your feasibility study look at the overall economic conditions, how many jobs will be created or needed, the management structure of your venture and whether you have the experience required to manage the operation.
In short, a feasibility does cost you some money but in the long run it can save you money, time, and the heartache of failure. It becomes a matter of knowing how much you are willing to invest to determine if your idea is commercially viable.
Consider this: Would you rather spend $10,000 and two months to learn the idea isn’t commercially viable, or invest $200,000 and two years of sweat equity to discover the same outcome?
The role of the consultant in the process is to present every aspect of your idea in a fair, impartial and unbiased report so that you can make an intelligent decision. Whether you elect to move forward with your concept or send it to the trash bin is solely your decision.
That decision is best made from a business perspective, leaving emotions aside. Once you have made a decision to move forward, emotions must come back strong as you will need to invest your heart and soul in your exciting new venture.
Ask Brand Irons about their experience conducting feasibility studies.