If you read my previous article on how to generate business ideas – now you need to know if the idea can be converted into a thriving business
How do you assess the feasibility of your business idea?
I have developed a system that you can use to see if your ideas will pass the litmus test of viability and feasibility.
- Profitability – what is the difference between your selling price and the cost
of sales – this called the gross profit has to be adequate to cover the costs of staying in business and also yield a profit adequate to meet cost of your entrepreneurship. Also the profitability has to ensure that the ROI demanded by your investors is met to meet their payback and business valuation requirements.
- Technical feasibility – does the business have the technical and technological resources to required to create the business processes required to meet critical success factors
- Market feasibility – is the market large enough to meet the sales target and profitability target of your company. How much will it cost to reach the customer segment that the business is targeting – i.e. the customer acquisition cost
- Competitiveness – will the business be able to meet the competition especially if it operates in an industry with high competition. What will be the business competitive advantage.
- Scalability – will your business be able to yield economies of scale – can the business increase production throughput without increasing fixed costs disproportionately.
- Risk Reward factor – what kind of risk is the business taking and is it being compensated adequately for the higher level of risk. Investors too will demand a higher ROI if they perceive a higher level of risk in the business.
- Financing – if your business is capital intensive it might require a big cash outlay – will you be able to raise the amount of funding required while still maintaining control of your business?
- Industry knowledge – is a key factor for any business – if you don’t have adequate expertise and the learning curve is too steep you may spend too much time learning the ropes and losing out in the process.
- Exit #strategy – begin with the end in mind – how will you sell and profit from ultimate disposal of the business? Concentrate on increasing the value of your business right from the time that it is a startup
Use the above factors to see if your idea meets the criteria – some issues might be more important than others but don’t worry too much if you don’t have the answers to all the issues raised – since this is still the researching phase. Go out and look for mitigating factors that you can use to answer any doubts or risks that you have about your business idea.
It is a good idea to create a vision and mission statement and focus more closely now on the nuts and bolts of what you have to achieve to call yourself an entrepreneur.
The next step is creating an actionable plan for your business including an project cost summary and a means of financing schedule.