Conducting Feasibility Study on a Business Idea

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A feasibility study helps to analyse the viability of a business idea. The feasibility study goes beyond the initial can we to answer the crucial question of

“should i proceed my the proposed business idea? The intricacies of the study are as follows;

1. Economic Analysis
I believe this is where your feasibility study should start from. What is the essence of carrying out market research or even going ahead to build a business when the economy does not favor entrepreneurship or private ventures? Analyzing the economy will help you align your planned business with the economic situation on ground. Economic feasibility should include analysis on government’s fiscal and monetary policies, import and export rate, inflation rate, and currency exchange rate and so on.

2. Market Analysis
The next thing you should be analyzing is the market for your proposed business idea. Carrying out a feasibility study on the market will enable you know if there is actually a need or market for your business idea. Market analysis will also help you to determine the size of the market, demographics and psychographics of the market, level of competition and the size of the market you can compete for.

3. Technical Analysis
This part of a feasibility study deals with the technological requirements of the business. Technical analysis will enable you determine the method of production to be employed, equipments, spare parts and tools, site development, supporting facilities, the nature of the factory building, fencing and so on.

4. Location Analysis
This is carried out with a view to determine the best location for the business in terms of nearness to high traffic roads, nearness to infrastructure, ease of transportation of raw materials and finished products, cost of land acquisition and so on.

5. Manpower Analysis
This part of a feasibility study deals with the process of estimating the level of skill, professionalism and number of employees to be hired by the business. The salary scale, incentives and pay package are also estimated at this point.

6. Financial Analysis
Financial analysis will be dealing with the estimation of the total capital involved, capital expenditures, working capital; profit and loss analysis, pricing of products, cash flow projections, projected sales revenue and the entire project viability. Everything concerning finance should be dealt with at this juncture. If you are trying to raise venture capital for your small business startup, then you have to do a clean job on the financial section of the feasibility report because this is where investors focus on. All they are interested in knowing is how much is the percentage return on investment and the payback period.

7. Sensitivity and Risk Analysis
This is the last part of a feasibility study and probably the most important. After all other factors have been analyzed and proven viable, sensitivity and risk analysis can come in. Building a business without properly conducting a risk analysis is like flying a plane without regards to weather condition.

Before any business idea is taken to the marketplace, its risk to reward ratio should be analyzed, the sensitivity to competition should be determined and the liquidation rate of companies in the industry of your proposed business venture should be calculated. With results obtained from sensitivity and risk analysis, growth and survival strategies can be developed for your proposed business.

As a final note, if conducting feasibility study is too technical for you; then consider hiring a professional to do the dirty work for you. It’s going to save you time and energy. And just before I drop my pen, always bear in mind that carrying out feasibility study on your business idea will help you forge a competitive advantage for your business and increase your chance of success.

Credit: Dada Adekunle

Read 1633 times Last modified on Saturday, 09 May 2015 06:33
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A social innovator, a fixer, who likes to make a difference and get things done better. His focus covers Project Management, Systemic Innovation, Product Development, Design Thinking, Business Strategy, Set-up & Development. Some call him a super manager, natural marketer and sales man. He is a Chelsea fan too.

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