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Consider the excitement and energy when starting your new business, either from scratch or through buying an established business. Now consider what happens when something doesn’t go according to your expectations. This could be a reality for your new business if you do not undertake a feasibility study to realistically plan for your business success. Here are some initial questions that a feasibility study will help you address:

When looking at starting a new business, will you be entering into an established market? If so, you need understand your competition, who the market leaders are and strength of your competitors. If alternatively there is no established market, you will need to be able to create the market you need to sustain your business.

You also want to do some research to measure whether that market is static, growing or shrinking.

How will you finance your entry into the market and your business until such a time as it is financially sustainable? What legal obligations are required for the type of business you are considering?

Consider the skills-set required to successfully operate your business. Will you need to acquire some skills or do you have them already? Or will you be considering hiring them through consultants or contractors?

These questions are crucial to address when considering the feasibility of your new business and form the basis for your feasibility study.

When looking at buying an established business there are questions to consider like: why are the owners selling? How are similar business performing? What is the location of the business like competed to its competitors and is it reliant on passing foot/street traffic? It is vital to consider these questions, analyse and understand them so as to be able to evaluate the asking price against your prospective business worth. You will need to dig down to see if the figures you are seeing really stack up before buying an existing business.

Undertaking a feasibility study will answer many key questions and expose any issues you haven’t previously considered, helping to make your business position transparent. Plan your feasibility study under the following headings:

Revenue: what do you believe a reasonable level of revenue would be for such a business and what is the worst case and the best case scenarios?

Competitors: you will want to make a list of all the competitors you are aware of in your market area, the ones that currently exist in that location.

General Business Environment and/or Economic Impacts: a description of the current environment and market trends your business will be entering into.

Your Business’ Unique Selling Point: note what will differentiate your business from others in the market place – what people will pay attention to about your business versus other businesses.

Cash Flow Analysis: you will need a careful cash flow analysis statement indicating when you expect money to come in and how much and when and how much money will be leaving your business. That way you will understand the cash needs of your business. Remember one of the biggest reasons that start-up businesses fail is because they run out of cash.

Once you have completed your feasibility study you will be able to more objectively evaluate the wisdom of starting your business. You will be able to see: if the timing is right to enter/create the market; if the price to buy or start up your business is realistic; and it will assist in helping you to define your business planning around revenue and cash flow, competition and market differentiation.

By taking out the emotional excitement from you decision to start a new business, by undertaking a feasibility study, you stand to give yourself the best opportunity for business success and minimise the heartache of wasted time, effort and money.

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