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Do you know how to conduct feasibility study on a business idea? What if I provide
you with a feasibility study template and sample? If I show you a practical feasibility
study outline, will you appreciate it? If your answer is yes, then read on.
In the previous article wrote, I stressed the importance of conducting feasibility study on
your business idea before taking it to the marketplace. Today, I will be teaching you how to
conduct feasibility study on your business idea. Since conducting feasibility study is such an
important process that must be carried out on your business idea or proposal, I will advise
you print out or bookmark this article for future reference.
A man that is prepared has half won the battle. Sydney M. Bremer
Once you are able to go through the process, the next thing to do is to sit back and review
the document generated from your economic analysis. As a matter of fact, you can liaise
with someone or perhaps a practicing economist to help you with the review of the
document; it might attract a fee though. The truth is that you would notice the professional
touch once an economist helps you review your economic analysis document.
Conducting a thorough economic analysis before starting a business will enable you start
and run the business with little or no pressure because you would have succeeded in taking
care of all the areas that you are likely going to get pressure from.
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
There are certain aspects of setting up a business that an entrepreneur need not neglect
and technical analysis is one of them. Technical analysis is all about collecting and studying
all the needed techniques that will help you effectively run your business. In some quarters,
especially the financial industry (stock market), technical analysis is about the collection of
price trends with the aim of forecasting or predicting the future price trend of stocks,
commodities, and futures et al.
Although technical analysis is majorly used in the stock market, but you can apply same
principle to your startup. The essence of conducting technical analysis for your startup is to
ensure that you are well equipped with the right resources to successfully launch your
business. Technical analysis is almost similar to economic analysis because it also involves
the law of demand and supply market fluctuation et al.
Now let us quickly consider some of the key steps you need to follow to be able to
effectively conduct technical analysis for your startup business;
No doubt if you are able to conduct technical analysis before launching your business, you
would have succeeded in putting in place machineries and structures that will guarantee
you huge success with your startup business.
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, accessibility to customers, ease of
transportation of raw materials and finished products, nearness to cheap labour, 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. In studying and researching
your line of business, you are expected to get a good idea of the technical skills required to
successfully run the business and how you can source for such skills.
For example; if you intend starting an automobile repair and maintenance workshop, part of
the technical skills you would need to be able to run a complete auto workshop are auto
mechanical skills, auto electrical skills, panel beating skills and also marketing skills
amongst others. Your business plan should be able to point your areas of strength and
weakness thereby affording you the opportunity to make provision to either acquire the
technical skills required or upgrade your existing technical skills.
Map out Strategy on How to Source for the Required Technique-: The next thing
to do once you are able to list the techniques needed to run your business is to sit
down and map out strategies on how to source for the required technique. As a
matter of fact, sourcing for some of the technique needed to run your business might
involve hiring an expatriate to help you fill in the skill gap if you cant find a qualified
person to fill in the role in your country. That is why it is important to conduct
technical analysis before launching your business so that you will be well informed
and prepared financially to shoulder the expenses that come with hiring expatriates
or consultants. There are other means you can follow to source for people with the
technical skills that is required in your business; you can poach from your
competitors, and you can as well hire fresh graduates and train them to fit into your
plans.
List the Techniques that will be needed in effectively running Your Type of
Business-: If you successfully carry out a thorough research and feasibility studies,
you will be able to pin point the required skills needed to successfully run the kind of
business, and how to source for the skills. So, what is expected of you to do is to list
all the techniques that will be needed and then conduct a proper analysis to know
the role and capacity each of the technique will play in your business. The truth is
that there are key techniques that you cant ignore from the day one of starting your
business and there are some other techniques that can be adopted as you grow the
business
Develop Suitable Training Program-: The essence of conducting technical
analysis before starting your business is to ensure that you put in place all the
techniques that are required to effectively run your business. So, part of what you
need to do is to develop suitable training program that will help you equip your staff
with the required technique needed to run your business and also to help them
operate effectively. The truth is that if you want to run a business that has the
capacity to compete globally, then you must ensure that you adopt best practices.
6. Financial Analysis
Part of what you need to do when you want to conduct financial analysis for your business
is to draw up a comprehensive budget for your business. Your budget should capture your
expenses and your income and also financial flow strategy. The truth is that the bulk of the
job to be done when conducting your economic analysis for your business will be done here
budgeting. So you must endeavor to give it the professionalism that is required to make it
fly.
Although when conducting financial analysis for business it involves working with forecast
and projections, but at the same time it is important that you know your financial capacity.
The bottom line is that economic analysis revolves around managing the scarce resources
within your disposal and finance is the chief of the resources.
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 or a business consultant to do the dirty work for you. Its 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 enable you write a business plan and help you forge a
competitive advantage for your business and increase your