Is Your Business Idea Feasible?

on February 14, 2014 Startups and Tags: , , , with 0 comments


Many people have ideas all the time but what makes your business idea feasible? After they get the idea, there are those that act on it, and others just keep talking. If you are one that acts on it, here’s some tips for a feasibility test that could help you skim through the ideas faster and properly. These are by no means an exhaustive checklist to know if your business idea is feasible or not but its a good start!


Market Demand

  • A business only succeeds only if there is market demand for it. So this is a critical success factor.
  • I separate business ideas into two groups. New (or improved) product/service offering. The other is going into an established market where there is already demand. ie you are an accountant coming out on your own to start your own practice.
  • New product/service offering. You would want to commit some good due diligence in this part, make sure the study is not sloppy. Sometimes the idea may be brilliant, but consumers take a long time to switch mindsets. As a startup, you may not have enough financial stamina for market penetration and acceptance. Ultimately, no one can predict future demand but at least you did your homework.
  • Entering an established market. You already know there is demand in this market. It could be a restaurant, an accounting firm, a grocery store, and other mature market. You could still determine your key strengths and competitive advantage then compare this to your competitors. Think as a consumer/client and whether your edge will get you more customers. Or perhaps you already have a client base from your job, make sure that you are able to migrate this client base over to your new business. There might be some legal barriers to do so.


Product/Service Costing

  • Generally, product costing decreases as volume increases. For service based businesses, your cost saving is not as significant because the cost is related to labor. You could still optimize productivity with technology or other methods but it’s not so straight forward.
  • Are you able to obtain the product or provide a service at a cost that will yield a good amount of profit margin at a price that can get sales?
  • Does your margin have enough room to allow for future promotions and sales?
  • Does your product cost decrease as your procurement volume increases? How high is the bulk volume requirement? Is that number attainable?


Capital Requirements

  • Do you have the required capital to start the business properly? Some businesses can be bootstrapped to the max, but most need a minimum amount of capital to launch properly. Like if you started a local delivery service, you need delivery vans. If you did skimp and bought really old vehicles, you could end up with disruptions and higher costs or even write-offs.
  • With the capital you have or have raised through fund raising, is it enough to start off with enough reserve for the “burn” period? Depending on the business, you can expect little or no profit for months or even the first year. Make sure you have some capital to cover expenses until you are able to breakthrough into the market. Sales and promotion, client development takes time.


Find Duplicate Success

  • This is a good tip. In this age of internet information, you could easily access almost anything online. Try to find successful companies in other cities, countries that sell the same products/services. If they are successful, it shows there is a demand for it.
  • Be sure to intelligently adjust their success environment to fit your market. Starbucks may work in North America, but the Europeans, especially the Italians love their own espresso.

by Dan Tan


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Up to 8 Methodologies Used:

1. Income approach: 3 methodologies.

2. Market approach: 3 methodologies.

3. Asset approach: 2 methodologies.