Bizstartup.ie - Start Up Kit

For the budding entrepreneur, completing a feasibility study is an obvious first step — if you know what a feasibility study is, that is. Many people confuse it with a business plan, when, in fact, the two things are entirely separate entities and perform different functions.

A feasibility study, as the name implies, looks at the feasibility of a business idea — ie whether the idea or project will succeed in the commercial world, generate adequate cash flow, withstand risks and remain viable in the long term. It should answer that essential question: ‘Should I proceed with this idea?’

On the other hand, a business plan lays out the steps you will take to turn that idea into a reality. It provides a roadmap of how the business will be created and developed.

When writing a business feasibility study, it is important to include and analyse three main areas of the business:

Market environment

A business (or product/service) is assessed as feasible if it can be shown that there is sufficient market demand for it, ie enough customers in your geographic/target market to estimate that your business will return a profit.

If, at the end of the process, you have decided there is no gap in the market, then you should make a choice: either target a different type of customer or different geographical catchment where there is potential for your business; or drop the idea.

Technical and operational requirements

A business is considered technically and operationally feasible if it has the necessary expertise, infrastructure and capital to develop, install, operate and maintain the proposed system, and that by establishing such a system, the business will be able to deliver goods or services at a profit. When considering a new business, it is important to consider if there is sufficient access to resources. One of the primary reasons that a new business fails not having enough money to keep the business going from start-up until it begins to make a profit. This can lead to a lack of resources.

Things you need consider include:

• What equipment will you need?
• Who will supply the equipment?
• What materials do you need?
• What facilities will you need?
• What managerial assets will be required?

Financial projections

A business or project may be regarded as economically feasible if it is able to produce goods/services and distribute them to the marketplace and still return a profit to the owners.

The following costs and income should be considered:

• What are the total start-up costs needed to begin operations?
• What are the cashflow requirements of the business?
• What is the business’s projected income?
• How will you determine your pricing arrangements?
• What are possible sources of financing?
• What is the projected profit/loss of the business over the first five years?
• When does the business break even?

If a business is able to ‘pass’ all of the above criteria, then there is potential for a successful business.