Feasibility Plans for Small Businesses Video

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  • 0:03 A Great Business Idea
  • 0:35 What's the Purpose of…
  • 1:20 Feasibility Study Components
  • 5:00 Lesson Summary
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Lesson Transcript
Instructor: Beth Hendricks

Beth holds a master's degree in integrated marketing communications, and has worked in journalism and marketing throughout her career.

Building a feasibility study is all about taking a concept and seeing if it's ready for success. In this lesson, you'll learn more about feasibility plans for small businesses and things to consider before launching a new venture.

A Great Business Idea

Jerry loves food. He enjoys traveling and dining at local restaurants, sampling regional flavors, and getting a glimpse of local culture. Recently, after returning from a trip overseas, Jerry has started envisioning owning his own bit of local flare and flavor - he wants to open a restaurant!

Before Jerry starts scouting a location and getting ahead of himself, he needs to take a step back and consider the merits of opening a restaurant by doing a feasibility study. A feasibility study can help Jerry answer the question: Should I proceed with this idea?

What's the Purpose of a Feasibility Study?

Rather than just launching into a business idea haphazardly, a feasibility study can help take a budding entrepreneur from a good idea to a successful business. By examining various components in a feasibility study, such as a market evaluation and commercial feasibility, a small business owner can figure out if his or her idea has a good chance of success.

A feasibility study can provide the following benefits before moving on to development and implementation of a plan:

  • Examining the strengths and weaknesses of a proposed idea
  • Uncovering opportunities and threats in the market
  • Discovering the type of resources necessary to proceed
  • Identifying potential pitfalls for a new venture

So, what types of things are covered in a feasibility plan?

Feasibility Study Components

A feasibility study touches on a variety of areas in assessing whether a good business idea has great potential. A feasibility study commonly includes an analysis and evaluation of these categories:

1. Market feasibility: Perhaps the most important question to ask is: Is there a market for my idea? This may include looking at the demand for your products or services, why people would purchase your item over the competitors, your target audience, and how you plan to market yourself. It may also include:

  • An analysis of your competitors, including their strengths and weaknesses
  • An answer to the question: What makes your business idea unique?
  • Any barriers that might serve as roadblocks to entering the market
  • The habits of your potential customers (How much do they make? What are their shopping habits?)

In our opening story, Jerry's idea for a hometown restaurant may be a good one. Based on his research, he has discovered that there are few other locally-owned restaurants in his area and his approach of offering regional food favorites may be embraced by his potential audience.

2. Commercial feasibility: It's always about the bottom line - money. A look at the commercial feasibility of your proposal will help you analyze financing, from start-up costs to projecting sales figures. Financial concerns to keep in mind include:

  • How much money is needed to begin?
  • What type of fixed and variable costs will you have?
  • What type of price point can you set for your products or services?
  • How much do you project to make?
  • What is the return on investment?
  • How much money do you need to cover living expenses?
  • Are there any adverse economic situations to think about?

For example, Jerry's initial idea for his restaurant included a large warehouse space near a heavy traffic area of a shopping mall complex. Upon further examination of the expenses required to get started, Jerry is re-evaluating his location idea to include a smaller storefront in the downtown area.

3. Other considerations: Market and commercial feasibility are far from the only things you need to consider when evaluating a small business idea. Here's a brief glimpse at some other items of note:

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