Feasibility Study for Entrepreneurs

The 6 Step of a Feasibility Study

           

            Often, entrepreneurs begin a new activity without even thinking of all the potential obstacles that can damage a new business. When performing a feasibility study, the entrepreneur should identify and evaluate all of the pertinent factors to determine if the idea is a good investment. When doing the study, there are many questions asked for each step. Below, there are many examples.

1st Step: CHOSE A PRODUCT OR SERVICE TO SELL.

Questions to ask:

1.   What type of activities are people already doing in my community?

2.   What types of products or services do people in my community need? Are there already suppliers of this product or service?

3.   List all the products and services available in your community.

4.   What sorts of skills do you possess that could help you in starting a business?

5.   Besides money, what would you personally like to gain from your business?

6.   What commercial areas are you interested in studying?

2nd Step: DETERMINE IF THERE IS A MARKET FOR THE PRODUCT OR SERVICE THAT YOU WOULD LIKE TO SELL.

1. Who is your customer?

2. Where do they live?

3. What are their sources of income?

4. How many times a year will the customer need to buy your product/service? One

    time? Two times?

5. Will you have competition? Are there other people providing the same product

    services in your community?

6. Why should someone choose your product/services over the competition?

7. Will the customer continue to want or need your product/service?

8. Why do you believe that you have the power to compete with already existing

    competitors?

3rd Step: DETERMINE HOW YOUR BUSINESS WILL FUNCTION.

1.   What do you know already about the production process of the business?

2.   Detail this process from the first step to the last step.

3.   How much time does it take to finish a production cycle?

4.   What don’t you know about the business? What are some points that you would like to clarify?

5.   What are the necessary skills and how will you acquire them?

6.   What are some problems that you have encountered?

7.   How will you organize your business in terms of production, finance, and daily management?

          

4th Step: CALCULATE YOUR BREAK-EVEN POINT.

1.   What are all the expenses that you will have over one production cycle?

A. Materials

•      What materials will you need?

•      How can you find out if you don’t know?

•      Where will you get your materials?

B. Transport

•      What transport will you need to obtain your materials and sell your product?

C.  Facilities

•      Where will you produce you product or offer your services?

•      Will you pay rent, electricity, or water?

D.  Employees

•      Who will perform the work?

•      How much will you have to pay them?

•      How many employees will you need?

E.  Training

•      What sort of knowledge does one need for the business?

•      How will you get it if you don’t have it?

•      Will the employees need to be trained?

F.  Promotion

•      How will customers hear about your product/services?

G. Money

•      How much starting capital do you need to start-up the business?

•      If you get a loan, how will you make the payments?

5th Step: ESTIMATE YOUR REVENUES.

1.   What price are you planning on asking for your product/services?

2.   How did you determine this price?

3.   Can your customers pay this price?

4.   How much are you adding to your unit price to realize a profit?

5.   Who is the competition? What do you know about them?

6.   How much are they asking for the same product/service?

7.   How much is the competition selling per day? Per week? Per month?

8.   Have you taken into account the competition’s price when you determined your own?

9.   If your price is:

a.   Higher than that of your competition, why would the customer still pick your product/services over the competition?

b.   Lower than that of your competition, will you be able to make a profit?

3.   What are the expected revenues per month?

6th Step: DECIDE IF THE BUSINESS IS A GOOD IDEA.

1.   Based on your research, will this activity allow you to make a profit?

2.   If your research indicates a potential loss, is there any way of making this business successful?

3.   Is the business a good financial investment?

4.   What are other important advantages to doing this activity?

5.   Is the business a good idea?