You’ve always wanted to go into business, but have never been sure your idea could carry the weight of what was already on your plate. Then one day, “the idea” for a business steps right in front of you, blocks your path, hands on hips, defiantly refusing to budge. Is “the idea” really feasible?
- Can it even be accomplished, let alone make a profit?
- Is this a flash in the pan or something with legs?
- What’s your first step – second step – etc.?
- Should you hire a lawyer?
- Maybe you should file for a patent?
- You’ve got some savings, is this the time to put it on the line?
- Should you go to college and get a degree or another degree?
Let’s take a breath…and come at it from another direction.
Evaluating Business Feasibility
A business feasibility evaluation comes down to answering four questions about “the problem” your new product or service innovation solves. Each question comes with an implied follow-up of “can you prove it with numbers?”
- Do you fully understand the problem?
- Does your solution resolve the problem?
- Does your solution improve how the problem is typically resolved?
- Does your solution answer an unidentified problem people don’t realize they have?
Business Feasibility Evaluation Methods
In general terms, business feasibility studies identify metrics about “the problem”, market parameters dictating how it’s being solved and how your new solution would fare in the marketplace. When it comes to specifics, business feasibility checklists abound.
- 15 types of innovations (http://www.7ideas.net/15-types-of-innovation/)
- Over 30 critical questions to consider when evaluating your business idea (Entrepreneur.com https://www.entrepreneur.com/article/81926)
- Three different approaches to determine if customers will like your innovation, how you can determine its feasibility and money making potential? (Destination-innovation.com http://www.destination-innovation.com/how-to-evaluate-ideas/)
- 16 Step Guide to Evaluating the Viability of any Product Idea (Shopify https://www.shopify.com/blog/13640265-the-16-step-guide-to-evaluating-the-viability-of-any-product-idea).
- 5 essential steps to evaluating your business by identifying how your business satisfies a market need, ways to differentiate your solution from others, measure the potential market and estimate the cost to for you to enter the market (Investopedia http://www.investopedia.com/financial-edge/0412/5-essential-steps-to-evaluating-your-business-idea.aspx)
- 10 Ways to Know if You have a Great Business Idea (Business News Daily http://www.businessnewsdaily.com/3969-finding-great-business-idea.html).
Common Business Feasibility Evaluation Elements
Despite the variety of approaches, some common elements exist in every method.
- What makes your idea different?
- Will your idea work?
- Is it profitable?
- Can it be stolen, back-engineered and duplicated by someone else?
- Can you convince others to help you?
- How much will it cost to start, get into the market and keep filling orders?
- Can you get sufficient funding?
- Is it worth doing?
- How many customers can you find?
- Do you have a business plan?
Doing A Reality Check
Coming up with interesting business ideas can be energizing, exciting and become all-consuming, especially if the group dynamics of your entrepreneurial community are working well. At some point, however generating ideas should come to a halt and the hard work of bringing new products or services to the market should begin. Before your idea becomes a startup venture with bills, long hours and group-sacrifices it’s critical to do a reality check.
Entrepreneur magazine has a simple worksheet which gives your idea a score between 1 and 10 points based on how well it would pass five common barriers new businesses face (https://www.entrepreneur.com/article/243220). A cumulative score of twenty or less means your idea should be considered unfeasible. Scoring 20 to 35 points indicates you should be cautious before proceeding further. A score over 35 indicates your idea has enough strength to proceed further.
- How high is the barrier for new participants to enter your target market? Have competitors limited the number of new entrants? Is your target market saturated or shrinking due to forces participants cannot control? The higher the barriers to enter or the less viable your target market is, the lower the score.
- Is your product or service proof of concept functional? If it was born in a protected environment, can it survive an industrial setting, scale to a larger size and still be profitable? Can production be automated or does it require highly skilled and specialized employees? The greater the number of variables degrading the performance of your prototype, the lower the score.
- Is your target market large enough to accommodate new players? Are there regulatory barriers that could delay your entry? Can your idea be patented, the processed licensed then leased to existing market participants? The more restricted your target market is to expansion, the lower the score.
- What is your pricing strategy? How high is too high for new customers unfamiliar with your product or service? Have you considered demographics in your price model? In general, the higher the price, without a commonly accepted higher perceived value, the lower the score.
- Can you fully fund getting your product or service to market? Have you received written commitments from friends, family or investors of sufficient funding at each step of introducing your product into the market? Have your total funding estimates been verified by a third-party? Are potential investors seeking you out? The larger the gap between your verified funding requirements and funds under your control, the lower the score.