In recent times, we have seen two things happen in the business world. The first is, too many businesses doing too well, and the second one is, too many businesses failing miserably. What could be the reason behind this? No business would succeed if any of the major factors like market trends, customer expectations and location are overlooked, because these are the main factors based on which a business runs. Another important factor is money. However, if your business is not doing well, then the monetary factor always remains critical. Studies say the two most common reasons for the failure of a new business are, first, businesses fail to meet the products and service expectations of customers at the right time, and second, they simply run out of cash. Right, when the business is not doing good cash flow will decline slowly and when there is no cash flow, it becomes difficult for a business to sustain.
What could be the reason? The answer is simple, though mostly ignored! The answer is, that they had overlooked certain key factors relating to market trends and demand and operational expenses.
So, what exactly do you need to do to make the right decisions at the right time?
If you have a great idea to start a new business or are planning to develop an idea in your existing business, you must do thorough research. Two things that are essential to find out are,
- Your idea has buyers or there is a market for your idea.
- You have enough finances to support your idea or your idea is financially feasible.
No business can succeed unless there is a demand for it in the market. And if you think you can create the demand then you will need enough money to sustain till you succeed in creating a new business need.
If you are planning to set up a business, you will need to follow the same rule for your new idea.
We can look at the example of online shopping here. It was running decently and then COVID-19 hit the world and we were locked inside our homes. This was the time when online businesses did record sales as even people who resisted buying online were now compelled to buy online. Many businesses on the verge of collapse got a new leash of life. Many new online stores popped up due to the growing demand for online shopping. So, it was market demand that gave life to even the dying online store business.
So, what exactly do you need to do before you plan to venture into a business idea? As mentioned above, you will need to do a thorough feasibility research study on market demand and cost of operation. The feasibility study is mostly number-driven and is the most appropriate way to test the feasibility of your business idea. It will include a study of the assessment of the market for your business idea, understanding the market competition, estimating the financial viability of your business idea, and identifying possible risk factors. This will help you in making an informed choice about the success potential of your entrepreneurial venture.
Make sure before you jump into your venture plans, that you have done effective brainstorming of your idea within your close circle of family and friends. You must have some initial idea about the feasibility report. Once you receive a good response to your idea from your close circle, you can move on to the professional feasibility study and market research stage to get a clearer idea of the feasibility of your concept in the market.
Below are the main phases of any feasibility study process:
Market Feasibility
This is the first step in the feasibility study process. It is crucial to identify the market in which your product or service has a demand. For example, you can not expect to sell baby products in a locality, where there are no newly married couples living. You will also need to find out if there is a demand for your product or service in a market, how many sellers are selling the same product or service as yours and if the market is controlled by intense competition. You need to check if your product will add additional value or if it is completely new in the market and has good demand. Also find out your target group that is whether it is women, men or kids and if your product is in high demand.
Technical Feasibility
Are you technically sound enough to start your business? Do you have all the necessary equipment, technology, machinery, staff, raw materials, supply system, distribution process, and technical and managerial expertise that you may need to meet the demand of the market? This will help you estimate your technical feasibility.
Financial Feasibility
How good are your finances? Can you sustain if, in the beginning, you do not make any profit? You need to keep in mind, you will have to make investments and then you will also need to make payments to your staff and partners you associate yourself with for business. Additionally, every setup has a maintenance cost to sustain. So, write down the investment and expenses to check your financial feasibility.
Final Thought
The above discussion will give you an idea of how to use feasibility studies to make better business decisions and any other part of the world. If you find it too complicated, you can hire feasibility study consultants to assist you in the process.
