Successful startups are not driven by ideas alone — you also need to assess whether it is practical to put the idea into practice and chalk out a roadmap of your journey to get there. Before you dive into the market, you need to conduct an analysis to check whether your product or service will survive. A feasibility study helps to do just that — it evaluates whether the idea is worth the effort and resources. In other words, it allows you to undertake a risk-benefit analysis of your venture before you make a hard commitment.
Given the fiercely competitive markets, setting up a startup without conducting a feasibility study sets you up for failure. This article tells you everything you should know about a feasibility study and why you cannot afford to ignore it.
Understanding Feasibility Study
While no one can guarantee the success of your new startup, a feasibility study gives you an insight into how likely you are to succeed. It involves conducting a SWOT analysis of the idea to pinpoint the challenges you may encounter that might make the venture unsustainable.
Typically, a feasibility study is conducted right before putting together a business plan as it provides you critical data to validate the model.
It gives you a fair assessment of critical components of your business plan, such as:
- the financial and technological resources needed
- the number of skilled and unskilled human resources needed
- An estimate of the capital required for working out a budget and cash flow projection
- What are the logistical challenges you are likely to face
- Understanding of compliance and how it can affect your business
Based on the outcome, you can make an informed decision regarding whether you should proceed with your idea or look for a new one.
Critical components of a feasibility study
Typically, a feasibility study includes the following:
- Description: Any feasibility analysis begins with outlining the product or service on offer, the target market, the pain points faced by the target customers, and how the product or service can address those issues.
- Organizational feasibility: You cannot run a successful business as a one-person operation. The primary objective of assessing organizational feasibility is to examine the need for human capital and the expected skillset. This is an important component as it enables hiring decisions. Additionally, this component also involves a detailed assessment of the legal and corporate structure of the business.
- Market feasibility: This involves understanding the demands of the market and examining whether you are offering the correct product-market fit. It also assesses your key competitors so that you can position your product effectively and price it correctly.
- Financial feasibility: The ultimate objective of every business idea is revenue generation. That’s why examining the financial viability of your startup is a crucial element — this evaluates the startup capital, cash flows, operating expenses and also provides the projected ROI so that you can create a profit plan.
- Technical feasibility: This looks at the operational side of the business. You need to have the right logistics and processes in place to deliver your product or service to the customer. This aspect of the feasibility study helps you to identify the various resources (including labor) and relevant technologies required for running your business efficiently.
- Legal feasibility: Your business needs to comply with the laws of the country where you are set up and operating. This analysis identifies the various legal constraints for your business. For instance, if you are planning to launch a new app that collects users’ personal data, you need to assess whether there is any conflict with the data protection laws.
How do startups benefit from a feasibility study?
Entrepreneurs always struggle with ‘getting it right.’ A feasibility study gives you a fair assessment of your proposed project so that you can make the correct decisions. It ensures that you evaluate all the pros and cons before committing resources.
Another advantage of a feasibility study is identifying the right opportunities for your business. Suppose you are planning to launch a new restaurant. Detailed location analysis and evaluating the feasibility of various business models can help you understand whether opening a restaurant during a pandemic is a viable option. It also helps new startups to attract potential investors by providing them a complete assessment of the business and showcasing financial projections.
You can use the data from a feasibility study report to create the USP (Unique selling proposition) that differentiates you from the competitors. You can also capitalize on the information for promoting and positioning your product better.
Lastly, it gives you valid reasons to move forward. Once you gain a better understanding of the expected profitability, the business environment where you wish to operate, and the challenges that you are likely to face, you can make strategic decisions about going ahead with your plan.
Regardless of how attractive your idea looks on paper, if a feasibility study cannot make a convincing case for the business, it is time to bin it and look for newer opportunities.
Get Experts to Conduct Feasibility of Your Latest Venture
Examining the viability of your business idea before you set things in motion is essential if you want to convert your pipe dream into reality. Skipping this step can expose you to a minefield of risks and reduce your chances of successfully pursuing your dream.
Looking for expert assistance for carrying out a detailed feasibility study?
Centurion Consulting LLC can guide you through the process. Our team of financial consultants provides market research services in Dubai to understand the market in UAE and GCC. Before setting up a production or manufacturing unit in uae, a detailed feasibility study is a ‘must have’ for your business. This will enable you to build a solid foundation for launching your latest venture. Learn more about how we can help you succeed by setting up a 45 min free online or offline consultation session with our experts.
