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Define a Feasibility Study

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  This article will help to define a feasibility study, what a feasibility study entails, when to create one (and when not to). It will outline how marketers and market researchers can provide value to a business proposal or new initiative by collecting market data through online surveys. What is a Feasibility Study? Put simply, it is an inquiry into the possibility of success for an idea or venture. Feasibility studies are done in every industry, where the intended goal is to drill into the question of “ is this initiative viable?” More often than not, the venture in question is an expansion, acquisition, or srcination of a new business. There are multiple and varied sections (which we’ll go through later) all aimed at different perspectives within an organization. But what each feasibility study has in common is the intention of confirming or refuting the future success of a business proposition. Put even simpler: Will this work, or won’t it?   What is Included in a Feasibility Study A feasibility study looks at three major areas:    Market analysis o   What does the competitive landscape look like? o   What is the current or projected demand? o   Is there a niche in which to operate? o   What are the target markets for this product or service? o   Will the location of the business affect success?    Financial resources and climate o   Start-up and operating costs (staffing, soft goods, etc.) o   Projected revenue and profit margins o   Sources of investment  –  small bank loans, venture capital, or bootstrapped, you’ll need understand the different avenues and how they apply to your industry    Technical issues o   What are the technology/capital/equipment needs? o   Where and when can you purchase this capital? o   Does the business’s future success hinge on a single proprietary technology?   When to Do a Feasibility Study Consider it a best practice. Feasibility studies are part of the first steps taken when you finally have that idea worth chasing. Here are some of the best reasons to invest in the process.    When faced with indecision, provides valid information in a go/no-go situation    When details of the scope of the initiative are unclear     When you need supporting evidence to convince investors of the future success of your business When Not to Do a Feasibility Study In order to save money, time, and possibly get to market faster, founders sometimes forego a feasibility study. Not that we agree in foregoing the process, but here some other known reasons as to why they are overlooked.    We *the founders+ know it’s feasible.  A similar business model is already operating profitably.    A feasibility study was recently done and showed promise.    We’re not market research experts –   we don’t know what it would include, or how to compile a feasibility study. Who Creates the Feasibility Study? Hiring a consultant may seem like an expensive way to confirm what seems like an obviously promising idea, but moving forward with investment in capital before fully understanding the scope, timeline, and chance of success of a new venture will be far more expensive if you are proven wrong. So unless you or a possible co-founder have gone through the process before and are confident in your research and reporting skills, it may be most appropriate to seek guidance from an entrepreneurial mentor or professional market researcher. A Sample Format for a Feasibility Study A) Executive Summary  –  Give a brief overview of the central points of each segment of your study. B) Product/Service  –   Define the benefits of your product or service from the consumer’s point of view. What is your pro duct or service? How is it different from what’s already available? Report on raw material suppliers, distribution strategy, patents, and any IP involved. C) Market Analysis    –  Describe your target audience. Discuss market share, cyclical changes in revenue, and predictions for annualized growth. Is there potential for overseas sales or domestic only? D) Price & Profitability  –  What will it cost and how much can be made? This is where your competitive analysis will come in handy. Knowing your costs for production will help you gauge margins before a single widget hits the store shelves. E) Findings and Recommendations  –  Does the feasibility plan show that the idea is worthwhile? Outline the next steps necessary to get to market. How to Better Understand Your Market with Surveys  The market analysis section is often considered the most lengthy and headache inducing. Not only should you be able to clearly describe the solution to the problem you are solving, you should be able to confidently describe the end user; who they are, why they need to solve the problem, price sensitivity, how they will interact with the product or service, where they live, what they do for work, and a dozen other variables. Using surveys to reach a randomly sampled target demographic can help you answer all of those questions, providing accurate and actionable data within your feasibility study. You may even find your audience helps to develop the product itself, providing ideas for features that add value. Examples of Feasibility Study Survey Questions Let’s say you’re developing a new competitor to Drop Cam; a wireless, HD security camera that can be operated remotely by smartphone or laptop. You’ve broken your audience into segments by geography and age, and have hired a panel company to provide a random sample of respondents that fit into each segment (let’s say this survey is only going to 30 -40 year old men who live in Midwest cities with a population above one million). Here are some sample questions that would help clarify the buying habits of your product for that specific audience segment.  Now, after following up with several audience segments in different regions, imagine the subsequent data shows that, somewhat surprisingly, 40-50 year old women are interested in purchasing the most cameras at the highest price point. You can use that data to provide more accurate predictions of earnings as well margins within your feasibility study. You’ll also know how to better design the product, packaging, and advertising to reach that segment. The feasibility plan is just that  –  a way to decide whether or not the venture is feasible. However, once you’ve put in the time to design, collect, and analyze that market data, remember that information can be re-used in an investment slide deck when presenting to VCs, the business plan, and countless other materials moving forward. If done with care, the research you undertake will prove endlessly valuable to your venture .
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