Conducting a Feasibility Analysis and Designing a Business Model
Idea Assessment
The process of examining a particular need in the market, developing a solution for that need, and determining the entrepreneur’s ability to successfully turn the idea into a business.
New Business Planning Process
Developing a business model
Crafting a business plan
Conducting a feasibility analysis
Creating a strategic plan
Conducting an idea assessment
Launching the business
Business Idea
Industry and Market Feasibility
Product or Service Feasibility
Industry and Market Feasibility Analysis
Demographic
Economic
Technological
Political and legal
Sociocultural
Global
Porter's Five Forces Model
Bargaining power of buyers
Threat of new entrants
Bargaining power of suppliers
Rivalry among companies in the industry
Threat of substitute products or services
Strongest of the five forces
Industry is growing fast
Competitors are not similar in size or capacity
Number of competitors is large, or, at the other extreme, quite small
Opportunity to sell a differentiated product or service exists
Many suppliers sell a commodity product
Substitutes are available
Switching costs are low
The greater the leverage of suppliers, the less attractive the industry
Items account for a small portion of the cost of finished products
Number of buyers is large
Customers want differentiated products
Customers’ switching costs are high
Customers find it difficult to collect information for comparing suppliers
Buyers’ influence is high when number of customers is small and cost of switching to a competitor’s product is low
Items account for a small portion of customers’ finished products
Capital requirements to enter are low
Cost advantages are not related to company size
Advantages of economies of scale are absent
Buyers are not loyal to existing brands
The larger the pool of potential new entrants, the less attractive an industry is
Government does not restrict the entrance of new companies
Quality substitutes are not readily available
Prices of substitute products are not significantly lower than those of the industry’s products
Substitute products or services can turn an industry on its head.
Buyers’ switching costs are high
Primary Research
Secondary Research
Determines the degree to which a product or service idea appeals to potential customers and identifies the resources necessary to produce it.
Collect data firsthand and analyze it
Gather data that already has been compiled and analyze it
Primary Research Techniques
Trade associations and business directories
"Windshield" research
In-home trials
Prototypes
Focus groups
Customer surveys and questionnaires
Use simple ranking system.
(eg: a 1 – 5 scale, with 1 representing “definitely would not buy” and 5 representing “definitely would buy”)
Word your questions carefully so that you don’t bias.
Keep survey shorts
a market research technique that involve enlisting a small number of potential customers (usually 8 – 12) to give an entrepreneur feedback on specific issues about a product or service (or the business idea itself)
An original, functional model of a new product that entrepreneurs can put into the hands of potential customers so that they can see it, test it, and use it.
Eg: Joi Sumpton: Step ‘N Wash
A research technique that involves sending researchers into customer’s home to observe them as they use the company’s product or service.
Eg: Scoot Cook: Intuit
A windshield survey is an informal survey where the health professional drives around the community / area they are researching, and records his / her observations
Industry databses
Demographic data
Forecasts
Articles
Local data
Internet
Eg: Sales & Marketing Management’s Survey of Buying Power contains comprehensive statistics, ranking, projections on consumer.
Eg: Marketing information
Financial Feasibility
Capital requirements: an estimate of how much start-up capital is required to launch the business.
Estimated earnings: forecasted income statements.
Time out of cash: the total cash it will take to sustain the business until the business achieves break-even cash flow.
Return on investment: combining the previous two estimates to determine how much investors can expect their investments to return.
Entrepreneur / Team Feasibility
What value does the business offer customers?
Who is my target market?
What do they expect of me as my customers?
How do I get information to them, and how do they want to get the product?
What are the key activities to make all this come together, and what will they cost?
What resources do I need to make this happen, including money?
Who are the key partners I will need to attract to be successful?
Is this idea right for me?
The Business Modeling Process
Phase 3: Test the Product with Prototype or Minimal Viable Product
Pivot Business Model Until Ready to Expand
Phase 2: Test the Value Proposition with Customers
Phase 1: Develop the Business Model Canvas
Do these customers care enough about this problem to spend their hard-earned money on our product?
Do these customers care enough about our product to help us by telling others through word-of-mouth?
Do we really understand the customer problem the business model is trying to address?
Recognizes that a business idea is a hypothesis that needs to be tested before taking it full scale.
Test early versions of a product or service using a lean start-up: a process of rapidly developing simple prototypes to test key assumptions by engaging real customers
Entrepreneurs test their business models on a small scale before committing serious resources to launch a business that might not work.
Begin the lean start-up process using a minimal viable product: the simplest version of a product or service with which an entrepreneur can create a sustainable business
Customer pivot
Revenue model pivot
Product pivot