Feasibility and Business Planning2.1 Feasibility Analysis: Testing an Opportunity

What you will learn . . .

• Developing a Business Concept

• Testing the Concept in the Market

Developing a Business Concept

• Turn an idea into a business concept

• Business concept – a clear and concise description of an opportunity.

• Four elements– The product or service– The customer– The benefit– The distribution

Ask These Questions

• What is the product or service being offered?

• Who is the customer?

• What is the benefit that is being provided?

• How will the benefit be delivered to the customer?

Writing a Concept Statement

• Basically, put the answers to these questions together

Feasibility Analysis

• The process used to test a business concept.

• Helps decide if there is demand.

• Decides if business conditions are favorable.

• Helps make a decision about the business concept.

Testing the Concept

• Test the Industry• Talk to customers• Test the product or service

requirements• Evaluate the founding team• Study the competition• Look at start-up resources• Analyze the value chain

Testing the Industry

• Scan table from book

Testing the Industry

• Industry– Group of businesses with a common

interest such as telecommunications, computers, retail and grocery

Talking to Customers

• Target Customers– Those most likely to purchase the product

or service

Testing the Product

• Prototype– Working model of a new product.

Evaluating the Founding Team

• Does the team have the knowledge and skills to make the business successful?

Studying the Competition

• Competitive Grid– A tool for organizing important information

about the competition.• Competitor• Customer• Benefits• Distribution• Strengths/Weaknesses

Competitive Grid

• Page 98Competitor Customer Benefits Distribution Strengths/

Weaknesses

Local Sports Store

Neighborhood teams and sports enthusiasts

Convenience of shopping locally; know the store owner

Retail store in the neighborhood

Owner knows the customers and understand their needs; not able to stock much variety

NikeTown Sports enthusiasts and tours

Huge selection and exciting environment

Retail store in large commercial area

Huge selection; impersonal service

Catalog Sales Sports enthusiasts who don’t like retail shopping

Quick and easy; don’t have to leave home to order merchandise

Mail order Lower costs bring lower prices; no personal contact with customers

Looking at Start-up Costs

• Business Model– Describes how you intend to make money

with your business concept.• Purchase/lease equipment, furnishings/facility• Buy inventory and supplies• Pay employees• Finish product development• Carry the expenses until you have sales and a

positive cash flow

Analyze the Value Chain

• The distribution channel through which your product or service flows from the producer to the customer. – Manufacturers, distributors, retailers

• Deliver maximum value for least possible cost– Each link adds value (cost)– Make it more efficient (cheaper)