Is your great idea actually a great idea? Feasibility testing is how you find out.
Start with your goals. Sure, everybody wants to make a million dollars. But how will you define success? Finish this sentence: I will consider this business successful if after three years, at a minimum, it ______. List just two or three things. Be specific on what your current money goals relate to: sales, margins, profitability, growth rate, market share, or something else? Also list whatever non-money goals you have for this business.
Next, describe the proposed business. Write down its products or services (benefits not just features), target customers, marketing strategies and sales channels, labor and supply channels and costs, pricing, key competitors, breakeven point, and, most importantly, management requirements.
Don’t have all that information? No problem. It’s time to do your feasibility research. Talk to anyone who could help you and read everything you can find about it. Find ways to talk to actual customers, and study your primary competitors online and, if possible, in person. Buy something from them. Remember the competition is anything your target customers would see as an alternative to your product or service.
Do this yourself or hire a consultant with venture feasibility expertise. Be clear that you’re looking for an objective assessment, not confirmation that your great idea really is a great idea.
Keep coming back to your goals, revising them if needed. Do “just enough” feasibility testing to provide the comfort level you need to be reasonably confident the business will meet your goals (or won’t). Finally, write down what you learned, even if it’s only two pages worth, and crank out some projections built on your research. Run the whole thing past half a dozen people with business experience. Ask them for frank and honest feedback. Revise and do more research as needed. Good luck!
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For more resources, see our Library topic Business Planning.