When to conduct a SWOT analysis
A SWOT analysis should be conducted twice a year at a minimum and up to daily for a rapidly growing...
A feasibility study defines the viability and success of a new venture. The new venture could be a product, service, business idea, building, or new concept. A market analysis will research the demand and supply that will create a market for a product at a given price, whereas a feasibility analysis tests whether a certain product will meet certain financial or social goals in the market. An essential step towards growth and often conducted by a growth agency.
Feasibility studies emerged after the Savings and Loan crisis broke in the late 1980s. Savings and Loans institutions were supposed to be safe places for people to keep their money and to obtain moderate home loans, but in 1982 deregulation had allowed these institutions to fund any type of project. Many new projects, especially real estate developments, were developed in epic scale, and loans were easily acquired with low interest rates. When businesses or developers sought out loans, the Savings and Loans institutions did not require accurate information showing whether a project would succeed, only that the building could be built quickly and cheaply. When the Saving and Loans crashed, the bailout cost Americans between $500B and $1T dollars. Now, before loans are honored by a bank or any investor, a feasibility study is required.
Why conduct a feasibility study? An entrepreneur looking to start a business or an existing business looking to add new products, services, locations, or concepts should consider conducting a feasibility study. Also, those looking to purchase new equipment or software, acquiring another company, or hiring additional employees should consider conducting a feasibility study.
To even get a loan or funding, a feasibility study is required, and often, a third-party report with objective data to speak to the potential success of the venture is required.
David E. Gumpert explained the importance of a feasibility study in the book, How to Really Create a Successful Business Plan. He wrote, “Although [an unsuccessful feasibility study] may appear to be a failure, it’s not. The failure would have been if you had invested your own and others’ money and then lost it to barriers you failed to research in advance.”
Often, conducting interviews with stakeholder audiences, like economic development contacts, developers, and other experts in the market prove to be valuable sources of data, and the cost is reasonable, the turn-around can be quick, and the quality can be outstanding.
By conducting demographic analysis, you can then understand who you are selling to. Sites such as the U.S. Census Bureau, state government websites, and county websites offer a great deal of demographic analysis. An agency may have more resources to pull demographic analysis, but those resources are often paid resources. Demographics to consider include population, population trends, ages, genders, household information, number of people in the household, number of children in the household, household incomes, education, renters, homeowners, etc. For brick-and-mortar businesses, demographics may also include traffic counts.
A company assessment as part of a feasibility assessment will offer more insight and help the business or entrepreneur understand how much or how little of an impact that competitors will have on their business. This research is often conducted online. There are paid resources, such D&B Hoover’s, that firms subscribe to that give them access to a lot of information, as well. The competitive assessment looks for marketing examples, pricing, PR, and other forms of information. Mystery shopping also serves as important research when evaluating competitors. Through mystery shopping, assessments of knowledge, service, and overall experience of the competitors can be made.
The survey allows an organization to follow-up on issues or ideas from the interviews that took place in the first step, address interest and appeal in the venture among your targeted audience identified in the demographics and provides an opportunity to measure awareness and usage levels of competitors in your market. Surveys can be conducted online, telephone, email, or in-person.
The main goal of this part of the feasibility study is to understand the revenue projection for implementing the proposed idea or action. This part of the study examines the kind of sale numbers to expect and the scope of promotional activities required to undertake.
Within this segment of the feasibility study, the following points need to be considered:
Throughout the course of my career, I have conducted a wide variety of feasibility studies. Some examples of feasibility studies I conducted were for an amusement park, media buying agency, domestic violence not-for-profit agency, retail business development, manufacturing facility, and others. Every single study that I conducted proved invaluable. Some of the businesses realized that to be viable major tweaks to the business concept and model were needed. Some the businesses realized that there were opportunities they needed to tap into, but some of the businesses realized that the concepts were not viable. Each feasibility study either grew opportunity and revenue or saved revenue, proving the importance of feasibility studies.
It makes sense as to why banks and investors demand a business plan from those seeking support. About seventy percent of a business plan is the marketing plan, and a good marketing plan is heavily supported by a feasibility study. Unfortunately, so many entrepreneurs skip the feasibility study because they are so passionate about their idea. However, most new businesses fail, so doing due diligence to test the viability or feasibility of a new concept makes sense. Not only is the feasibility study the most important aspect of the business plan, it’s an essential first step towards starting a new business, concept or idea.
As Dan Zarrella, an award- winning social media scientist at HubSpot, said, “Marketing without data is like driving with your eyes closed.”