The Importance of a Business Feasibility Study
A business feasibility study is simple in concept: Will a proposed line of business, product, service, or other business venture be doable and profitable?
The execution, however, can be more complex. Depending on the nature of the opportunity and the resources available, a feasibility study can be done internally, require experienced consultants, or be a combination of the two.
Morrison does several business feasibility studies a year. As a business feasibility study report sample, a general outline of the process we use is:
1. Venture Description and Approach. Start with an overall vision of the product or service, the markets for it, and the opportunity. This section usually evolves as the study progresses, but it’s a good starting point particularly if several internal or external parties will be involved. Make the vision clear.
2. Markets. It’s not enough to know there’s a market for the product or service: There’s a market for smartphones but you better have a pretty significant advantage if you plan to go against giants. It can be done (ask Blackberry), but are you prepared?
Market assessment involves a number of tactics, which can include qualitative research (e.g., user interviews, user trials), quantitative research (e.g., surveys and polls of target markets), and secondary research (reviews of existing research and studies).
Once it’s determined that there are viable markets, explore the feasibility of entering them and develop a general marketing plan. This does not have to be “ready to launch” at this point, but detailed enough to know the basic approach and costs.
3. Production. What will be involved in producing the proposed product or service? It may be as simple as a change in flavoring to an existing product, or it may require entirely new resources and personnel. For example, MBG Marketing, the largest marketer of fresh and cultivated blueberries in the world, needed to increase its capacity for instant quick frozen (IQF) blueberries. Lacking sufficient outsource availability, they desired to build and operate their own IQF facilities, something that would be entirely new for them. The feasibility study Morrison prepared included a full analysis of the needs and costs for such facilities, in the desired locations.
4. Distribution. Like production, marketing can be as simple as distributing a product variation through existing channels, or may involve entirely new methods. One of the most interesting feasibility studies we’ve done was for Top O’ The Morn Farms, a large dairy producer that wished to “bring back the milkman” by delivering dairy products to doorsteps. There wasn’t a lot to compare to, and significant ground-up research was required. The venture has been enormously successful.
5. Project Personnel. This involves an analysis of both the needs to get the business feasibility study completed (e.g., engineers, technology, designers, marketers, etc.) and the labor and management force to operate the project once live.
6. Work Plan and Budget. Work plans and budgets should be developed for both the implementation and operating stages, and include financial forecasts for at least three to five years. This process turns dreams into dollars, and provides a realistic assessment of whether the venture is feasible.
7. Capital. Determining both long- and short-term capital needs goes hand-in-hand with the work plan and budget. Once general feasibility and capital needs are determined, it may be time for a chat with your bank or investors.
8. Risk Assessment. Now that you have all your eggs in the basket, what are the risks and how can they be mitigated? This can cover a lot of territory, and maybe a few that aren’t obvious. We did a feasibility study for a new product that relied heavily on the availability of a particular type of packaging. Our research found only two sources in North America (not all US), one of which had been available for only 18 months. Mitigation efforts were planned, and the product has been successful.
Morrison has worked with clients on all aspects of business feasibility for nearly 20 years. I always warn that one result they should be prepared for is “Not feasible,” but it’s more likely that feasibility may be realistic with some adjustments to the vision. A business feasibility study takes time and has costs, but it consumes less time and money than a business failure.
About the Author
Brent Morrison is the Founding Principal at Morrison. To get in touch with Brent, please find contact information for Morrison here.