Feasibility Checklist when Going into
Business
Summary
This publication is a checklist for the owner-manager of
a small business enterprise or for one contemplating going
into business for the first time. The questions concentrate
on areas you must seriously consider to determine if your
idea represents a real business opportunity and if you
really know what you are getting into. You can use the
checklist to evaluate a completely new venture proposal or
an apparent opportunity in your existing business.
Perhaps the most crucial problem you will face after
expressing an interest in starting a new business or
capitalizing on an apparent opportunity in your existing
business will be determining the feasibility of your idea.
Getting into the right business at the right time is simple
advice, but advice that is extremely difficult to implement.
The high failure rate of new businesses and products
indicates that very few ideas result in successful business
ventures, even when introduced by well established firms.
Too many entrepreneurs strike out on a business venture so
convinced of its merits that they fail to thoroughly
evaluate its potential.
This checklist should be useful in evaluating your business
idea. It is designed to help you screen out ideas that are
likely to fail before you invest extensive time, money and
effort in them.
Preliminary Analysis
A feasibility study involves gathering, analysing and
evaluating information with the purpose of answering the
question: "Should I go into this business?" Answering this
question involves a preliminary assessment of both personal
and project considerations.
General Personal Considerations
The first seven questions ask you to do a little
introspection. Are your personality characteristics such
that you can both adapt to and enjoy small business
ownership/management?
Yes No
Do you like to make your own decision?
Do you enjoy competition?
Do you have will power and self-discipline?
Do you plan ahead?
Do you get things done on time?
Can you take advice from others?
Are you adaptable to changing conditions?
The next series of questions stress the physical, emotional
and financial strains of a new business.
Yes No
Do you understand that owning your own business may entail
working 12 to 16 hours a day, probably six days a week, and
maybe on holidays?
Do you have the physical stamina to handle a business?
Do you have the emotional strength to withstand the strain?
Are you prepared to lower your standard of living for
several months or years?
Are you prepared to lose your savings?
Specific Personal Considerations
Yes No
Do you know which skills and areas of expertise are critical
to the success of your project?
Do you have these skills?
Does your idea effectively utilize your own skills and
abilities?
Can you find personnel that have the expertise you lack?
Do you know why you are considering this project?
Will your project effectively meet your career aspirations?
The next three questions emphasize the point that very few
people can claim expertise in all phases of a feasibility
study. You should realize your personal limitations and seek
appropriate assistance where necessary (i.e. marketing,
legal, financial).
Yes No
Do you have the ability to perform the feasibility study?
Do you have the time to perform the feasibility study?
Do you have the money needed to have the feasibility study
done?
General Project Description
Briefly describe the business you want to enter.
List the products and/or services you want to sell.
Describe who will use your products/services.
Why would someone buy your product/service?
What kind of location do you need in terms of type of
neighbourhood, traffic count, nearby firms, etc.
List your products/services suppliers.
List your major competitors - those who sell or provide
similar products/services.
List the labour and staff you require to provide your
products/services.
Requirements for Success
To determine whether your idea meets the basic requirements
for a successful new project, you must be able to answer at
least one of the following questions with a "yes."
Yes No
Does the product/service/business serve a presently unserved
need?
Does the product/service/business serve an existing market
in which demand exceeds supply?
Can the product/service/business successfully compete with
existing competition because of an "advantageous situation",
such as better price, location, etc.?
Major Flaws
A "Yes" response to questions such as the following would
indicate that the idea has little chance for success.
Yes No
Are there any causes (i.e. restrictions, monopolies,
shortages) that make any of the required factors of
production unavailable (i.e. unreasonable cost, scarce
skills, energy, material, equipment, processes, technology,
or personnel)?
Are capital requirements for entry or continuing operations
excessive?
Is adequate financing hard to obtain?
Are there potential detrimental environmental effects?
Are there factors that prevent effective marketing?
Desired Income
The following questions should remind you that you must
seek both a return on your investment in your own business
as well as a reasonable salary for the time you spend in
operating that business.
How much income do you desire?
Are you prepared to earn less income in the 1st - 3rd years?
What minimum income do you require?
What financial investment will be required for your
business?
How much could you earn by investing this money? (A)
How much could you earn by working for someone else? (B)
Add the amounts in (A) and (B). If this income is greater
than what you can realistically expect from your business,
are you prepared to forego this additional income to be your
own boss with the prospects of more substantial
profit/income in future years?
Supply
Yes No
Can you make a list of every item of inventory and operating
supplies needed?
Do you know the quantity, quality, technical specifications,
and price ranges desired?
Do you know the name and location of each potential source
of supply?
Do you know the price ranges available for each product from
each supplier?
Do you know about the delivery schedules for each supplier?
Do you know the sales terms of each supplier?
Do you know the credit terms of each supplier?
Do you know the financial condition of each supplier?
Is there a risk of shortage for any critical materials or
merchandise?
Are you aware of which suppliers have an advantage relative
to transportation costs?
Will the price available allow you to achieve an adequate
markup?
Expenses
Yes No
Do you know what your expenses will be for: rent, wages,
insurance, utilities, advertising, interest, etc.?
Do you need to know which expenses are direct, indirect, or
fixed?
Do you know how much your overhead will be?
Do you know how much your selling expenses will be?
Miscellaneous
Yes No
Are you aware of any major risks associated with your
product, service and/or business?
Can you minimize any of these major risks?
Are there major risks beyond your control?
Can these risks bankrupt you?
Venture Feasibility
Yes No
Are there any major questions remaining about your proposed
venture?
Do the above questions arise because of a lack of data?
Do the above questions arise because of a lack of management
skills?
Do the above questions arise because of a "fatal flaw" in
your idea?
Can you obtain the additional data needed?
Can you obtain the additional managerial skills needed?
Are you aware that there is less than a 50-50 chance that
you will be in business two years from now?
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