The best way to assess whether your business will be profitable is by conducting a short and concise feasibility study. The result of the feasibility study will determine whether you should proceed with a full business plan, and in some cases, a feasibility study can replace a business plan.
The Main Components Of A Feasibility Study:
1. Unique Selling Point (USP)
Having a unique selling point (USP) is crucial to your business's success. Ideally you should try and distinguish your business from the competition by providing a product or service that customers can only get from you. Even if you are in a market with several similar competitors you can still distinguish yourself from the competition through a process or the delivery of your product or service to your customers.
2. Competitive AdvantageProving that your business is better than your competitors is crucial, you need to explain why your product or service will beat the competition.
The main ways to beat the competition:
- Price - are you cheaper?
- Convenience - are you based locally to your target market?
- Quality - is your product faster or more efficient?
- Guarantee/Warranty - Will you guarantee your product or service for longer than your competitor
3. Market Environment AnalysisYou need to prove in this section that a market exists, or will exist for your product or service. Some market research is essential here. If you cannot afford a market research company it is possible to research your market for yourself.
Google - search engines contain lots of useful information, but be prepared to spend a long time looking for what you need.
Libraries - most local libraries contain trade journals and local information you may find useful. If you live in London or are planning a trip there I would recommend a visiting the British Library, the Business & IP Centre is a fantastic resource for researching your business.
Social Networks - Use a service to send mail out surveys to via email and your social networks to find out what people think of your idea. A couple well written tweets in peak hours may also generate some valuable feedback.
4. Technical & Operational RequirementsIn this section you need to cover the basic requirements your company will need to operate. It's always best to plan the first year in detail, then look at the next two years on a summary level.
5. Financial Information
Making money is the most important part of going into business, be very careful when you are working on this section.
You will need:
- Start up costs
- Revenue expectations for first year
- Ongoing expenditure for first year
- Cash Flow Statement for first year
If you are finding it difficult to plan revenue and expenditure it may be a good idea to download the annual statement of a startup company in a similar sector.
ConclusionWhen applying for a Startup Loan when you have a business idea which has not been it is very important for you have undergone a feasibility test. This will speed up the process of getting your loan and will provide most of the information you need to complete your business plan.
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