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In considering a business opportunity why is it important to undertake a feasibility study prior to attempting to start the business?
- Undertaken to determine the commercial
- viability of a business idea, cannot be done separately from attempting to identify a viable strategy for the proposed business. Important in terms of financial analysis, business strategy and management considerations. Is this opportunity feasible in terms of return on investment, and also do you as an entrepreneur have the necessary skills and the right people to make the business successful.
What typically are the various components of a feasibility study?
Formulating a strategy (goals and objectives, R and D, determine strategy), realising a competitive advantage (cost leadership, product differentiation, focus strategies), formulating a business strategy (market lead or resource based), SWOT analysis.
identify in a comprehensive fashion the issues that an entrepreneur may need to consider
in evaluating a business idea, in respect of: Industry and competitor analysis
What is the current status of the industry you are looking to compete in (increasing/decreasing), how many competitors exist, how does your product/service compare to those being offered, on what basis can they be competitive.
identify in a comprehensive fashion the issues that an entrepreneur may need to consider in evaluating a business idea, in respect of: market analysis
What is the current status of the market you are looking to compete in (increasing/decreasing), is there room for another competitor
identify in a comprehensive fashion the issues that an entrepreneur may need to consider in evaluating a business idea, in respect of: financial analysis
what is the cost associated with this opportunity, how long will it take to be profitable, where will finance be sourced form, will the product/service be competitive based on the estimated cost of producing the product.
identify in a comprehensive fashion the issues that an entrepreneur may need to consider in evaluating a business idea, in respect of: operational analysis
- how will the operation function, under what
- basis: small business, partnership, sole proprietorship, what skills will be required for the business to function, will any procedures be outsourced to minimise cost.
identify in a comprehensive fashion the issues that an entrepreneur may need to consider in evaluating a business idea, in respect of: management considerations
- how will the firm make and distribute its
- product in an effective and efficient manner.
In respect of undertaking market research, explain what is meant by primary data and by secondary
Primary data: is information not currently available from any other source, or field research, generally useful to fill in gaps after secondary research has been analysed. For example surveys, focus groups, observations, experimentation and case studies.
- Secondary data: is information that already exists, seeking information for sources including publications, reports, government
- sources, telephone and business directories, internet, trade shows, annual reports, former employees, reverse engineering.
Identify and briefly explain the different ways in which an entrepreneur could seek primary information.
- Observation: for example observing which
- customer shop in which stores.
Experimentation and case studies: for example analysis what gives more profit, cost less – buy more or cost more – buy less.
- Surveys: including questionnaires, focus
- groups, in-depth interview etc. gaining specific information (buying patterns,
- what they want) from target markets.
Imagine you are planning to start your own business. There are numerous issues to consider in doing so. Where might you go to seek assistance, support and professional/expert advice? List as many possible sources of assistance/advice as you can.
- Include accountants, lawyers, management
- consultants, bank managers, government agencies, mentors, other business operators, family and friends.
Why can it be a good idea to seek advice from business advisers and other sources?
- Advice from someone that is not personally
- invested in the business, they can be objective about the analysis.
- Understanding of the technical and legal
- requirements of the proposed business.
- Information that you may have overlooked in
- your analysis.
- Tangible support: start-up assistance,
- business incubators.
Are there any possible downsides in relying upon advice from business
advisers and other sources?
- Yes, they are not personally invested in
- the businesses success (aka they get paid either way) therefor they may not be
- motivated to undertake the most comprehensive analysis possible. They may be providing incorrect/ out of date information, irrelevant information, or be missing important information that may be necessary to analysis viability of business.