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What Is Business Viability?

What You Need to Know About Business Viability

• Make Sure Your Business Is Viable

Viability vs. Solvency

Viability vs. liquidity.

Business viability is measured by a business' potential for long-term survival and the ability to sustain profits over a period of time.

Learn more about how to tell if a business is viable.

Business viability means that a business is (or has the potential to be) successful. A viable business is profitable, which means it has more revenue coming in than it's spending on the costs of running the business.

If a business isn't viable, it's difficult to recover. The business would need to increase revenue, cut costs, or both. Viability is closely linked to profit as well as solvency and liquidity. 

How Business Viability Works 

Creating a viable business is a two-part process. First, it means creating a marketing strategy by knowing who you are, who you are selling to, and who else is selling to them. Second, it means having your financial house in order. 

To create a marketing strategy that will make your business viable, you'll need to have this information: 

• Unique selling proposition : This is a critical factor in having a viable business. Being unique keeps your business out in front of the competition. 
• Stable customer base : To be viable, you have to know who is going to buy your product or service. That means researching to find out who these people are.
• Competitive advantage : Even if your product is unique and you know who you're selling to, you must always consider the competition. Find out who your competitors are and keep them in mind as you create your marketing strategy. 

In addition to your marketing strategy, a continuing focus on your business' financial status will help create a viable business. This includes:

• Cash stability : The most important factor that makes a business viable is that it has enough assets (cash and other reserve funds) for day-to-day operations and to weather the ups and downs that all businesses experience. Getting to cash stability doesn't happen overnight. It means being frugal, not over-spending in anticipation of sales, and not taking too much out of the business. 
• Continuing attention to your financial status : Having a viable business means always knowing where your business is financially. Get good financial software, input all your business information regularly, and analyze it against your goals for cash stability and other factors. 

Use business check-up ratios to measure the health of your business. 

A general assessment of whether a business is (or will be) successful

Involves multiple aspects of a business, including marketing and financials

An assessment of whether a business has enough money

Often measured using a current ratio

Business viability is often confused with two other terms that are often used for business performance—solvency and liquidity. A business is solvent when it has  enough assets  to cover its liabilities. Solvency is often confused with liquidity, but it's not the same thing.

Solvency is often measured as a  current ratio , which is a business's total current assets divided by its total current liabilities. A business should have a current ratio of 2:1 to be solvent and cover liabilities, which means that it has twice as many current assets as it has current liabilities. You need twice as many assets as liabilities because selling assets to raise cash may result in losses. A business is solvent and not likely to declare  bankruptcy  if its current ratio is over 2:1.

An assessment of the overall business model, not just finances

Looks at both short- and long-term profitability

Short-term measure of financial health

Looks at the ability of a business to quickly turn assets into cash

Liquidity is more of a short-term measure. It refers to the ability of a business to quickly turn  assets into cash without loss. If your business needs money, you may have to sell assets. Unless the asset is cash, the most liquid asset of all, you may lose money by selling. For example, you may not get full value if you sell receivables. If you try to sell equipment, you will probably take a loss because the equipment has most likely depreciated.

If you're liquid, you have enough cash or other easily liquidated assets to ensure you can pay your immediate bills and/or your employees. This is called positive cash flow, and positive cash flow means liquidity. 

Key Takeaways

• Business viability looks at a business' long-term survival and profitability. 
• Creating a viable business means having a good marketing strategy and keeping a close eye on your financials.
• Viability is different from solvency and liquidity.
• Solvency means having enough assets to cover your liabilities. 
• Liquidity means having the ability to quickly turn assets into cash.  

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5 Steps to Develop a Viable Business Plan

Small Business

No matter what type of business you run, you need a business plan. A business plan is a description of your business and objectives and the strategies of how you expect to achieve your goals with a management team and financial resources. Contrary to belief, you don’t need a business plan just to obtain financing. You also need a plan to help you guide your company.

Step 1: Define Your Business

Defining your business is the most vital thing that can help your company become successful. By defining your business, you are better able to achieve your goals and sustain superior performance.

Two things that you need to consider when you define your business are your marketing position statement and your unique selling proposition. A marketing position statement is a one- to two-sentence statement that says what you do and for whom you do it to uniquely solve an urgent need or fulfill a desire. A unique selling proposition is a statement that shows the reader how your product or service stands out and is different than other substitutes on the market. Your USP must be strong enough to attract customers and compel them to buy your product or service.

Surprisingly, not all business owners and managers know the answer to how they define their business. As a result, their businesses can ultimately fail.

The U.S. Small Business Administration highlights a store owner who repairs and sells watches. After analyzing his business operations, the owner came to realize most of its earnings were from repair, even though the company spent most of its resources on selling products. As a result of his analysis, the owner concluded that his business was a repair shop. He shut down the product sales operation and focused on the repair service. This move resulted in dramatic increases in sales and profits.

Step 2: Determine Your Target Audience

Knowing your target audience is an integral part of business plan success. Although your product or service can appeal to many different types of buyers, a one-size-fits-all marketing and sales approach is not focused enough . The more you know about the audience you target, the better able you are to reach and communicate with them and sell your products and services.

You can get a better idea of your target audience by looking at the demographic and psychographic segments of prospective customers that can benefit from your products and services. Do they fit a specific gender or age range? What income bracket do they mostly share? What problems do they need solved? What common attitudes, opinions, values and behaviors do they share?

The more narrow your target market, the more focused you can be in your marketing. On the other hand, if you are tempted to serve more than one target market it can be costly, and you may not succeed.

Take a look at the dilemma Aviva Weis faced after she hired a new marketing executive . Weiss is the co-founder and lead designer of Fun and Function, a company that makes items for special needs children, such as therapy balls that help children develop fine motor skills. Her company grew more than sevenfold from 2007 to 2010 by targeting the consumer market. However, her new marketing executive–who previously worked for a competitor–wanted Fun and Function to target schools and hospitals. This was NOT a good strategy to serve two target markets because it not only required a huge investment and a change in operations, but it also increased risk to alienate the company’s base of loyal consumer customers.

Step 3: Understand the 5 Forces that impact Your Business

Every business–yours included–is subject to five external forces. These forces include existing competitors, threat of new competitors, substitute products or services, bargaining power of its suppliers, and bargaining power of its customers, according to Michael Porter of Harvard Business School .

By understanding these five forces, you are able to comprehend the environment that impacts your business. If your company is in an industry that requires government approval of its products, such as pharmaceuticals or medical devices, then you operate in an environment that makes it difficult for new competitors to enter your market. Yet, if your company is in an industry that does not require proprietary products, special know-how or high investment, then you may have new competitors as you grow.

It’s not enough to know about your industry from just its products or services. You also need to understand the demand and supply of raw materials, manufacturing and labor. Plus, you need to comprehend political and legal related issues. These factors can affect the bargaining power of suppliers or customers. For example, the nutrition supplement industry has many distributors, fewer manufacturers and even fewer raw material suppliers that dominate and influence costs. If one raw material supplier reduces production, that can cause a shortage of products and raise prices accordingly.

Step 4: Create a Competitive Strategy

To demonstrate the viability of your business, your plan needs to demonstrate how you will sustain a competitive advantage. Porter says there are three unique strategies a business could choose from to sustain competitive advantage, namely cost leadership, differentiation and focus. If you are a small company with limited resources, your best strategy is focus .

Your strategy needs to show how you will capture your target market. What are the marketing strategies and tactics that you will create and execute to generate customers and sales? What advertising message will you create that will resonate with prospective buyers and compel them to buy from you? Who will be on your marketing team? What functions will you perform in house and which will you outsource? These are some of the important questions you need to address in your business plan.

Step 5: Project Your Financial Performance

Your financial performance is a measure of your success. Your business plan must include a projection of how you expect your company to perform based on what you discover developing the first four steps of your plan.

You’ll need to address the price and profitability of your products and services. Your projections include the number of customers you expect you’ll attract. How much will they each buy?

A rule of thumb is to underestimate your expected revenues and overestimate your company expenses. You can never know what types of delays may occur in receiving revenues from the sale of your products or services. Plus, you may be hit with unexpected expenses or hidden costs you don’t yet know about.

Another rule of thumb, especially for start-up and early stage companies, is that cash flow is more important than profits. Cash is what lubricates the flow of business. You can always manipulate profits through various accounting techniques, such as deciding if you record inventory as first in-first out or last in-first out. But you can’t do this with cash flow.

Your projected financial performance is also a factor that can influence investors. Higher operating profit margins can attract more investors. However, the reality of your ability to achieve these projections comes from the quality of your plan and execution.

Now that you’ve become more knowledgeable about the five steps to developing a viable business plan, what’s your next step? If you don’t have a business plan, then get started right away...even if you have a successful company. And if you have a plan, see how you can improve it with some of what you have learned here.

Eric Wagner

While Eric now focuses on internet marketing, he also has a background in web development. He loves being among the first to find out about new tech—and better yet, being a part of making that tech succeed. Eric is known to be a good listener, seeking to understand how each individual sees the world. He is a harmonizer in group settings, cultivating unity while constructing the overall goal and strategy. When he’s not busy helping i7 clients dominate the online marketplace, Eric enjoys drone videography (he’s got a UAV pilot’s license), woodworking, community service, and all things outdoors.

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Viable Business: Meaning, Elements, & Plan Testing

by Devra Gartenstein

Published on 29 Apr 2019

A viable business plan is based on a viable business model. Your business plan should outline ways that your company will produce and market its products and services to keep its customers satisfied and earn a sustainable profit. To determine whether a business idea can actually be viable, your business plan should present a value proposition and then explore the details of potential market size along with product and distribution channels and cost structure.

To explain what is meant by a viable business idea, imagine the elements that will help your business to live and breathe on its own, such as attracting the right customers and earning enough money to survive and grow.

Why Write a Viable Business Plan?

Your business plan is the road map to starting and running your business. The process of writing its text and generating its financials is an opportunity for you to think through details and hash out scenarios. You'll never be able to accurately predict how things will actually unfold once you start your business, but if you take the time and make the effort to envision how your company could succeed and cope with adversity, you will be well positioned to set your ideas in motion.

In addition to being a vital thought exercise for your own planning, a viable business plan is a necessary tool for approaching lenders and investors. The individuals and institutions who will be able to provide access to the capital you'll need will understandably want to make sure that your endeavor will be a worthwhile investment and that you'll be able to repay any sums you borrow.

If you base your business plan simply on the fact that you like your product, and you assume everyone else will enjoy it as well, you will show investors right off the bat that your idea isn't viable. Instead of basing your financials on shoddy research and wishful thinking, you should do careful research and be transparent about your assumptions.

Elements of a Viable Business Plan

• Value proposition. Your business plan should explain what your business will offer, who will want it and why. If you understand and can explain the answers to these questions, you'll have the basic elements of your marketing plan, which will outline how you intend to attract the customers who are your best prospects.
• Marketing research. To be viable and realistic, your business plan should demonstrate that you've collected real data about who will want your product and how large a market you anticipate reaching. This information should address demographics such as age and gender and psychographics such as tastes and personality traits.
• Production and distribution. By addressing these aspects of how you expect your business to unfold, you have the opportunity to show that you have a realistic grasp of the nuts and bolts of your endeavor. This section will address scale and technologies as well as procurement and delivery logistics.
• Financials. Your business plan will be largely theoretical until you start plugging in numbers. Develop realistic projections detailing anticipated revenue and outlays. Show how much cash you expect to need and where you expect to find it. Do multiple versions of these spreadsheets showing best-, worst- and medium-case scenarios.

Testing the Viability of Your Business

A business plan is an exercise in anticipating the future. It is a useful and important part of your business development process, but the true test of your business plan's viability is the process of actually running your business. Rather than existing as a static testament to your initial ideas, your business plan should be a living, breathing document. Revise it often as you grow more familiar with the landscape in which your company will exist and use this process to update your operations and your objectives.

What are the 5 Factors that Determine the Viability of a Business?

To stay competitive in a market landscape that’s constantly in flux you’ll need to understand the dynamics that govern the success and sustainability of a business. There are five critical elements that dictate the viability of a business. Asking what they are and how they relate to your business model is what sets established business owners apart from those who fail quickly. 

The viability of a business is determined by a combination of various factors including, but not limited to, market demand, competition, financial stability, operational efficiency, and the quality of the management team.

In this article, we will delve into the five pivotal factors that determine the viability of a business to dissect each element and provide you with a comprehensive understanding that will help you steer your business towards success. 

By the end of this read, you will be equipped with the knowledge to assess the potential and sustainability of a business venture effectively. If you have any questions at the end, ask us for help and clarification on how you use these five factors to determine how viable your business is.

How can I Determine the Viability of a Business?

Business viability is like asking whether a business has a good chance of surviving and thriving in the real world. It’s all about figuring out if a business idea or a company is likely to be successful and make a profit.

Whether you’re just starting out or you’re a year or two into your journey, going through the following steps will be an invaluable exercise to help you work out if you should forge on or pivot.

Think of it this way: Imagine you want to open a bakery. To determine if it’s viable, you’d need to consider things like:

• Market Demand : Is there a strong desire for baked goods in your area, or are there too many bakeries already? If people love pastries, your bakery might have a good chance.
• Competition : How many other bakeries are there, and how well are they doing? If there are too many, it might be tough to stand out. What point of difference can you offer?
• Costs : What does it take to run the bakery? This includes ingredients, rent, staff, and more. Can you cover these costs and still make a profit?
• Revenue : How much money can you make from selling your baked goods? Are people willing to pay the prices you need to charge to cover your costs and make a profit?
• Sustainability : Can your business keep making money over the long term, or is it just a short-lived trend?
• Legal and Regulatory Issues : Are there any laws or regulations that might affect your bakery, like health and safety standards or zoning rules?

Business viability is about looking at all these factors and how they apply to your business to decide if your money-making idea is likely to work out and be successful. 

Does your idea have big enough wings to fly? 

Check these five critical factors against what business plan …

#1 Market Demand

Understanding the market demand involves analysing market trends, understanding the needs and preferences of your target audience and offering products or services that meet those needs. 

Conducting market research can help identify current gaps in the market and create a unique value proposition that sets you apart from the competition.

#2 Competition

A business cannot operate in isolation; it has to contend with other players in the market – which isn’t always a bad thing. Having competition can help hold you accountable to excelling in your business, pushing your boundaries and innovation. Analysing the strengths and weaknesses of your competitors can provide insights into market opportunities and help carve out a niche for your business where you can excel.

#3 Financial Stability

Financial stability involves maintaining a healthy cash flow , having sufficient capital to cover operational costs and ensuring profitability in the long run. A business with a robust financial foundation is more likely to withstand economic downturns and emerge victorious.

#4 Operational Efficiency

Operational efficiency involves streamlining processes, reducing waste, and improving productivity to give your business the ability to utilise resources in the most optimal way. A business that operates efficiently can offer better quality products and services at competitive prices, to gain an edge in the market.

#5 Management Team

A competent management team has the power to steer a business in the right direction, make informed decisions and provide a positive work environment. This is an easy one to overlook but it gives back in so many ways with high employee satisfaction , less turnover and the ability to attract a highly skilled team to back you up. It’s also important to have a strong management team to handle stressful situations. It’s one thing to have a stable team around when the going is good, but really you want a team that sticks with it when the plan hits the fan.

It is essential to have a team that is skilled, experienced and aligned with the vision of the business. 

You will need the leadership skills to see the big picture and bring it all together through great communication, realistic expectations and the ability to give and receive feedback.

What else do you need to know to fully grasp the intricacies of business viability? We answer the biggest questions for you below. If we’ve missed your question, email it through and we’ll get back to you on how you can make these viability factors a backbone of your business setting.

How Can I Assess the Market Demand for My Business?

To assess your market demand, start with market research to get a feel for the current trends and customer preferences. There are plenty of online tools that can help, including Google Trends as well as consumer surveys to gather data. Studying your competitors and their customer base can offer insights into the market dynamics as well as your own personal experiences and grievances with the products on offer.

What Strategies Can Be Employed to Stay Ahead of the Competition?

To stay ahead of the competition, focus on offering superior quality products or services. Secondly, invest in customer service to build a loyal customer base. Innovative marketing strategies and leveraging technology can also give you a competitive edge. Remember, understanding your unique selling proposition (USP) and capitalising on it is key.

How Do I Ensure Financial Stability for My Business?

Ensuring financial stability involves budgeting, financial forecasting and maintaining a healthy cash flow. I get that that sounds obvious but it’s a ball a lot of businesses drop. Setting up great money habits early on makes the financial side of things a lot easier in the long run. It’s just as important to monitor every money movement as a sole trader as it is when you are an enterprise. Consider seeking the advice of a financial advisor to help you navigate the complex financial landscape. They can also help you forecast risk and put aside a contingency fund to safeguard your business if something unforeseen knocks the wind out of your sails.

How do I Enhance Business Operational Efficiency?

Set up a business system and flow with intent and purpose from the start. So many businesses just allow their business to grow ‘naturally’. This creates a patchwork of operating methods from all over and the result is far from smooth and seamless. 

Streamline your everyday business processes by blocking out task times, delegating effectively, creating a system (which will automatically show up double handling and gaps) and bringing in automation when relevant. Implementing systems that facilitate smooth workflow and reduce manual errors can be a game-changer. Make sure you and your team stay up-to-date with training to foster productivity and efficiency as well as personal growth.

Utilising Resources Wisely

Allocating resources wisely is a critical aspect of enhancing operational efficiency. When you use your resources efficiently, you spend less money on things like materials, labour and energy to put more profit in your pocket, or reinvest in better services for your audience.

Resource allocation also loops back into effective leadership and decision-making, stemming from having a solid plan and crystal clear objectives that allow you to use financial, human and material resources in the most efficient way possible. 

Smart resource management can give you an edge over your competitors. You can offer better prices, higher quality, or faster delivery, making customers choose you over others.

Trying to do more with less can help push you out of the rut of a comfort zone, leading to creative solutions and innovations to improve your business processes. Efficient resource use makes your business more resilient. You can weather economic ups and downs better because you’re not wasting resources during tough times.

As well as looking professional and well-oiled, being known as a business that uses resources wisely can boost your reputation. Customers and investors like to support companies that are responsible and efficient.

Feedback and Continuous Improvement

True viability in your business comes back to your mindset. If you are ready and willing to take on feedback from employees and customers you’ll have the flexibility and early warning you need to make improvements and shift gears to stay relevant. A culture of continuous improvement can lead to enhanced operational efficiency over time as well as your professional growth and overall satisfaction with your business performance.

What are the Common Pitfalls to Avoid?

The biggest ways business owners can stick their heads in the sand and run into trouble are by avoiding feedback and resisting change.

Avoiding Customer Feedback

Ignoring or avoiding customer feedback can be detrimental as it can lead to a disconnect from the market needs and preferences, resulting in lost opportunities.

Resistance to Change

All businesses must respond to the changing landscape. No one is immune. Businesses that resist change and do not adapt to the evolving market trends will lag behind, missing out on potential growth opportunities while their competitors fill the gaps and make off with all the profits.

Final Thoughts

As you navigate the complex landscape of establishing and running a successful business, it’s important to consider how viable your business idea is. The five crucial factors that determine viability will help get your business feet under you, and if you don’t have everything it takes, you can look at the changes you can make or another offer with a better fit.

Wanting to make a lot of money is not going to be enough to get you the lifestyle you are dreaming of. You need to have something other people want and need. 

After defining market demand, competition, financial stability, operational efficiency, and the role of a competent management team you’ll be better positioned to steer your new venture in the right direction, making informed decisions that foster growth and sustainability.

Remember, the journey of building a viable business is a continuous learning process. Stay curious, be open to feedback and never stop learning. The road to success is paved with diligence, resilience and a deep understanding of the business landscape. Here’s to forging a path to success with a business that stands the test of time, grounded in viability and poised for growth.

For help assessing the viability of your business, book a free ‘meet and greet’ session today.

What are the 5 Factors that Determine the Viability of a Business – FAQs

How do you determine business viability.

A1: Determining business viability involves assessing several critical aspects. Firstly, conduct a thorough market analysis to understand the demand for your product or service. Evaluate the competition and identify a unique selling proposition. Consider your financial feasibility, including startup costs, revenue projections, and profitability. Assess the skills and expertise of your team, and ensure you have a clear business plan. Lastly, analyse potential risks and challenges that may affect your business’s viability.

What are the 4 main factors businesses must consider?

Four main factors that businesses must consider for success include:

Market Demand: Ensure there is a genuine need for your product or service in the market.

Financial Sustainability: Assess your financial resources, including startup capital, operating costs, and revenue generation capabilities.

Competitive Landscape: Analyse your competition and find ways to differentiate your business in the market.

Effective Management: Having a skilled and efficient team, along with a well-defined business strategy, is essential for managing and growing your business.

What are the 5 things to consider when evaluating a business opportunity?

When evaluating a business opportunity, focus on these five key factors:

Market Potential: Determine if there is a sizable and sustainable market for your product or service.

Profitability: Assess the potential for generating consistent profits and a positive return on investment.

Competitive Advantage: Identify what sets your business apart from competitors and how you can maintain that advantage.

Resource Requirements: Calculate the resources needed, including funding, manpower, and technology, to successfully operate the business.

Risk Analysis: Evaluate potential risks and challenges and develop strategies to mitigate them.

What is the key to success in business?

The key to success in business is multifaceted but often centres around the ability to adapt and innovate. Successful businesses consistently meet customer needs, stay ahead of market trends, and maintain financial stability. Additionally, effective leadership, a strong team, ethical practices, and a focus on customer satisfaction contribute significantly to business success.

What are the three significant things we need to consider in starting a business?

When starting a business, prioritise these three critical considerations:

Market Research: Thoroughly research your target market, understand customer preferences, and assess competition.

Financial Planning: Determine the startup capital required, create a budget, and plan for ongoing financial management.

Legal and Regulatory Compliance: Ensure that you understand and comply with all legal requirements, such as permits, licences, and tax obligations, to operate your business legally and avoid potential issues in the future.

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12 Key Elements of a Business Plan (Top Components Explained)

Starting and running a successful business requires proper planning and execution of effective business tactics and strategies .

You need to prepare many essential business documents when starting a business for maximum success; the business plan is one such document.

When creating a business, you want to achieve business objectives and financial goals like productivity, profitability, and business growth. You need an effective business plan to help you get to your desired business destination.

Even if you are already running a business, the proper understanding and review of the key elements of a business plan help you navigate potential crises and obstacles.

This article will teach you why the business document is at the core of any successful business and its key elements you can not avoid.

Let’s get started.

Why Are Business Plans Important?

Business plans are practical steps or guidelines that usually outline what companies need to do to reach their goals. They are essential documents for any business wanting to grow and thrive in a highly-competitive business environment .

1. Proves Your Business Viability

A business plan gives companies an idea of how viable they are and what actions they need to take to grow and reach their financial targets. With a well-written and clearly defined business plan, your business is better positioned to meet its goals.

2. Guides You Throughout the Business Cycle

A business plan is not just important at the start of a business. As a business owner, you must draw up a business plan to remain relevant throughout the business cycle .

During the starting phase of your business, a business plan helps bring your ideas into reality. A solid business plan can secure funding from lenders and investors.

After successfully setting up your business, the next phase is management. Your business plan still has a role to play in this phase, as it assists in communicating your business vision to employees and external partners.

Essentially, your business plan needs to be flexible enough to adapt to changes in the needs of your business.

3. Helps You Make Better Business Decisions

As a business owner, you are involved in an endless decision-making cycle. Your business plan helps you find answers to your most crucial business decisions.

A robust business plan helps you settle your major business components before you launch your product, such as your marketing and sales strategy and competitive advantage.

4. Eliminates Big Mistakes

Many small businesses fail within their first five years for several reasons: lack of financing, stiff competition, low market need, inadequate teams, and inefficient pricing strategy.

Creating an effective plan helps you eliminate these big mistakes that lead to businesses' decline. Every business plan element is crucial for helping you avoid potential mistakes before they happen.

5. Secures Financing and Attracts Top Talents

Having an effective plan increases your chances of securing business loans. One of the essential requirements many lenders ask for to grant your loan request is your business plan.

A business plan helps investors feel confident that your business can attract a significant return on investments ( ROI ).

You can attract and retain top-quality talents with a clear business plan. It inspires your employees and keeps them aligned to achieve your strategic business goals.

Key Elements of Business Plan

Starting and running a successful business requires well-laid actions and supporting documents that better position a company to achieve its business goals and maximize success.

A business plan is a written document with relevant information detailing business objectives and how it intends to achieve its goals.

With an effective business plan, investors, lenders, and potential partners understand your organizational structure and goals, usually around profitability, productivity, and growth.

Every successful business plan is made up of key components that help solidify the efficacy of the business plan in delivering on what it was created to do.

Here are some of the components of an effective business plan.

1. Executive Summary

One of the key elements of a business plan is the executive summary. Write the executive summary as part of the concluding topics in the business plan. Creating an executive summary with all the facts and information available is easier.

In the overall business plan document, the executive summary should be at the forefront of the business plan. It helps set the tone for readers on what to expect from the business plan.

A well-written executive summary includes all vital information about the organization's operations, making it easy for a reader to understand.

The key points that need to be acted upon are highlighted in the executive summary. They should be well spelled out to make decisions easy for the management team.

A good and compelling executive summary points out a company's mission statement and a brief description of its products and services.

An executive summary summarizes a business's expected value proposition to distinct customer segments. It highlights the other key elements to be discussed during the rest of the business plan.

Including your prior experiences as an entrepreneur is a good idea in drawing up an executive summary for your business. A brief but detailed explanation of why you decided to start the business in the first place is essential.

Adding your company's mission statement in your executive summary cannot be overemphasized. It creates a culture that defines how employees and all individuals associated with your company abide when carrying out its related processes and operations.

Your executive summary should be brief and detailed to catch readers' attention and encourage them to learn more about your company.

Components of an Executive Summary

Here are some of the information that makes up an executive summary:

• The name and location of your company
• Products and services offered by your company
• Mission and vision statements
• Success factors of your business plan

2. Business Description

Your business description needs to be exciting and captivating as it is the formal introduction a reader gets about your company.

What your company aims to provide, its products and services, goals and objectives, target audience , and potential customers it plans to serve need to be highlighted in your business description.

A company description helps point out notable qualities that make your company stand out from other businesses in the industry. It details its unique strengths and the competitive advantages that give it an edge to succeed over its direct and indirect competitors.

Spell out how your business aims to deliver on the particular needs and wants of identified customers in your company description, as well as the particular industry and target market of the particular focus of the company.

Include trends and significant competitors within your particular industry in your company description. Your business description should contain what sets your company apart from other businesses and provides it with the needed competitive advantage.

In essence, if there is any area in your business plan where you need to brag about your business, your company description provides that unique opportunity as readers look to get a high-level overview.

Components of a Business Description

Your business description needs to contain these categories of information.

• Business location
• The legal structure of your business
• Summary of your business’s short and long-term goals

3. Market Analysis

The market analysis section should be solely based on analytical research as it details trends particular to the market you want to penetrate.

Graphs, spreadsheets, and histograms are handy data and statistical tools you need to utilize in your market analysis. They make it easy to understand the relationship between your current ideas and the future goals you have for the business.

All details about the target customers you plan to sell products or services should be in the market analysis section. It helps readers with a helpful overview of the market.

In your market analysis, you provide the needed data and statistics about industry and market share, the identified strengths in your company description, and compare them against other businesses in the same industry.

The market analysis section aims to define your target audience and estimate how your product or service would fare with these identified audiences.

Market analysis helps visualize a target market by researching and identifying the primary target audience of your company and detailing steps and plans based on your audience location.

Obtaining this information through market research is essential as it helps shape how your business achieves its short-term and long-term goals.

Market Analysis Factors

Here are some of the factors to be included in your market analysis.

• The geographical location of your target market
• Needs of your target market and how your products and services can meet those needs
• Demographics of your target audience

Components of the Market Analysis Section

Here is some of the information to be included in your market analysis.

• Industry description and statistics
• Demographics and profile of target customers
• Marketing data for your products and services
• Detailed evaluation of your competitors

4. Marketing Plan

A marketing plan defines how your business aims to reach its target customers, generate sales leads, and, ultimately, make sales.

Promotion is at the center of any successful marketing plan. It is a series of steps to pitch a product or service to a larger audience to generate engagement. Note that the marketing strategy for a business should not be stagnant and must evolve depending on its outcome.

Include the budgetary requirement for successfully implementing your marketing plan in this section to make it easy for readers to measure your marketing plan's impact in terms of numbers.

The information to include in your marketing plan includes marketing and promotion strategies, pricing plans and strategies , and sales proposals. You need to include how you intend to get customers to return and make repeat purchases in your business plan.

5. Sales Strategy

Sales strategy defines how you intend to get your product or service to your target customers and works hand in hand with your business marketing strategy.

Your sales strategy approach should not be complex. Break it down into simple and understandable steps to promote your product or service to target customers.

Apart from the steps to promote your product or service, define the budget you need to implement your sales strategies and the number of sales reps needed to help the business assist in direct sales.

Your sales strategy should be specific on what you need and how you intend to deliver on your sales targets, where numbers are reflected to make it easier for readers to understand and relate better.

6. Competitive Analysis

Providing transparent and honest information, even with direct and indirect competitors, defines a good business plan. Provide the reader with a clear picture of your rank against major competitors.

Identifying your competitors' weaknesses and strengths is useful in drawing up a market analysis. It is one information investors look out for when assessing business plans.

The competitive analysis section clearly defines the notable differences between your company and your competitors as measured against their strengths and weaknesses.

This section should define the following:

• Your competitors' identified advantages in the market
• How do you plan to set up your company to challenge your competitors’ advantage and gain grounds from them?
• The standout qualities that distinguish you from other companies
• Potential bottlenecks you have identified that have plagued competitors in the same industry and how you intend to overcome these bottlenecks

In your business plan, you need to prove your industry knowledge to anyone who reads your business plan. The competitive analysis section is designed for that purpose.

7. Management and Organization

Management and organization are key components of a business plan. They define its structure and how it is positioned to run.

Whether you intend to run a sole proprietorship, general or limited partnership, or corporation, the legal structure of your business needs to be clearly defined in your business plan.

Use an organizational chart that illustrates the hierarchy of operations of your company and spells out separate departments and their roles and functions in this business plan section.

The management and organization section includes profiles of advisors, board of directors, and executive team members and their roles and responsibilities in guaranteeing the company's success.

Apparent factors that influence your company's corporate culture, such as human resources requirements and legal structure, should be well defined in the management and organization section.

Defining the business's chain of command if you are not a sole proprietor is necessary. It leaves room for little or no confusion about who is in charge or responsible during business operations.

This section provides relevant information on how the management team intends to help employees maximize their strengths and address their identified weaknesses to help all quarters improve for the business's success.

8. Products and Services

This business plan section describes what a company has to offer regarding products and services to the maximum benefit and satisfaction of its target market.

Boldly spell out pending patents or copyright products and intellectual property in this section alongside costs, expected sales revenue, research and development, and competitors' advantage as an overview.

At this stage of your business plan, the reader needs to know what your business plans to produce and sell and the benefits these products offer in meeting customers' needs.

The supply network of your business product, production costs, and how you intend to sell the products are crucial components of the products and services section.

Investors are always keen on this information to help them reach a balanced assessment of if investing in your business is risky or offer benefits to them.

You need to create a link in this section on how your products or services are designed to meet the market's needs and how you intend to keep those customers and carve out a market share for your company.

Repeat purchases are the backing that a successful business relies on and measure how much customers are into what your company is offering.

This section is more like an expansion of the executive summary section. You need to analyze each product or service under the business.

9. Operating Plan

An operations plan describes how you plan to carry out your business operations and processes.

The operating plan for your business should include:

• Information about how your company plans to carry out its operations.
• The base location from which your company intends to operate.
• The number of employees to be utilized and other information about your company's operations.
• Key business processes.

This section should highlight how your organization is set up to run. You can also introduce your company's management team in this section, alongside their skills, roles, and responsibilities in the company.

The best way to introduce the company team is by drawing up an organizational chart that effectively maps out an organization's rank and chain of command.

What should be spelled out to readers when they come across this business plan section is how the business plans to operate day-in and day-out successfully.

10. Financial Projections and Assumptions

Bringing your great business ideas into reality is why business plans are important. They help create a sustainable and viable business.

The financial section of your business plan offers significant value. A business uses a financial plan to solve all its financial concerns, which usually involves startup costs, labor expenses, financial projections, and funding and investor pitches.

All key assumptions about the business finances need to be listed alongside the business financial projection, and changes to be made on the assumptions side until it balances with the projection for the business.

The financial plan should also include how the business plans to generate income and the capital expenditure budgets that tend to eat into the budget to arrive at an accurate cash flow projection for the business.

Base your financial goals and expectations on extensive market research backed with relevant financial statements for the relevant period.

Examples of financial statements you can include in the financial projections and assumptions section of your business plan include:

• Projected income statements
• Cash flow statements
• Balance sheets
• Income statements

Revealing the financial goals and potentials of the business is what the financial projection and assumption section of your business plan is all about. It needs to be purely based on facts that can be measurable and attainable.

11. Request For Funding

The request for funding section focuses on the amount of money needed to set up your business and underlying plans for raising the money required. This section includes plans for utilizing the funds for your business's operational and manufacturing processes.

When seeking funding, a reasonable timeline is required alongside it. If the need arises for additional funding to complete other business-related projects, you are not left scampering and desperate for funds.

If you do not have the funds to start up your business, then you should devote a whole section of your business plan to explaining the amount of money you need and how you plan to utilize every penny of the funds. You need to explain it in detail for a future funding request.

When an investor picks up your business plan to analyze it, with all your plans for the funds well spelled out, they are motivated to invest as they have gotten a backing guarantee from your funding request section.

Include timelines and plans for how you intend to repay the loans received in your funding request section. This addition keeps investors assured that they could recoup their investment in the business.

12. Exhibits and Appendices

Exhibits and appendices comprise the final section of your business plan and contain all supporting documents for other sections of the business plan.

Some of the documents that comprise the exhibits and appendices section includes:

• Legal documents
• Licenses and permits
• Credit histories
• Customer lists

The choice of what additional document to include in your business plan to support your statements depends mainly on the intended audience of your business plan. Hence, it is better to play it safe and not leave anything out when drawing up the appendix and exhibit section.

Supporting documentation is particularly helpful when you need funding or support for your business. This section provides investors with a clearer understanding of the research that backs the claims made in your business plan.

There are key points to include in the appendix and exhibits section of your business plan.

• The management team and other stakeholders resume
• Marketing research
• Permits and relevant legal documents
• Financial documents

Was This Article Helpful?

Martin luenendonk.

Martin loves entrepreneurship and has helped dozens of entrepreneurs by validating the business idea, finding scalable customer acquisition channels, and building a data-driven organization. During his time working in investment banking, tech startups, and industry-leading companies he gained extensive knowledge in using different software tools to optimize business processes.

This insights and his love for researching SaaS products enables him to provide in-depth, fact-based software reviews to enable software buyers make better decisions.

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Business model viability: key assessment metrics.

Nov 24., 23

Table of contents

An introduction to business model viability, insights into key metrics used to assess business model viability, the interconnection of viability metrics, industry specific viability metrics, short-term vs. long-term viability indicators, enhancing business model viability, case studies and theoretical models, advanced analytics and tools for viability assessment, common pitfalls in assessing business model viability, regulatory and ethical considerations in viability assessment, developing actionable insights from viability metrics, future trends in business model viability assessment, conclusion: the dynamic nature of business model viability, further reading and resources.

Defining Business Model Viability

Business model viability is a vital factor in determining a business’s success or lack thereof. It refers to the long-term growth potential and the capacity of a business model to yield sustainable profits. Assessed correctly, it allows companies to seize opportunities, make informed decisions, and modify strategies as necessary.

The Importance of Regularly Assessing Viability

Regular analysis of business model viability equips businesses to identify their strengths and weaknesses, track their financial performance, and respond to changing market trends. This ongoing evaluation allows businesses to adjust and evolve to remain in line with a rapidly shifting business environment.

An Overview of Key Assessment Metrics

The examination of business model viability involves taking into account various essential metrics. These metrics offer insights into various facets of a business model’s performance:

• Growth Rates: Their significance and how to measure them
• Profitability Analysis: The metrics that matter most

The Cost of Customer Acquisition (CAC)

• Customer Lifetime Value (CLV): How to estimate it and the implications it has
• Market Share: A reliable benchmark for viability

Growth Rates: Significance and Measurement

Growth rates are a measure of how quickly a business expands. A business model with high growth rates signals a healthy and viable company. In contrast, slow or negative growth rates might suggest potential issues or prompt the need for adjustments.

Profitability Analysis: Metrics that Matter

Profitability analysis assesses a business model’s capacity to generate profits. Key metrics such as gross profit margin, net profit margin, and return on investment (ROI) are utilized to evaluate the financial performance and health of the business.

CAC measures the cost associated with gaining a new customer. An analysis of CAC allows businesses to gauge the effectiveness of their sales and marketing strategies. It also ensures that the cost of acquiring customers correlates reasonably with the generated revenue.

Customer Lifetime Value (CLV): Estimations and Implications

CLV represents the total revenue a company expects from a customer over their entire relationship. It assists companies in understanding the value each customer brings and guides the effective allocation of resources to retain profitable customers.

Market Share: A Benchmark for Viability

Market share represents the portion of the market that a business occupies. A healthy market share indicates business success and viability. Continually monitoring market share offers plenty of insight and helps businesses adapt strategies accordingly.

Balance Between CAC and CLV

The interplay between CAC and CLV is crucial. A successful business aims to acquire customers at a reasonable cost while maximizing the revenue they generate over their lifetime. Achieving the right balance ensures the business stays profitable and remains viable long-term.

Growth and Profitability: Contradiction or Confluence?

Growth and profitability can often seem at odds with each other, but they can work in harmony. Strategic growth allows businesses to realize economies of scale and increase profitability in the long term.

Market Share vs. Profitability: Finding the Right Mix

While considerable market share points to success, it does not assure profitability. Businesses have to find the right balance between market share and profitability to ensure sustainable growth and viability.

Interpreting the Data: A Holistic Approach to Viability

Interpreting viability metrics, it’s crucial to grasp the entire picture. By considering multiple metrics and studying trends and patterns, a company can more accurately gauge its business model’s viability .

Software as a Service (SaaS) Metrics

For SaaS businesses, metrics like monthly recurring revenue (MRR), customer churn rate, and customer acquisition cost (CAC) to lifetime value (LTV) ratio are vital when assessing the viability of subscription-based business models.

Retail Business Metrics

Metrics such as average transaction value, inventory turnover rate, and customer retention rate are significant when evaluating the profitability and viability of retail businesses.

Manufacturing Sector Metrics

In the manufacturing industry, metrics like production efficiency, defect rates, and supply chain performance serve as valuable viability indicators while shedding light on operational excellence.

Service-Based Business Metrics

For service-based businesses, metrics like customer satisfaction scores, service response time, and repeat business rate are critical for assessing viability and the quality of service delivery.

The Role of Innovation and Adaptability in Long-term Viability

To set the stage for long-term viability, businesses must innovate, adapt, and stay relevant in ever-evolving markets. Emphasizing process improvements, new market exploration, and technology adoption all contribute to long-term viability .

Short-term Financial Health Vs. Sustainable Growth

While short-term financial health is crucial for operational expenses, sustainable growth is indispensable for long-term viability. By balancing short-term objectives with a focus on strategic growth, business model viability is ensured.

Market Trends: Adapting to Stay Relevant

Changes in market trends can significantly impact a business model’s viability. By staying abreast of technological innovations, evolving customer preferences, and emerging market demands, businesses can adapt and remain viable.

Improving Customer Acquisition Strategies

Effective customer acquisition strategies lead to an increased number of customers at a reasonable cost. This can be achieved through the optimization of marketing campaigns, improved targeting, and leveraging data-driven approaches.

Maximizing Customer Lifetime Value

Increasing customer lifetime value involves fostering customer loyalty, providing exceptional customer experiences, and offering personalized products or services. This significantly boosts revenue and ensures long-term sustainability.

Strategies for Increasing Market Share

To increase market share, businesses can leverage various strategies like product differentiation, competitive pricing, expansion into new markets, and building a strong brand.

Fostering Innovation for Sustainable Growth

Innovation is a key driver of sustainable growth and viability. Encouraging a culture of innovation, investing in research and development and embracing emerging technologies all contribute to long-term success.

Blue Ocean Strategy: Redefining Market Boundaries

The Blue Ocean Strategy aims to create uncontested market spaces and focus on differentiation. By offering unique value propositions, businesses can unlock new opportunities, redefine markets, and enhance business model viability .

Lean Startup Methodology: An Iterative Approach to Development

The Lean Startup Methodology emphasizes fast experimentation, feedback loops, and iterative development. By testing assumptions rapidly and adapting based on market feedback, businesses can validate their business models and improve viability .

Value Proposition Canvas: Understanding the Product-market Fit

The Value Proposition Canvas helps businesses analyze their value propositions and align them with customer needs. By understanding the fit between products and markets, companies can refine their offerings and improve business model viability .

Using Big Data to Predict Business Trends

Big data analytics enable businesses to analyze vast volumes of data to uncover patterns, trends, and predictive insights. This contributes significantly to better-informed decision-making, strategy enhancement, and improvement of business model viability.

Financial Modeling Techniques

Financial modeling involves creating mathematical representations of real-world financial conditions and projections. This modelling helps forecast financial outcomes, evaluate investment opportunities, and assess business model viability.

Software Tools for Real-Time Analytics

The use of software tools for real-time analytics enables businesses to monitor key metrics, spot trends, and make data-driven decisions immediately. Real-time analytics ultimately enhances business agility and supports proactive viability assessment.

Overreliance on Specific Metrics

Reliance on just one or a limited number of metrics when assessing viability can lead to a skewed view of a business. It is crucial, therefore, to consider multiple metrics and understand their interdependencies to gain a comprehensive understanding of the business’s viability .

Ignoring the Competitive Landscape

Ignoring competitors and overall market dynamics can undermine business model viability. For a business to remain competitive and viable, it is essential to assess the competitive landscape, understand customer preferences, and identify market trends.

Underestimating the Impact of External Factors

Various external factors such as government policy changes, economic fluctuations, and technological advancements can significantly impact viability. Ignoring or underestimating these factors can lead to unforeseen challenges.

Navigating Regulatory Compliance

Ethical Implications of Business Practices

Any process of assessing viability should not overlook the importance of ethical considerations. Prioritizing ethical business practices, responsible supply chains, and positive social impacts are central to long-term viability and maintaining a good reputation.

Transparency in Reporting and Analysis

Transparent reporting and analysis foster trust and credibility in business. Ensuring that data is accurately represented, that communication is clear, and that there is transparent information disclosure to stakeholders is of prime importance.

Setting Realistic Goals Based on Assessment

Viability metrics provide a basis for setting realistic, achievable goals. By aligning the results of the assessment process with business strategies and objectives, business model viability can continuously improve.

Benchmarking and Continuous Improvement

Benchmarking against industry standards and best practices offers insights into areas of performance gaps and where improvement is needed. Continuous monitoring and improvements serve to enhance competitiveness and sustainability.

Strategic Decision Making Using Viability Insights

Insights into business model viability enable businesses to make informed strategic decisions. Taking into account the analysis of key metrics helps guide the best direction, the most effective resource allocation, and ways to maximize viability.

The Growing Role of AI and Machine Learning

Artificial intelligence (AI) and machine learning are revolutionizing the viability assessment process. Automated data analysis, predictive modeling, and optimized decision-making algorithms greatly enhance the efficiency and accuracy of these assessments.

Sustainability Metrics for Long-term Success

Sustainability is gaining importance in business , and more and more businesses are incorporating sustainability metrics into viability assessment. Key indicators including Environmental, Social, and Governance (ESG) criteria provide valuable insights into the long-term success and viability of the business.

Globalization and its Impact on Viability Assessments

Globalization is expanding markets and increasing competition. Businesses need therefore to analyze viability metrics in light of global markets, cultural nuances, and diverse customer preferences.

Summarizing Key Takeaways on Viability Metrics

Business model viability is a dynamic and multifaceted concept requiring analysis across a range of key metrics, consideration of various interconnections, and understanding of industry-specific dynamics.

Remaining Agile in a Competitive Business Landscape

Businesses need to stay agile , adapting to changing market conditions, customer preferences, and emerging technologies. Such agility enables continuous improvement, spurs innovation, and allows for responses to market challenges, thereby ensuring long-term viability .

The Road Ahead for Business Model Assessment

As business landscapes evolve, the assessment process for business model viability will also continue to change. Businesses need to integrate new technologies, adopt advanced analytics, and prioritize sustainability for ensuring continuing success and viability.

Books and articles on business model innovation

• “Business Model Generation: A Handbook for Visionaries, Game-Changers, and Challengers” by Alexander Osterwalder and Yves Pigneur
• “Value Proposition Design: How to Create Products and Services Customers Want” by Alexander Osterwalder, Yves Pigneur, Gregory Bernarda, and Alan Smith
• “The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail” by Clayton M. Christensen

Online Courses and Workshops

• Coursera – “Business Model Innovation for Sustainable Growth by University of Virginia”
• Udemy – “Design Thinking for Innovation by Boot Camp Digital”
• LinkedIn Learning – “Lean Startup Principles by Eric Ries”

Professional Associations and Networking Opportunities

• Business Model Innovation Hub
• Strategic Management Society
• American Marketing Association
• Association for Strategic Planning

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Business Feasibility Study: Turning Business Ideas into Reality

Over 30 years in business as an owner, restaurateur, and consultant, offering a unique understanding of business and marketing expertise.

“ Chase the vision, not the money, the money will end up following you. “ ~ Tony Hsieh

Key Takeaways

• Business Feasibility Study : An evaluation process to determine the viability of a business idea, covering market viability, financial feasibility, and operational capacity.
• Market Research : Investigates the target market, customer demand, competitive landscape, and market opportunities to validate the product or service demand.
• Financial Viability Assessment : Involves detailed financial projections, including start-up costs, operating expenses, revenue forecasts, and profitability analysis, to ensure financial sustainability.
• Technical Feasibility : Examines the technical resources, technology, and infrastructure required to deliver the product or service effectively.
• Legal and Regulatory Compliance : Identifies legal obligations, industry-specific regulations, and ethical considerations impacting the business.
• Operational Feasibility : Assesses the operational processes, resource allocation, and scalability of business operations.
• Risk Analysis : Identifies potential business risks and develops contingency plans to mitigate these risks.

Introduction to a Business Feasibility Study

Got an idea for a new business venture? Whether it's a small startup or an expansion of an existing business, one of the first steps you should consider is conducting a Business Feasibility Study. Think of it as your business's reality check. This article provides you with the information you need to determine if your business idea is viable and has the potential for success.

At its core, a Business Feasibility Study is a comprehensive process that evaluates the practicality of your business idea. It's not just about finding out if your idea can work, but it's also about identifying potential obstacles and opportunities that lie ahead. This study looks into various aspects of the business, such as market viability, financial feasibility, legal compliance, and more.

The purpose of this study is not to discourage you but to give you a clear picture of what you're stepping into. It helps you answer crucial questions like: Is there a demand for your product or service? Can you realistically compete in the market? What are the financial requirements and risks involved? By addressing these questions early on, you can make informed decisions and avoid costly mistakes.

As you investigate deeper into the feasibility study, you'll come across several components, from analyzing your target market to understanding the financial implications of your venture. Each component plays a vital role in shaping your business strategy and ensuring that your venture is grounded in reality.

Remember, the goal here is not just to validate your business idea but also to lay down a solid foundation for your business plan. A well-conducted Business Feasibility Study can be a powerful tool in attracting investors, securing loans, and guiding your strategic decisions as you move forward.

In the following sections, we'll explore each aspect of the Business Feasibility Study in detail, guiding you through the steps to conduct one effectively. Especially if you're a budding entrepreneur, understanding how to navigate through these studies can be a game-changer for your business success.

Steps in Conducting a Business Feasibility Study

Now that we've broached the topic of a Business Feasibility Study let's walk through the steps to conduct one effectively. This type of hike can seem daunting at first, but breaking it down into manageable steps makes it much more approachable. Each of the following steps will give you valuable insights into the feasibility of your business idea. The key is to approach this study with an open mind and a willingness to evaluate every aspect of your business idea critically.

• Define Your Business Idea and Goals : The first step is crystal clear: know what your business idea is and what you want to achieve with it. This might seem obvious, but having a well-defined goal will guide the entire feasibility study.
• Conduct Preliminary Analysis : Before diving deep, do a quick initial check to see if your idea has any obvious flaws or if there are immediate red flags. This analysis could include a basic market scan, a quick review of similar existing products or services, and a brief assessment of your potential customer base.
• Market Research : This is where you roll up your sleeves and dive into the nitty-gritty of your target market. Who are your potential customers? What do they need? What are the current trends affecting your industry? Market research can range from online surveys and focus groups to in-depth competitor analysis.
• Organizational and Technical Assessment : Here, you need to evaluate whether you have or can obtain the necessary resources, including technology, staff, and expertise, to turn your idea into reality. This step is crucial in understanding the operational aspect of your business.
• Financial Viability Assessment : One of the most critical aspects of the feasibility study is financial assessment. This involves creating detailed financial projections, including start-up costs, operating costs, revenue forecasts, and profitability analysis. It's about figuring out if your idea can be profitable and sustainable in the long term.
• Legal and Regulatory Compliance : Every business operates within a legal framework. In this step, you should identify the legal and regulatory requirements related to your business. This could include licenses, permits, or any industry-specific regulations.
• Risk Assessment and Contingency Planning : No business venture is without risk. Identifying potential risks and developing contingency plans to mitigate these risks is a vital part of the feasibility study.
• Conclusion and Recommendations : Based on your findings, draw conclusions about the viability of your business idea. Is it feasible? If so, what are the next steps? If not, what alternative strategies could you consider?

Market Feasibility Study

In this section, let's talk about how you gather a wealth of information that will be critical in making informed decisions about your business idea. The goal is to ensure that there is a market for your product or service and to understand the dynamics of that market to position your business for success strategically.

• Market Analysis for Feasibility : Understanding your market is a cornerstone of business success. A thorough market analysis for feasibility involves examining the industry you're entering, the demand for the product or service you plan to offer, and the dynamics of the market itself. This step is not just about seeing if there's a market for your idea but understanding the nuances of that market – its size, growth trends, and customer behaviors. This knowledge is crucial in shaping your business strategies and offerings to ensure they resonate with your target audience .
• Customer Demand Analysis Feasibility : Diving deeper, customer demand analysis focuses on the needs and preferences of your target demographic. It's about asking questions like, Who are your potential customers? What are their buying habits? What problems do they need to solve? This analysis helps you tailor your product or service to the specific needs and desires of your customers, increasing the likelihood of your business's success.
• Market Opportunity Assessment : Identifying market opportunities is about spotting gaps in the market that your business can fill. This might include underserved areas, emerging trends, or unique angles your competitors havent explored. By identifying these opportunities, you can position your business to take advantage of them, giving you a competitive edge.
• Competitive Analysis Feasibility Study : Finally, understanding your competition is vital. A competitive analysis involves looking at who your competitors are, what they offer, their strengths and weaknesses, and how they meet the market's needs. This analysis not only helps you find your unique selling proposition but also teaches you about the successes and failures of others in your industry.

Financial Feasibility Study

It is here you'll gain a comprehensive understanding of the financial aspects of your business. It's about ensuring that your business idea is not just viable in the market but is also financially sound and capable of generating profits.

• Financial Viability Assessment : This step is all about the numbers. A financial viability assessment examines whether your business idea makes financial sense. It's where you crunch the numbers to understand the financial health of your proposed venture. This includes forecasting revenues, estimating start-up and operating costs, and projecting profits and cash flow . The goal here is to determine if your business can be financially sustainable and profitable in the long term.
• Cost Analysis in Feasibility Study : Every business incurs costs, and understanding these is crucial. In this part of the study, you'll break down all the costs associated with starting and running your business. This includes direct costs like inventory and labor, as well as indirect costs like marketing and administrative expenses. A thorough cost analysis helps you plan your finances more effectively and avoid unexpected financial challenges.
• Investment Feasibility Analysis : This analysis focuses on the investment aspect of your business. How much capital will you need to get started, and where will it come from? This section explores potential funding sources such as loans, investors, or personal savings and assesses the feasibility of securing the required funds. It also involves evaluating the risk associated with these investments and their potential returns.
• Return on Investment in Feasibility : Lastly, calculating the Return on Investment (ROI) is a key component. This involves estimating how much profit your investment will generate relative to its cost. It's a crucial metric that helps you understand the value you can expect from your business venture. A favorable ROI indicates that your business idea could be a wise investment.

Technical Feasibility Study

The goal of the following section is to provide you with a comprehensive understanding of the legal landscape in which your business will operate. It's about ensuring that your business idea is robust, not just in terms of market and financial viability but also in its ability to meet legal and ethical standards.

• Legal Requirements Feasibility : When starting a business , you must navigate a maze of legal requirements. This part of the feasibility study focuses on understanding all the legal aspects related to your business. This includes local, state, and federal laws that apply to your business , industry-specific regulations, and requirements for permits and licenses. The aim is to ensure that your business idea is not only feasible from a market and financial perspective but also legally viable. Legal compliance is more than just ticking boxes; it's about understanding how legal aspects can impact your business operations. For instance, if you're in a highly regulated industry like healthcare or finance, legal compliance becomes even more critical. The study should also consider the implications of not meeting these legal requirements, which could range from fines to the shutdown of your business operations.
• Evaluating Ethical Considerations : In addition to legal compliance, it's also important to consider the ethical implications of your business. This involves evaluating how your business practices align with ethical standards and societal expectations. Its about doing the right thing, not just the legally required thing. For example, if your business deals with sensitive customer data, you need to ensure that data is handled ethically and responsibly.
• Impact on Business Strategy : Legal and ethical considerations can significantly impact your business strategy. For example, if there are stringent environmental regulations in your industry, your business strategy may need to include sustainable practices and eco-friendly solutions. The feasibility study should assess how legal and ethical considerations can be integrated into your business strategy, ensuring that your business is not only compliant but also socially responsible.

Risk Analysis and Scheduling

This section of your feasibility study will arm you with the knowledge and strategies to anticipate and manage the risks associated with your business venture. It's about being prepared and proactive, rather than reactive, to the challenges that your business might face.

• Risk Assessment in Feasibility Studies : Starting a business is inherently risky, but understanding and planning for these risks can greatly improve your chances of success. In this part of your feasibility study, you'll identify potential risks that could impact your business. This includes financial risks, such as unexpected costs or revenue shortfalls. Operational risks like supply chain disruptions, market risks, such as changing consumer preferences, and other external risks, including regulatory changes or economic downturns. After identifying these risks, the next step is to assess their likelihood and potential impact on your business. This involves not only recognizing the risks but also understanding how they could affect your operations and financial health. Risk assessment helps you develop strategies to mitigate these risks, such as diversifying your product line, securing insurance , or establishing strong supplier relationships.
• Project Management in Feasibility : Effective project management is crucial in executing your business plan and in conducting your feasibility study. This includes planning, organizing, directing, and controlling resources to achieve specific goals. Good project management in feasibility studies ensures that your research is thorough, timely, and aligned with your business objectives. It also involves setting realistic timelines for your project, allocating resources efficiently, and managing stakeholders' expectations. Incorporating project management principles into your feasibility study can help in scheduling and organizing the various components of the study. It ensures that the study is completed in a systematic and efficient manner, providing you with reliable and actionable insights.

Business Model and Strategy

In this section, you're not just evaluating the feasibility of your business idea but also ensuring that it aligns with a larger strategic vision. It's about crafting a business model and strategy that are not only feasible but also poised for growth and success in the long run.

• Business Model Evaluation : The heart of your business feasibility study lies in evaluating your proposed business model. This is where you align your business idea, market research, financial assessments, and technical capabilities to see if they all fit together into a viable business model. A business model evaluation involves scrutinizing how you plan to create, deliver, and capture value. It answers questions like: How will you generate revenue? What value are you providing to your customers? How will you reach your target market? What are the costs involved, and how will they be covered? This evaluation is crucial in understanding whether your business model is practical, sustainable, and profitable.
• Business Strategy Feasibility : Once you have a clear picture of your business model, the next step is to align it with your overall business strategy. This involves assessing whether your business model supports your long-term business goals and objectives. Business strategy feasibility is about ensuring that your approach to the market, your growth plans, and your operational strategy are all in sync with the findings of your feasibility study. It's about making strategic decisions that are informed by data and insights from your study rather than just intuition or assumptions.

Operational Feasibility Study

Operational Feasibility Analysis: This part of the feasibility study is about getting down to the brass tacks of how your business will operate on a day-to-day basis. It's about examining if your business plan can be effectively translated into operations. This includes assessing your operational processes, from production or service delivery to supply chain management, customer support, and sales operations.

You need to evaluate whether you have the necessary resources, such as manpower, materials, and technology, to carry out your business operations. It's also important to consider the scalability of your operations – can they grow as your business grows?

Another key aspect of operational feasibility is determining if your business operations align with your organizational structure and culture. For instance, if your business requires rapid innovation and flexibility, do your operational plan and organizational culture support that?

Operational feasibility is not just about whether you can do something but whether you can do it efficiently, effectively, and sustainably.

Specialized Feasibility Studies

This section is about tailoring your feasibility study to address the specific considerations of your industry, the environmental impact of your business, and your growth potential. It's about making sure that your business is not only viable at launch but also set up for future success.

• Industry-specific Feasibility Studies : Different industries have unique challenges and opportunities, making it crucial to conduct industry-specific feasibility studies. For instance, a feasibility study in the tech industry would focus heavily on technological innovations and market adoption rates, while one in the manufacturing sector might concentrate more on production capabilities and supply chain logistics. Understanding the nuances of your specific industry is vital to ensure that your feasibility study is relevant and accurate. It helps in identifying industry-specific risks, regulatory requirements, and market dynamics that are crucial for your businesss success.
• Environmental Impact Business Study : In an era where sustainability is increasingly important, considering the environmental impact of your business is essential. This part of the feasibility study assesses how your business operations will affect the environment and what measures you can take to minimize negative impacts. This includes looking at factors like energy consumption, waste management, and the sourcing of materials. Being environmentally responsible can not only help reduce potential liabilities but can also enhance your brand's reputation and appeal to environmentally conscious consumers.
• Business Growth Feasibility Study : This section looks beyond the initial launch of your business to its potential for growth. It involves evaluating how scalable your business model is, identifying potential areas for expansion, and assessing the feasibility of these growth plans. It's about understanding what it will take for your business to grow, both in the short-term and long-term, and whether your current plan supports this growth.

Feasibility Study Tools and Techniques

Let's now explore a variety of tools and techniques essential for conducting a well-rounded feasibility study. Understanding how to use these tools and techniques effectively is crucial in gaining a holistic view of your business ideas feasibility.

Overview of Feasibility Study Tools: To conduct an effective feasibility study, various tools can be utilized. These tools help in collecting data, analyzing information, and making informed decisions. For example, SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) is a common tool used to evaluate the strategic position of a business idea. Financial tools like cash flow forecasting , break-even analysis, and ROI calculations are essential for the financial aspect of the study. For market analysis, tools such as market surveys, customer interviews, and competitor analysis can provide valuable insights.

Techniques Used in Feasibility Studies : Besides tools, certain techniques are pivotal in conducting a thorough feasibility study. These include qualitative methods like focus groups and interviews that provide an in-depth understanding of customer attitudes and preferences. Quantitative methods like statistical analysis and market trend analysis offer concrete data on market size, growth rates, and customer demographics. Additionally, scenario planning can be used to envision various business scenarios and plan accordingly.

Utilizing Technology in Feasibility Studies : In the digital age, leveraging technology can significantly enhance the efficiency and accuracy of your feasibility study. Software tools for data analysis, project management software for organizing and tracking the study, and digital survey tools for gathering market insights are examples of how technology can aid in conducting a comprehensive feasibility study.

Integrating Findings to Formulate Conclusions : The final technique in a feasibility study is the integration of findings from various tools and methods to formulate comprehensive conclusions. This involves collating data from market, financial, technical, and legal analyses to see the overall picture. It's about synthesizing information from different sources to determine the overall feasibility and viability of your business idea.

Comparative Analysis

Now, we need to compare and contrast the roles of a business plan and a feasibility study, emphasizing how they work together in the planning and execution of a successful business venture.

Business Plan Versus Feasibility Study : It's essential to understand the difference between a business plan and a feasibility study as they serve different, yet complementary, purposes. A business plan is a detailed roadmap for the operation and growth of your business. It outlines your business goals, strategies to achieve them, operational structure, marketing plan , and financial projections. Essentially, a business plan is a guide for how to run your business and achieve success.

On the other hand, a feasibility study is more of a preliminary step. Itis conducted before the business plan to assess the viability of a business idea. The feasibility study helps determine whether your idea is worth pursuing before you invest significant time and resources into developing a business plan. It includes market analysis, financial feasibility, legal compliance, and technical assessment.

Comparatively, a feasibility study asks the question, Should this business be started? While a business plan addresses How will this business succeed? A feasibility study is what you need when deciding if your business idea is worth pursuing, and a business plan is what you'll use to guide your business's establishment and growth after deciding it's feasible.

Integrating Feasibility Study Findings into Business Planning : Often, the findings of your feasibility study will directly inform your business plan. For example, insights from market analysis in the feasibility study can shape your marketing strategies in the business plan. Financial assessments from the study can help in creating more accurate financial projections in your business plan. In this way, the feasibility study can be seen as the foundation upon which your business plan is built.

Final Thoughts on Business Feasibility Study

Summarizing Key Findings : After thoroughly examining each aspect of your business idea through the feasibility study, it's time to bring all these findings together. This summary should encapsulate the insights from market analysis, financial viability, technical assessment, legal compliance, and operational feasibility. Highlight the key strengths and opportunities your study has revealed, as well as any significant challenges or risks.

Providing Actionable Recommendations : Based on the key findings, the next step is to provide actionable recommendations. If your feasibility study shows that your business idea is viable, outline the next steps to take your idea from concept to reality. This could include developing a detailed business plan, securing funding, or initiating market entry strategies.

If the feasibility study suggests that your business idea may not be viable, or if there are significant challenges, recommend alternative approaches. This might involve pivoting your business idea, exploring different markets, or addressing the identified weaknesses before proceeding.

Emphasizing the Importance of Continuous Evaluation : It's important to remember that a feasibility study is not a one-time task but an ongoing process. As your business grows and the market evolves, continuously re-evaluating the feasibility of your business model and strategies is crucial. This ongoing evaluation ensures that your business remains relevant and competitive in a changing business environment.

Encouragement and Motivation : Lastly, whether your feasibility study results are positive or less encouraging, it's important to stay motivated. Every business journey comes with its challenges and learning opportunities. Use the insights gained from this study to refine your business idea and strategy. Remember, the ultimate goal of a feasibility study is to set the stage for a successful and sustainable business.

FAQs on Business Feasibility Study

While all components of a business feasibility study are important, the market analysis is often considered critical. It helps determine if there's a demand for your product or service and sets the foundation for the rest of your study.

The duration of a business feasibility study can vary widely depending on the complexity of the business idea and the depth of analysis required. Generally, it could take anywhere from a few weeks to several months.

It's possible to conduct a basic feasibility study on your own, especially for small-scale projects. However, for more complex or larger-scale business ideas, it might be beneficial to engage a professional consultant who can provide expertise and an objective perspective.

If your feasibility study suggests that your business idea might not be viable, consider exploring alternative ideas, adjusting your business model, or addressing the identified challenges. Sometimes, a pivot in strategy or a different approach can make a significant difference.

It's a good practice to revisit your feasibility study periodically, especially when there are significant market shifts, technological advancements, or changes in consumer behavior. This helps ensure that your business stays relevant and adapts to changing conditions.

A business feasibility study is a preliminary assessment to determine the viability of a business idea, while a pilot project is a small-scale implementation of the business plan to test its practicality in a real-world setting.

There are various software tools available for different aspects of a feasibility study, such as financial modeling (e.g., Excel), market analysis (e.g., MarketResearch.com), and project management (e.g., Trello or Asana). The choice of tools depends on your specific needs and the complexity of the study.

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Table of Contents

How to make a business plan

How to make a good business plan: step-by-step guide.

A business plan is a strategic roadmap used to navigate the challenging journey of entrepreneurship. It's the foundation upon which you build a successful business.

A well-crafted business plan can help you define your vision, clarify your goals, and identify potential problems before they arise.

But where do you start? How do you create a business plan that sets you up for success?

This article will explore the step-by-step process of creating a comprehensive business plan.

What is a business plan?

A business plan is a formal document that outlines a business's objectives, strategies, and operational procedures. It typically includes the following information about a company:

Products or services

Target market

Competitors

Marketing and sales strategies

Financial plan

Management team

A business plan serves as a roadmap for a company's success and provides a blueprint for its growth and development. It helps entrepreneurs and business owners organize their ideas, evaluate the feasibility, and identify potential challenges and opportunities.

As well as serving as a guide for business owners, a business plan can attract investors and secure funding. It demonstrates the company's understanding of the market, its ability to generate revenue and profits, and its strategy for managing risks and achieving success.

Business plan vs. business model canvas

A business plan may seem similar to a business model canvas, but each document serves a different purpose.

A business model canvas is a high-level overview that helps entrepreneurs and business owners quickly test and iterate their ideas. It is often a one-page document that briefly outlines the following:

Key partnerships

Key activities

Key propositions

Customer relationships

Customer segments

Key resources

Cost structure

Revenue streams

On the other hand, a Business Plan Template provides a more in-depth analysis of a company's strategy and operations. It is typically a lengthy document and requires significant time and effort to develop.

A business model shouldn’t replace a business plan, and vice versa. Business owners should lay the foundations and visually capture the most important information with a Business Model Canvas Template . Because this is a fast and efficient way to communicate a business idea, a business model canvas is a good starting point before developing a more comprehensive business plan.

A business plan can aim to secure funding from investors or lenders, while a business model canvas communicates a business idea to potential customers or partners.

Why is a business plan important?

A business plan is crucial for any entrepreneur or business owner wanting to increase their chances of success.

Here are some of the many benefits of having a thorough business plan.

Helps to define the business goals and objectives

A business plan encourages you to think critically about your goals and objectives. Doing so lets you clearly understand what you want to achieve and how you plan to get there.

A well-defined set of goals, objectives, and key results also provides a sense of direction and purpose, which helps keep business owners focused and motivated.

Guides decision-making

A business plan requires you to consider different scenarios and potential problems that may arise in your business. This awareness allows you to devise strategies to deal with these issues and avoid pitfalls.

With a clear plan, entrepreneurs can make informed decisions aligning with their overall business goals and objectives. This helps reduce the risk of making costly mistakes and ensures they make decisions with long-term success in mind.

Attracts investors and secures funding

Investors and lenders often require a business plan before considering investing in your business. A document that outlines the company's goals, objectives, and financial forecasts can help instill confidence in potential investors and lenders.

A well-written business plan demonstrates that you have thoroughly thought through your business idea and have a solid plan for success.

Identifies potential challenges and risks

A business plan requires entrepreneurs to consider potential challenges and risks that could impact their business. For example:

Is there enough demand for my product or service?

Will I have enough capital to start my business?

Is the market oversaturated with too many competitors?

What will happen if my marketing strategy is ineffective?

By identifying these potential challenges, entrepreneurs can develop strategies to mitigate risks and overcome challenges. This can reduce the likelihood of costly mistakes and ensure the business is well-positioned to take on any challenges.

Provides a basis for measuring success

A business plan serves as a framework for measuring success by providing clear goals and financial projections . Entrepreneurs can regularly refer to the original business plan as a benchmark to measure progress. By comparing the current business position to initial forecasts, business owners can answer questions such as:

Are we where we want to be at this point?

Did we achieve our goals?

If not, why not, and what do we need to do?

After assessing whether the business is meeting its objectives or falling short, business owners can adjust their strategies as needed.

How to make a business plan step by step

The steps below will guide you through the process of creating a business plan and what key components you need to include.

1. Create an executive summary

Start with a brief overview of your entire plan. The executive summary should cover your business plan's main points and key takeaways.

Keep your executive summary concise and clear with the Executive Summary Template . The simple design helps readers understand the crux of your business plan without reading the entire document.

2. Write your company description

Provide a detailed explanation of your company. Include information on what your company does, the mission statement, and your vision for the future.

Provide additional background information on the history of your company, the founders, and any notable achievements or milestones.

3. Conduct a market analysis

Conduct an in-depth analysis of your industry, competitors, and target market. This is best done with a SWOT analysis to identify your strengths, weaknesses, opportunities, and threats. Next, identify your target market's needs, demographics, and behaviors.

Use the Competitive Analysis Template to brainstorm answers to simple questions like:

What does the current market look like?

Who are your competitors?

What are they offering?

What will give you a competitive advantage?

Who is your target market?

What are they looking for and why?

How will your product or service satisfy a need?

These questions should give you valuable insights into the current market and where your business stands.

4. Describe your products and services

Provide detailed information about your products and services. This includes pricing information, product features, and any unique selling points.

Use the Product/Market Fit Template to explain how your products meet the needs of your target market. Describe what sets them apart from the competition.

5. Design a marketing and sales strategy

Outline how you plan to promote and sell your products. Your marketing strategy and sales strategy should include information about your:

Pricing strategy

Advertising and promotional tactics

Sales channels

The Go to Market Strategy Template is a great way to visually map how you plan to launch your product or service in a new or existing market.

6. Determine budget and financial projections

Document detailed information on your business’ finances. Describe the current financial position of the company and how you expect the finances to play out.

Some details to include in this section are:

Startup costs

Revenue projections

Profit and loss statement

Funding you have received or plan to receive

Strategy for raising funds

7. Set the organization and management structure

Define how your company is structured and who will be responsible for each aspect of the business. Use the Business Organizational Chart Template to visually map the company’s teams, roles, and hierarchy.

As well as the organization and management structure, discuss the legal structure of your business. Clarify whether your business is a corporation, partnership, sole proprietorship, or LLC.

8. Make an action plan

At this point in your business plan, you’ve described what you’re aiming for. But how are you going to get there? The Action Plan Template describes the following steps to move your business plan forward. Outline the next steps you plan to take to bring your business plan to fruition.

Types of business plans

Several types of business plans cater to different purposes and stages of a company's lifecycle. Here are some of the most common types of business plans.

Startup business plan

A startup business plan is typically an entrepreneur's first business plan. This document helps entrepreneurs articulate their business idea when starting a new business.

Not sure how to make a business plan for a startup? It’s pretty similar to a regular business plan, except the primary purpose of a startup business plan is to convince investors to provide funding for the business. A startup business plan also outlines the potential target market, product/service offering, marketing plan, and financial projections.

Strategic business plan

A strategic business plan is a long-term plan that outlines a company's overall strategy, objectives, and tactics. This type of strategic plan focuses on the big picture and helps business owners set goals and priorities and measure progress.

The primary purpose of a strategic business plan is to provide direction and guidance to the company's management team and stakeholders. The plan typically covers a period of three to five years.

Operational business plan

An operational business plan is a detailed document that outlines the day-to-day operations of a business. It focuses on the specific activities and processes required to run the business, such as:

Organizational structure

Staffing plan

Production plan

Quality control

Inventory management

Supply chain

The primary purpose of an operational business plan is to ensure that the business runs efficiently and effectively. It helps business owners manage their resources, track their performance, and identify areas for improvement.

Growth-business plan

A growth-business plan is a strategic plan that outlines how a company plans to expand its business. It helps business owners identify new market opportunities and increase revenue and profitability. The primary purpose of a growth-business plan is to provide a roadmap for the company's expansion and growth.

The 3 Horizons of Growth Template is a great tool to identify new areas of growth. This framework categorizes growth opportunities into three categories: Horizon 1 (core business), Horizon 2 (emerging business), and Horizon 3 (potential business).

One-page business plan

A one-page business plan is a condensed version of a full business plan that focuses on the most critical aspects of a business. It’s a great tool for entrepreneurs who want to quickly communicate their business idea to potential investors, partners, or employees.

A one-page business plan typically includes sections such as business concept, value proposition, revenue streams, and cost structure.

Best practices for how to make a good business plan

Here are some additional tips for creating a business plan:

Use a template

A template can help you organize your thoughts and effectively communicate your business ideas and strategies. Starting with a template can also save you time and effort when formatting your plan.

Miro’s extensive library of customizable templates includes all the necessary sections for a comprehensive business plan. With our templates, you can confidently present your business plans to stakeholders and investors.

Be practical

Avoid overestimating revenue projections or underestimating expenses. Your business plan should be grounded in practical realities like your budget, resources, and capabilities.

Be specific

Provide as much detail as possible in your business plan. A specific plan is easier to execute because it provides clear guidance on what needs to be done and how. Without specific details, your plan may be too broad or vague, making it difficult to know where to start or how to measure success.

Be thorough with your research

Conduct thorough research to fully understand the market, your competitors, and your target audience . By conducting thorough research, you can identify potential risks and challenges your business may face and develop strategies to mitigate them.

Get input from others

It can be easy to become overly focused on your vision and ideas, leading to tunnel vision and a lack of objectivity. By seeking input from others, you can identify potential opportunities you may have overlooked.

Review and revise regularly

A business plan is a living document. You should update it regularly to reflect market, industry, and business changes. Set aside time for regular reviews and revisions to ensure your plan remains relevant and effective.

Create a winning business plan to chart your path to success

Starting or growing a business can be challenging, but it doesn't have to be. Whether you're a seasoned entrepreneur or just starting, a well-written business plan can make or break your business’ success.

The purpose of a business plan is more than just to secure funding and attract investors. It also serves as a roadmap for achieving your business goals and realizing your vision. With the right mindset, tools, and strategies, you can develop a visually appealing, persuasive business plan.

Ready to make an effective business plan that works for you? Check out our library of ready-made strategy and planning templates and chart your path to success.

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Plans and pricing.

Five Ways To Confirm If A Business Idea Is Viable Before You Launch

This reader is looking to make a big career change in a small town and wants to know if her idea is viable:

Can I pull off a career switch to becoming a post-partum doula from my current bookkeeping practice in [small Canadian town], in such a way that I can support a full and abundant life for me and my family of four? -- MC

Not having any additional information on MC’s background, I will assume that she has the requisite skills and certification required for the potential doula business. If not, securing the necessary qualifications is an additional consideration. If your business idea requires a specific degree or certification, the education requirement is a time and financial investment. There may also be ongoing licensing and coursework required to maintain compliance. Finally, there is the opportunity cost of not working while pursuing the required qualifications.

For now, I will focus on the market side of MC’s question. She lives in a small town – are there enough clients for a doula business? She has a family of four – is there enough profit in a doula business to support her household needs? She has an existing, very different business in bookkeeping -- how can she make the change?

It would be expensive and disruptive if we had to launch a new business each time we wanted to test an idea. Here are five ways to confirm if a new business idea is viable:

1. Run the numbers

How many doula businesses are in this town and surrounding areas within a reasonable commute? Bear in mind that the span of your customer potential is related to your business. Your potential customer geography varies dramatically if your business can deliver services virtually (e.g., online education) versus in-person and time-sensitive (e.g., restaurant).

Have these businesses been operating for a long time? If so, there is an established market. If not, you will need to investigate if there is enough other evidence – e.g., changing customer needs – that point to your business being able to succeed despite the absence of other successful competitors.

Don’t forget to run your own numbers about how much business you’ll need to generate to cover your business expenses and household expenses – in MC’s case, supporting a family of four. If you plan to tap into savings, convert that figure into a monthly run rate. How long does your business have to ramp up before it needs to sustain you?

2. Attend a professional event – live or virtually

The relevant professional associations for your business are a great resource for information on pricing, business costs, and typical sales. You’ll want to understand how long the business might need to move into profitability. There may be large upfront costs to establish the business (e.g., licensing) that will take time to recoup. When you look at prices, you’ll want to adjust for your geography. Does your town have higher or lower prices than the average? When you look at sales, take into account how many competitors you have. You will be the new business and will need to build up your brand and reputation.

If you’re in a small town, your professional association may not have a chapter in your area, so you’ll need to travel to a larger geography or national conference. This is time and money that needs to be added to your start-up cost calculation. However, you may be able to get the same information from online groups and communities that cover your business.

3. Talk to people currently in the business – owners and customers

In a small town, competitors may not be helpful to a new entrant. Talk to business owners in another geography far enough away that you wouldn’t be competing. Ask the business owner, “What do you know now that you wished you knew when you started?” You can copy best practices, improve on their mistakes and not have to reinvent the wheel. You can also ask about favorite and least favorite aspects of the business, as well as confirm some of the research you have for typical revenues and costs.

In addition, talk to customers who have used the product or service you are thinking about. How much did they pay? How did they find the business they patronized? What did they like/ not like about the product or service? Customers may be more forthcoming than fellow businesses, and they will give you a different and important perspective on your market.

4. Talk to other experts

Talk to former business owners who should be more willing to share their experiences now that they’re not competitors. Why did they leave the business? Maybe there are market forces that make the business less desirable than you think. Just remember that any advice you’re getting is from people who decided to leave that field (and therefore are likely less positive about the field).

Talk to your local chamber of commerce about the state of business in general. Talk to experts in your relevant industry. For a doula business, you may want to talk to health professionals in your area. Are they seeing more or less demand for doulas? How do doulas establish their reputation and get doctors to refer them? Parent-related services and groups are another possible resource.

5. Run a beta test

For a doula business, I assume it would be hard to do a test run as a doula since there is probably a lot of initial set up costs and processes. However, you might be able to work with an existing doula business as a subcontractor or even in an administrative function just to see behind-the-scenes. For another business with less set up, you can try to generate a few clients to experience the business firsthand in a smaller scale. Sometimes the business you imagine is very different than the business when you’re working on it.

A limited beta test would also smooth the transition from one business to another. MC has an existing business, and she could do her doula exploration alongside her current bookkeeping business up to a point. Once she’s sure she really wants to transition, then she can go about selling her bookkeeping business or finding alternatives for her clients if she closes up shop. As you transition from one business to another, remember that some customers can transition with you. At the very least, you can leverage your reputation as an established business owner – if you are effective and trustworthy in one area, this reputation can extend to something new.

Research: Writing a Business Plan Makes Your Startup More Likely to Succeed

by Francis J. Greene and Christian Hopp

Summary .   

When asked about an opponent’s plan for their impending fight, former world heavyweight champion Mike Tyson once said: “everyone has a plan until they get punched in the mouth.” It is a school of thought now fashionable in entrepreneurship circles. The truth, though, is that we just don’t know if it pays to plan. For every study that shows that it does, another study comes along and says that start-ups should just learn by doing. We wanted to study entrepreneurial planning, but with more context than previous efforts. We found that it pays to plan. Entrepreneurs who write formal plans are 16% more likely to achieve viability than the otherwise identical non-planning entrepreneurs. More than that, we were also able to see what makes people write business plans in the first place.

When asked about an opponent’s plan for their impending fight, former world heavyweight champion Mike Tyson once said: “Everyone has a plan until they get punched in the mouth.”

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What Is a Business Plan?

Understanding business plans, how to write a business plan, common elements of a business plan, the bottom line, business plan: what it is, what's included, and how to write one.

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

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A business plan is a document that outlines a company's goals and the strategies to achieve them. It's valuable for both startups and established companies. For startups, a well-crafted business plan is crucial for attracting potential lenders and investors. Established businesses use business plans to stay on track and aligned with their growth objectives. This article will explain the key components of an effective business plan and guidance on how to write one.

Key Takeaways

• A business plan is a document detailing a company's business activities and strategies for achieving its goals.
• Startup companies use business plans to launch their venture and to attract outside investors.
• For established companies, a business plan helps keep the executive team focused on short- and long-term objectives.
• There's no single required format for a business plan, but certain key elements are essential for most companies.

Investopedia / Ryan Oakley

Any new business should have a business plan in place before beginning operations. Banks and venture capital firms often want to see a business plan before considering making a loan or providing capital to new businesses.

Even if a company doesn't need additional funding, having a business plan helps it stay focused on its goals. Research from the University of Oregon shows that businesses with a plan are significantly more likely to secure funding than those without one. Moreover, companies with a business plan grow 30% faster than those that don't plan. According to a Harvard Business Review article, entrepreneurs who write formal plans are 16% more likely to achieve viability than those who don't.

A business plan should ideally be reviewed and updated periodically to reflect achieved goals or changes in direction. An established business moving in a new direction might even create an entirely new plan.

There are numerous benefits to creating (and sticking to) a well-conceived business plan. It allows for careful consideration of ideas before significant investment, highlights potential obstacles to success, and provides a tool for seeking objective feedback from trusted outsiders. A business plan may also help ensure that a company’s executive team remains aligned on strategic action items and priorities.

While business plans vary widely, even among competitors in the same industry, they often share basic elements detailed below.

A well-crafted business plan is essential for attracting investors and guiding a company's strategic growth. It should address market needs and investor requirements and provide clear financial projections.

While there are any number of templates that you can use to write a business plan, it's best to try to avoid producing a generic-looking one. Let your plan reflect the unique personality of your business.

Many business plans use some combination of the sections below, with varying levels of detail, depending on the company.

The length of a business plan can vary greatly from business to business. Regardless, gathering the basic information into a 15- to 25-page document is best. Any additional crucial elements, such as patent applications, can be referenced in the main document and included as appendices.

Common elements in many business plans include:

• Executive summary : This section introduces the company and includes its mission statement along with relevant information about the company's leadership, employees, operations, and locations.
• Products and services : Describe the products and services the company offers or plans to introduce. Include details on pricing, product lifespan, and unique consumer benefits. Mention production and manufacturing processes, relevant patents , proprietary technology , and research and development (R&D) information.
• Market analysis : Explain the current state of the industry and the competition. Detail where the company fits in, the types of customers it plans to target, and how it plans to capture market share from competitors.
• Marketing strategy : Outline the company's plans to attract and retain customers, including anticipated advertising and marketing campaigns. Describe the distribution channels that will be used to deliver products or services to consumers.
• Financial plans and projections : Established businesses should include financial statements, balance sheets, and other relevant financial information. New businesses should provide financial targets and estimates for the first few years. This section may also include any funding requests.

Investors want to see a clear exit strategy, expected returns, and a timeline for cashing out. It's likely a good idea to provide five-year profitability forecasts and realistic financial estimates.

2 Types of Business Plans

Business plans can vary in format, often categorized into traditional and lean startup plans. According to the U.S. Small Business Administration (SBA) , the traditional business plan is the more common of the two.

• Traditional business plans : These are detailed and lengthy, requiring more effort to create but offering comprehensive information that can be persuasive to potential investors.
• Lean startup business plans : These are concise, sometimes just one page, and focus on key elements. While they save time, companies should be ready to provide additional details if requested by investors or lenders.

Why Do Business Plans Fail?

A business plan isn't a surefire recipe for success. The plan may have been unrealistic in its assumptions and projections. Markets and the economy might change in ways that couldn't have been foreseen. A competitor might introduce a revolutionary new product or service. All this calls for building flexibility into your plan, so you can pivot to a new course if needed.

How Often Should a Business Plan Be Updated?

How frequently a business plan needs to be revised will depend on its nature. Updating your business plan is crucial due to changes in external factors (market trends, competition, and regulations) and internal developments (like employee growth and new products). While a well-established business might want to review its plan once a year and make changes if necessary, a new or fast-growing business in a fiercely competitive market might want to revise it more often, such as quarterly.

What Does a Lean Startup Business Plan Include?

The lean startup business plan is ideal for quickly explaining a business, especially for new companies that don't have much information yet. Key sections may include a value proposition , major activities and advantages, resources (staff, intellectual property, and capital), partnerships, customer segments, and revenue sources.

A well-crafted business plan is crucial for any company, whether it's a startup looking for investment or an established business wanting to stay on course. It outlines goals and strategies, boosting a company's chances of securing funding and achieving growth.

As your business and the market change, update your business plan regularly. This keeps it relevant and aligned with your current goals and conditions. Think of your business plan as a living document that evolves with your company, not something carved in stone.

University of Oregon Department of Economics. " Evaluation of the Effectiveness of Business Planning Using Palo Alto's Business Plan Pro ." Eason Ding & Tim Hursey.

Bplans. " Do You Need a Business Plan? Scientific Research Says Yes ."

Harvard Business Review. " Research: Writing a Business Plan Makes Your Startup More Likely to Succeed ."

Harvard Business Review. " How to Write a Winning Business Plan ."

U.S. Small Business Administration. " Write Your Business Plan ."

SCORE. " When and Why Should You Review Your Business Plan? "

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• Viability Study: What it is, Importance & Ways to Conduct

Introduction

Before starting a new business or undertaking a new project, it is important to conduct a viability study. This study helps to assess the potential success and profitability of the venture. In this article, we will discuss what a viability study is, its importance, factors to consider when evaluating viability, the difference between feasibility and viability studies, ways to conduct a viability study, and finally, conclude.

What is a Viability Study?

A viability study is a type of assessment conducted to determine the potential success and sustainability of a business venture or project. The study evaluates the practicality of the proposed venture by analyzing various factors such as market demand, competition, financial projections, available resources, regulatory requirements, and other factors that may impact the success of the venture. 

The viability study helps stakeholders to assess the potential risks, opportunities, and challenges involved in the proposed venture before making any significant investment or taking any major steps toward implementation. The viability study is an essential tool for entrepreneurs, investors, and other stakeholders to determine whether a business idea or project is feasible and has the potential for success. 

The study helps stakeholders to understand the market potential, the competitive landscape, and the financial feasibility of the proposed venture. In order to conduct a successful viability study, it is essential to conduct thorough market research to assess demand and competition, develop realistic financial projections, and evaluate available resources, including personnel, capital, and equipment. It is also essential to evaluate potential regulatory requirements and legal considerations that may impact the project’s viability.

The results of the viability study can be used to inform decision-making, including whether to pursue the business idea or project, and to guide the development of a comprehensive business plan. By conducting a viability study, stakeholders can better understand the potential risks and challenges involved in a venture, and make informed decisions that increase the chances of success.

Importance of Viability Study

The importance of a viability study cannot be overstated when considering a new business venture or project. Here are some of the reasons why a viability study is crucial:

• Risk Management: A viability study helps identify potential risks and challenges that could impact the success of the venture. By understanding these risks upfront, stakeholders can develop strategies to mitigate them, reducing the potential for financial losses.
• Realistic Financial Projections: A viability study includes a detailed financial analysis, including revenue and expense projections, to help stakeholders understand the financial feasibility of the venture. This analysis helps ensure that the proposed project is financially viable and helps stakeholders avoid financial surprises later on.
• Market Demand and Competition Analysis: A viability study involves conducting market research to evaluate the demand for the product or service being offered and assessing the competition in the market. This information helps stakeholders understand the market potential and identify strategies to effectively compete in the market.
• Resource Allocation: A viability study helps identify the resources required to launch and operate the venture. This information helps stakeholders allocate resources more effectively and efficiently.
• Improved Decision-Making: A viability study provides stakeholders with a comprehensive understanding of the proposed venture, enabling them to make informed decisions about whether to proceed with the project or not.

Factors to Consider When Evaluating Viability

When evaluating the viability of a business venture or project, there are several key factors that should be considered:

• Market Demand: Is there sufficient demand for the product or service being offered? Is the target market large enough to support the business?
• Competition: Who are the competitors in the market? What are their strengths and weaknesses? Is there a competitive advantage that the proposed venture can leverage?
• Financial Projections: What are the projected revenues and expenses for the business? Are the projections realistic and based on accurate assumptions?
• Available Resources: Does the proposed venture have access to the necessary resources, including capital, personnel, equipment, and technology, to launch and operate the business?
• Legal and Regulatory Requirements: What are the legal and regulatory requirements that must be met for the business to operate? Are there any potential obstacles or risks related to compliance?
• Scalability: Is the business model scalable? Can the business grow and adapt to changing market conditions over time?
• Sustainability: Is the proposed venture financially and environmentally sustainable in the long term? What impact will it have on the community and society as a whole?
• Management Team: Does the proposed venture have an experienced and competent management team in place? Are there any potential risks or challenges related to management or leadership?

What’s the Difference Between Feasibility and Viability Studies?

While both feasibility and viability studies are essential in assessing the potential success of a new business or project, there are some key differences between the two:

Feasibility Study:

A feasibility study is conducted to evaluate whether a business idea or project is viable in the short term. It typically focuses on determining the practicality and potential profitability of the business idea, analyzing factors such as market demand, competition, available resources, financial projections, and regulatory requirements. The primary objective of a feasibility study is to determine whether the business idea is worth pursuing and whether it can be turned into a viable business.

Viability Study:

A viability study, on the other hand, is conducted to evaluate the potential success and sustainability of a business venture or project in the long term. It focuses on assessing the practicality, profitability, and sustainability of the business idea, analyzing factors such as market demand, competition, financial projections, available resources, legal and regulatory requirements, scalability, and environmental sustainability. The primary objective of a viability study is to determine whether the business venture or project is worth pursuing and whether it can be profitable and sustainable in the long term.

Here are some key differences between the two:

• Objective: The primary objective of a feasibility study is to determine whether a business idea or project is feasible and can be turned into a viable business, while the primary objective of a viability study is to assess the potential success and sustainability of the business venture or project in the long term.
• Timeframe: A feasibility study focuses on the short-term feasibility of the business idea, while a viability study focuses on the long-term sustainability and profitability of the venture.
• Scope: A feasibility study typically focuses on a narrow scope of factors, such as market demand, competition, financial projections, available resources, and regulatory requirements. A viability study, on the other hand, takes a broader perspective and includes additional factors such as scalability, environmental sustainability, and social impact.
• Output: The output of a feasibility study is a recommendation on whether to proceed with the business idea or project. The output of a viability study is a more comprehensive assessment of the potential success and sustainability of the venture, including recommendations for strategies to improve its long-term viability.
• Timing: A feasibility study is typically conducted at the beginning of the planning process, while a viability study may be conducted after the business has been launched to assess its ongoing success and sustainability.

Ways to Conduct a Viability Study

There are several ways to conduct a viability study, including:

• Market Research: Conducting market research is an essential part of a viability study. It involves gathering and analyzing data about the target market, including demographics, trends, and behaviors. This information helps to determine the potential demand for the product or service being offered and to identify potential customers.
• Financial Analysis: A comprehensive financial analysis is essential to assess the potential profitability of the venture. This includes developing financial projections, such as income statements, balance sheets, and cash flow statements. The financial analysis should also consider the costs of launching and operating the venture, such as marketing, personnel, and equipment costs.
• SWOT Analysis: A SWOT analysis is a useful tool to identify the strengths, weaknesses, opportunities, and threats of the proposed venture. This analysis helps to assess the internal and external factors that may impact the success of the venture.
• Competitive Analysis: Analyzing the competition is an essential part of a viability study. This involves researching the competitors in the market, analyzing their strengths and weaknesses, and identifying potential strategies to differentiate the proposed venture from its competitors.
• Expert Opinions: Seeking expert opinions from industry professionals and consultants can be a valuable addition to a viability study. These experts can provide insights into industry trends, potential challenges, and best practices that can help to improve the viability of the venture.

In conclusion, a viability study is an essential step in evaluating the potential success of a business venture or project. It provides stakeholders with the necessary information to make informed decisions and minimize the potential for financial losses.

By conducting a thorough assessment of these factors, stakeholders can make informed decisions and take appropriate actions to minimize risks and maximize the potential for success.

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How to test the viability of a business model?

Lessons from ash maurya's scaling lean.

The traditional top-down approach for doing a business plan exercise is attaching your business model to a “large enough” customer segment. The next assumption is if you can capture “just 1 percent” of this large market, you’ll be all set.  After all, 1 percent of a billion-dollar market is still a lot of zeros. And some business plans also talk about capturing all the way to 10% of market share.

I myself have worked in organizations where the business plan's hypothesis was to capture 10% of market share. However, this assumption does not hold any water eventually.

Prior to this I had created a video episode on how to identify growth opportunities to pursue. But I had not gone into the minutest details:

I then read Ash Maurya's Scaling Lean , which provided a good model to test if a business model is worth pursuing.

Ash Maurya highlighted that the problem with having a 1% or 10% market share estimates are many:

First,  it gives you a false sense of comfort. There is no foundational basis for the estimate,

It doesn’t address how to get to this 1 percent market share with your specific product.

1 percent market share might not even be the right success criteria for you.

He offered a much better bottoms up approach for testing business models.

1. Determine your minimum success criteria

Let's begin by understanding the minimum success criteria. Your minimum success criteria are the smallest outcomes that would deem the project a success X years from now.

Instead of thinking in terms of your business model’s maximum upside potential (like the 1 percent market share goal), it’s more helpful to time-box the minimum success criteria.

If you don’t have a reasonable minimum goal, it’s hard to define what success will look like. Not only are the minimum success criteria easier to estimate than your maximum upside potential, they also help you model your progress along the way.

Here are some guidelines for defining your minimum success criteria:

Keep your time box under three years.

Anything longer becomes too far to see. The key is picking a date just far enough into the future that it allows you to demonstrate a working version of your business model. I have worked in large organisations where they made 5 year business plans and I always felt uneasy about it.

Frame the outcome in terms of a revenue (or throughput) goal.

A yearly revenue goal more directly maps to the revenue streams listed on your Lean Canvas and keeps the model simple.

If you’d like to target a profit goal, use a gross margin assumption to convert your profit goal into a revenue goal. For instance, healthy SaaS products typically target a gross margin above 80 percent.

Remember that the goal is a rough ballpark

You dont need exact precision but an initial estimate with an order of magnitude.

First ask yourself whether you are aiming to build a $100K/year, $1M/year, $10M/year, or $100M/year business. You can then narrow a bit further from there.

2. Convert Your Minimum Success Criteria to Customer Throughput

Customer throughput is the rate at which nonpaying users are processed into paying customers.

Pricing Model: In order to calculate the customer throughput needed, the first critical input we need is a pricing model . Most times Lean Canvases dont specify the pricing model. Even at the early ideation stage, you need to get specific on pricing. The biggest objection you often hear is: “How can I price a product when my solution is still uncertain? Price against their problems (using value-based pricing) and not what it’s going to cost you to build and deliver your solution (that’s a cost structure concern). You do this by anchoring against their existing alternatives, which should ideally provide evidence of monetizable pain.

“Again, precision here is not the goal but an estimate. First estimate to an order of magnitude. Is your solution potentially worth $1/month, $10/month, $100/month, “$1,000/month, $10,000/month? Then use your knowledge of your customers’ existing alternatives to get more specific.

At this point, it’s simple to figure out the number of active customers I would need to sustain my business model objective:

This is already a better number than the fuzzy $10M revenue goal because it makes the number more tangible. You can immediately test this number against your customer segment to ensure that it’s big enough.

While a number of active users is better than just a revenue goal, it still reveals only a part of the story. The danger of relying only on this number is that it’s easy to believe that all we need to do is reach this number of active customers one time and we’re set. But it does not factor in customer attrition or churn. Customers leave as a natural part of every business.

Another way of stating this is that the number of active customers represents the steady state number of customers that you need to maintain to sustain your throughput goal, but it’s not a measure of the rate at which you need to create new customers to replace those who leave.

To get this rate, we need to first estimate a customer’s potential lifetime, from which we can calculate their lifetime value.

ESTIMATING LIFETIME VALUE

Here are some ways to tackle estimating a typical customer lifetime:

Does your value proposition have recurring utility?

One way to guess at the customer lifetime is through the nature of the problem you are solving. Is it a single-occurrence problem or something recurring? If recurring, how frequently would users need to solve the problem and for how long? From there you might be able to guess when they might outgrow your solution.

Think in terms of jobs

Once you can clearly articulate the job your customers hire your product to do, it becomes easier to estimate the average time it might take to accomplish the job. “If you hire a painter to paint your house, you expect him to be done in a few days. If he is still there two months later, that’s probably a bad sign.

Study other analogs

Studying other analogs in your vertical, or domain, can also be an effective way of estimating your average customer lifetime. In the SaaS world, for instance, Salesforce (the largest company in this space) reports a four-year customer lifetime. It doesn’t mean you can’t do better, but it helps to ground your own estimates.

If you are still stuck

If all else fails, pick a conservative estimate for now. A more conservative estimate for most business models is somewhere between less than a year (a one-time-use product) and five years.

Once you have a projected customer lifetime and pricing model, go ahead and calculate your projected LTV. For this business model, we can then calculate the required customer throughput rate as:

People usually have no problem calculating the number of active customers needed for $10M/year revenue, which we previously calculated as 16,000-plus active customers.

But the 8,000-plus new customers/year isn’t the number of active customers, but rather the number of new customers you need to make every year after you hit your minimum success criteria—just to sustain your desired throughput.

The point of this exercise is getting a first dose of reality on the viability of your business model.

What do you think about the viability of this business model now?

Creating 16,000 active customers one time is very different from having to create 8,000 new customers every year just to maintain your desired revenue goal

This part of the calculation, in the business model was the most insightful lesson for me. This lesson is going to remain with me for a long long time.

Discussion about this post

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Viability Study: What is it, Importance, Ways to Conduct

The word “viability” is a mass noun that means the ability or capacity of something to work well. It could be a proposal, an idea, a project, or even a plan to change how a company does business.

The Viability study is mostly needed during development and is a required document for getting money. It is a key tool for determining the energy price generated and whether it can be used for captive generation.

A viability study tries to find out if something can work or not. The amount of time a company spends on the study also depends on the new operations.

In this blog, find out more about the viability study, its importance, and ways to conduct it.

What is a Viability Study?

A viability study is a detailed look at how profitable a business idea might be. The investigation also determines whether the idea could be turned into a business.

A business often conducts a viability study to determine how profitable a new business idea could be. The study may look at a new idea or business from several different points of view. Before it is put into action, all of these points are looked at.

This type of study doesn’t consider whether something can be done. Instead, it looks at whether or not it is worth doing.

A viability study usually looks at the market, the technical side, the business model, and the management. Depending on the proposal and its likelihood of failure, the analysis may examine different factors.

LEARN ABOUT:  Market Evaluation

In a viability study, technical aspects can include technology, value, supply chain, integration with current operations, and other things. Operational managers are often needed for this part of the study because they can explain the most technical parts of changing how things are done now.

Importance of viability study

Because it helps to uncover potential problems or dangers associated with a project before major resources are committed to it, a viability study is an important tool for companies. A viability study is crucial for the following reasons in particular:

• Increases your success probability

A viability study will assist you in determining whether a project, plan, or concept is worth pursuing. It restricts you from engaging in a business or undertaking that could result in significant losses. The research recommends spending time examining and questioning a plan.

Therefore, it will indicate whether you should abandon or continue your desired plan.

• Focused and specific

The studies that look at viability are focused and clear. It focuses mostly on making money and puts little thought into how well a plan will work. With this study, you ask questions to determine if an investment will make money.

It’s a way to examine something by focusing on how much money will be made or saved.

• Helps you draw up a plan

You will know what steps to take to meet your needs if you have a plan. A viability study will help you define your goals and ideas that will lead to profits. A well-thought-out plan will also help you estimate a project’s or proposal’s financial benefits.

• Helps to see the bigger picture.

Remember that the big picture in the viability study is the money that will be made.

For example, using solar energy at home will decrease your electricity bill. Also, solar power is better in the long run.

Because it can be used for a long time, it saves money.

• Offers Chances and Solutions

It gives you a chance to stop working on projects that don’t make money before you spend a lot of time and money on them. As you research a project, you might develop new and better ideas.

Also, you might only sometimes have to give up on a project because you might think of ways to improve it.

Ways to conduct viability study

By conducting a thorough viability study, companies can make more informed judgments regarding whether or not to engage in a project, thereby preventing the waste of resources and financial losses.

Using a viability study, you can determine if a proposed business or project is possible and how likely it is to succeed. Some of these steps could be:

• Define the project’s or venture’s scope: 

This involves describing the project’s goals, objectives, and deliverables and any restrictions or limitations.

• Perform a market analysis: 

This entails investigating and evaluating the project or business’s target market, including identifying possible clients, rival businesses, and market trends.

• Put together a financial plan: 

This includes making a budget for the project or venture, estimating income and costs, and figuring out how much money you expect to make back.

• Assess risks and uncertainties: 

This entails locating and assessing any potential risks or uncertainties that may impact the project or enterprise, such as governmental changes or market conditions.

• Prepare a report: 

After the methods above, the data should be compiled into a report that explains the viability study results and offers options for continuing the project or venturing ahead.

• Review and feedback: 

Distribute the report to the relevant parties and stakeholders, get their input, and make any necessary adjustments.

A viability study evaluates a proposed project or commercial venture to see if it has the potential to succeed financially and technically.

It often involves a market research , a competitor analysis, an operational and financial requirements evaluation, and a management team evaluation. Additionally, the investigation will highlight any dangers and potential difficulties and offer suggestions for dealing with them.

A viability study’s overall objective is to decide whether or not the project or business should move forward and, if so, how it should be set up to have the best chance of success.

QuestionPro Research Suite is surveying, data analysis, and report creation software. The program uses market research, customer satisfaction, employee engagement, and other research projects.

The QuestionPro research suite can be helpful in a viability study by collecting information and opinions from a target market or audience. The analysis of the market and the competition can benefit from this information, which also offers insightful information about the requirements and preferences of future customers.

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What is a viability study? Definition and examples

Viability Study is an in-depth study that tries to determine how profitable a business idea is. The investigation also tries to determine whether it is possible to convert the idea into a business enterprise.

In medicine, a viability study of the heart, for example, tries to determine whether the heart muscle is alive. This type of study also tries to determine whether the patient needs a revascularization procedure.

This article focuses on the meaning of the term in a finance or business context.

Viability study – is it viable?

The word viability, a mass noun, refers to something’s ability or capacity to work successfully. It could be a proposal, idea, project, or even a plan to change how a company does business.

A viability study tries to determine whether something is viable.

The word ‘viable’ is an adjective. If something is viable , it means that it can work successfully. If a company is viable, it means that we expect it to make a profit year after year.

Viable refers to anything or any situation which can carry on developing, growing, advancing, or thriving.

Wikipedia says the following about viability studies: “This study is the most important especially to people who plan to start their own business.”

Viability study vs. feasibility study

People often use the two terms interchangeably. However, they do not have the same meaning.

Feasibility study

A feasibility study is an assessment of how practical or doable a proposed method or plan is. It is an analysis that tries to find out whether it is possible to complete a project, successfully.

Viability study

A viability study is an investigation into a business idea. Specifically, whether the idea will make money, i.e., whether it will be profitable.

The viability study is not about whether something is doable, but rather whether it is worth doing.

Put simply; a feasibility study looks at whether something can be done, while a viability study looks at whether it is worth doing.

However, a growing number of feasibility studies today also include an analysis of the expected profitability of a project or idea.

Viability studies often incorporate market analysis to ensure that a business concept aligns with current market conditions and consumer trends.

Compound nouns – examples

There are many compound nouns in the English language that contain the term “viability study.” A compound noun is a term that contains at least two words. Here are six of them, with their meanings, and also examples of how we can use them in a sentence:

Viability Study Report

A document that presents the findings of a viability study, detailing whether a business idea or project is likely to succeed. Example: “After months of research, the consulting firm presented a comprehensive viability study report to the investors.”

Viability Study Analysis

The process of examining and evaluating the data collected during a viability study to reach a conclusion about the project’s potential success. Example: “The viability study analysis indicated a high potential for market penetration, encouraging the team to proceed with the launch.”

Viability Study Framework

An outline or structure used to conduct a viability study, including the criteria and methods of assessment. Example: “The project manager developed a viability study framework to ensure all critical aspects of the project were assessed.”

Viability Study Consultant

A professional or firm specializing in conducting viability studies for businesses considering new ventures or expansions. Example: “The startup hired a viability study consultant to evaluate the potential success of their new app.”

Viability Study Methodology

The systematic procedure followed during a viability study, encompassing the steps and techniques used to gather and analyze data. Example: “Their viability study methodology included both qualitative interviews and quantitative market research.”

Viability Study Outcome

The result or conclusion derived from a viability study, which determines the feasibility and profitability of a project. Example: “The viability study outcome was positive, showing a clear path to profitability within the first two years of operation.”

These two educational videos come from our sister channel on YouTube – Marketing Business Network . One explains what a “Viability Study” is, and the other explains what a “Feasibility Study” is. Both videos use easy-to-understand vocabulary and examples.

What is a Viability Study?

What is a Feasibility Study?

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Feasibility study: definition, benefits and differences with a Business Plan

• Last updated on 09 January, 2024

Welcome to our series of articles on feasibility studies.

• What is a Feasibility study?
• What is a bankable feasibility study?
• How to do a feasibility study?
• Feasibility study consultants: expertise needed
• Cost of a feasibility study
• Car Park Feasibility Study: Key considerations
• Hotel Feasibility Study: Methodology
• Feasibility study of solar PV projects: Key components
• Feasibility study of real estate developments
• Feasibility study of marina projects

In this post, we will touch on all the basic concepts behind a feasibility study. definition, benefits of doing it, main parts, differences with a business plan, etc. Aninver Development Partners is a consulting firm specializing in Feasibility studies for projects such as hotels, infrastructure, energy, technology, etc. We assist clients globally. 

Definition of Feasibility study

A feasibility study is a comprehensive and systematic analysis and evaluation of a proposed project, business venture, or initiative to determine its practicality, viability, and potential for success. It involves a thorough examination of various factors, such as financial, technical, operational, legal, environmental, and market-related aspects, to assess whether the project is feasible and worth pursuing. 

The primary goal of a feasibility study is to provide stakeholders with essential information and insights to make informed decisions about whether to proceed with the project, abandon it, or make necessary adjustments to enhance its chances of success.

Differences between a feasibility study and a business plan

Feasibility studies and business plans are both important tools in the development and evaluation of a business or project, but they serve different purposes and are created at different stages of the process. Here are the key differences between a feasibility study and a business plan:

Differences in Purpose

• Feasibility Study : Feasibility studies are conducted in the early stages of project development or business planning. Their primary purpose is to determine whether a proposed project or business idea is viable and should be pursued. Feasibility studies focus on assessing the potential risks, challenges, and opportunities associated with the project.
• Business Plan : Business plans are created after the feasibility study, once it has been established that the project is viable. The purpose of a business plan is to outline in detail how the business will be structured, operated, and grown. It serves as a roadmap for the future of the business and is often used to secure financing.

Differences in Content

• Feasibility Study : A feasibility study includes an analysis of the project's overall concept, market research, technical requirements, financial projections, potential risks, and recommendations. It provides a high-level overview of the project's feasibility.
• Business Plan : A business plan is a detailed document that outlines the company's mission, vision, goals, organizational structure, market strategy, marketing and sales plans, financial forecasts, and operational details. It delves into the specifics of how the business will operate.

Differences in Timing

• Feasibility Study : Feasibility studies are conducted at the outset of a project or business idea to assess its potential feasibility. They help stakeholders decide whether to move forward with the project.
• Business Plan : Business plans are typically created after the feasibility study, once it has been determined that the project is feasible and worth pursuing. They provide a roadmap for the actual operation and growth of the business.

Differences in Audience

• Feasibility Study : The primary audience for a feasibility study includes project stakeholders, investors, and decision-makers who need to determine whether the project should proceed.
• Business Plan : Business plans are used to communicate the business's vision and strategy to a wider audience, including potential investors, lenders, partners, and employees.

In summary, a feasibility study is a preliminary assessment of the potential success of a project, while a business plan is a detailed document that outlines how a business will be run. The feasibility study helps determine whether a business plan should be developed, while the business plan provides a comprehensive strategy for the ongoing operation and growth of the business.

Feasibility study vs Pre-feasibility study

Let's explore now the key differences between a prefeasibility study and a feasibility study:

Purpose and Scope : A prefeasibility study and a feasibility study both play critical roles in project evaluation, but they serve distinct purposes. A prefeasibility study is typically the initial phase in the assessment process. Its primary purpose is to provide a preliminary evaluation of a project's potential viability. It helps stakeholders decide whether it's worth investing further resources into a detailed feasibility study. In contrast, a feasibility study goes into much greater depth and detail, assessing the project's practicality from technical, financial, operational, and market perspectives. It aims to provide a comprehensive understanding of whether the project is feasible and worth pursuing.

Level of Detail : One of the key distinctions between the two studies is the level of detail they encompass. A prefeasibility study offers a broad overview of the project, examining high-level factors like market demand, technical requirements, and rough cost estimates. It provides enough information to make an initial go/no-go decision. In contrast, a feasibility study drills down into finer details, providing precise financial projections, risk assessments, engineering specifics, and a comprehensive business plan. It seeks to leave no stone unturned in assessing the project's practicality.

Resource and Cost Implications : A prefeasibility study is generally less resource-intensive and cheaper to conduct compared to a full feasibility study. It acts as a cost-effective filter to eliminate unviable projects early in the evaluation process. Once a project passes the prefeasibility stage and proceeds to a feasibility study, it implies a commitment of more resources, time, and finances due to the comprehensive nature of the study. A prefeasibility study helps in efficient resource allocation by focusing only on the most promising projects, while a feasibility study is a more intensive process suitable for projects that have demonstrated a higher likelihood of success during the prefeasibility assessment.

Benefits of doing a Feasibility study

Conducting a feasibility study offers numerous benefits, making it an essential step in the decision-making process for any project, business venture, or initiative. Here are the key advantages of performing a feasibility study:

• Risk Assessment : Feasibility studies help identify potential risks and challenges associated with a project. By thoroughly examining technical, financial, operational, and market-related aspects, stakeholders can pinpoint areas of concern and develop strategies to mitigate or manage these risks effectively.
• Decision-Making : Feasibility studies provide critical information to decision-makers, helping them make informed choices about whether to proceed with a project. These studies offer a basis for go/no-go decisions, preventing resources from being wasted on unviable endeavors.
• Resource Allocation : By assessing the feasibility of a project, stakeholders can allocate resources more efficiently. They can avoid overinvesting in projects with limited potential and allocate resources to those with a higher likelihood of success.
• Financial Planning : Feasibility studies include detailed financial projections and cost estimates. This financial information is invaluable for securing funding from investors, lenders, or other sources. It helps in creating a solid business case.
• Market Insight : Market feasibility studies provide insights into customer demand, market trends, and competitive dynamics. This information is crucial for designing products or services that meet market needs and for formulating effective marketing strategies.
• Optimized Design : Technical feasibility studies ensure that a project's technical requirements and design are viable. They help in avoiding costly design flaws and ensuring that the project can be implemented as planned.
• Legal and Regulatory Compliance : Feasibility studies can identify potential legal and regulatory challenges. This allows for the development of strategies to navigate and comply with relevant laws and regulations, reducing the risk of legal complications later on.
• Enhanced Project Viability : Feasibility studies may lead to adjustments and improvements in the project plan, making it more viable and likely to succeed. This iterative process ensures that potential issues are addressed proactively.
• Investor and Stakeholder Confidence : When potential investors and stakeholders see that a comprehensive feasibility study has been conducted, they are more likely to have confidence in the project. This can make it easier to secure funding and support.
• Long-Term Planning : Feasibility studies not only assess the viability of a project in the short term but also help in long-term planning. They provide insights into the sustainability and growth potential of a business or initiative.

In summary, conducting a feasibility study is a valuable step in the project development process. It provides a structured approach to assess the viability of a project, manage risks, make informed decisions, secure financing, and set the stage for a successful venture. The benefits of a feasibility study extend beyond initial decision-making and contribute to the overall success and sustainability of a project or business.

Components of a Feasibility study

A feasibility study typically consists of several key components that provide a comprehensive evaluation of a project, business venture, or initiative. These components help stakeholders make informed decisions about the feasibility and viability of the proposed endeavor. The main components of a feasibility study include:

Executive Summary

The executive summary provides a concise overview of the entire feasibility study. It includes a brief description of the project, its objectives, and the key findings and recommendations. It serves as a quick reference for decision-makers.

Project Description

This section outlines the project's goals, objectives, and scope. It defines the problem the project aims to solve or the opportunity it seeks to capture. It also specifies the project's location and the stakeholders involved.

Market Analysis

Market analysis assesses the demand for the product or service within the target market. It includes information on target customers, market size, growth potential, competition, and market trends. This component helps determine whether there is a viable market for the project.

Technical Feasibility

Technical feasibility examines the project's technical requirements. It assesses whether the necessary technology, equipment, and resources are available or can be developed. It also identifies any technical challenges that may need to be addressed.

Operational Feasibility

Operational feasibility evaluates how the project will be implemented and operated. It includes details about project timelines, workflow, personnel requirements, and operational processes. This section helps in understanding how the project will function on a day-to-day basis.

Financial Feasibility

Financial feasibility is a critical component that includes detailed financial projections and analysis. It covers aspects such as startup costs, revenue forecasts, expense estimates, cash flow analysis, and return on investment calculations. It assesses the project's financial viability and potential profitability.

Legal and Regulatory Analysis

This section examines the legal and regulatory requirements that may impact the project. It identifies permits, licenses, or compliance issues that need to be addressed. Understanding and addressing legal and regulatory aspects are essential to avoid potential obstacles.

Risk Assessment

The risk assessment component identifies potential risks and challenges associated with the project. It evaluates the probability and impact of these risks and suggests risk mitigation strategies. Risks can be financial, technical, operational, market-related, or related to external factors.

Recommendations and Conclusion

In this section, the feasibility study summarizes the findings and presents clear recommendations based on the assessment. It often includes a conclusion that states whether the project is feasible and worth pursuing or whether it should be abandoned or modified.

The appendices contain additional supporting documentation and data, such as detailed financial spreadsheets, market research reports, technical specifications, and any other relevant information. These provide a more in-depth reference for stakeholders.

The main components of a feasibility study collectively provide a thorough assessment of a project's viability from multiple angles, ensuring that decision-makers have a comprehensive understanding of the project's potential, risks, and benefits.

Examples of Feasibility studies

Let's look now into some examples of feasibility studies for different types of projects and initiatives:

• Real Estate Development

A real estate developer is considering constructing a residential apartment complex in a growing urban area. A feasibility study would assess factors like market demand, location, zoning regulations, construction costs, potential revenue from rentals, and the financial viability of the project.

• Manufacturing Plant Expansion

A manufacturing company is considering expanding its operations by building a new production facility. The feasibility study would evaluate factors such as available land, infrastructure, equipment requirements, workforce, environmental impact, and the financial feasibility of the expansion.

• Small Business Startup

An entrepreneur is exploring the feasibility of starting a small restaurant in a specific location. The feasibility study would examine the local market, including competitors, target customer demographics, startup costs, regulatory requirements, and financial projections for the first few years of operation.

• Renewable Energy Project

A renewable energy company is considering the construction of a solar power plant. The feasibility study would assess the site's solar exposure, grid connection feasibility, equipment costs, revenue from energy sales, environmental impact, and the return on investment over the project's lifespan.

• Healthcare Facility Expansion

A hospital is contemplating an expansion to meet growing patient demands. The feasibility study would include an assessment of the required medical equipment, staffing needs, regulatory compliance, funding sources, and the anticipated patient load.

• Tourism Development

A tourist destination is considering the construction of a new hotel and recreational facilities. The feasibility study would evaluate the area's appeal to tourists, competition with existing businesses, construction costs, expected occupancy rates, and potential revenue from tourism.

• Nonprofit Program Expansion

A nonprofit organization is looking to expand its community outreach programs. The feasibility study would assess the need for the programs, funding sources, volunteer availability, operational costs, and the impact of the expansion on the organization's mission and goals.

• E-commerce Startup

An entrepreneur plans to launch an e-commerce website. The feasibility study would examine market demand, website development costs, marketing strategies, competitive analysis, and projected sales revenue and profitability.

These examples illustrate how feasibility studies are conducted in various fields and industries to evaluate the potential success and viability of a wide range of projects and initiatives. The specific components and focus areas of a feasibility study will vary depending on the nature of the project and the questions it seeks to address.

7 steps to conduct a Feasibility study

Now, let's think we are going to write a feasibility study. Let's check what steps we need to take to develop the final report.

• Conduct a Preliminary Analysis

Begin by conducting an initial evaluation of the project's objectives and scope. This step involves defining the problem the project intends to address or the opportunity it aims to seize. Ensure that the project's goals are clear and well-defined.

• Analyze Technical Specifications

Examine the technical aspects of the project in detail. Evaluate the availability of required technology, equipment, and resources. Verify that the project's technical requirements can be met effectively.

• Conduct a Commercial Analysis

Perform a comprehensive analysis of the project's commercial aspects. This step involves assessing the market's demand for the product or service, analyzing market size, competition, customer needs, and market trends. Determine if there is a feasible market for the project.

• Prepare a Projected Income Statement

Create a detailed projected income statement for the project. This includes estimating startup costs, revenue forecasts, expense projections, and cash flow analysis. Calculate the return on investment (ROI) to determine the project's financial viability, the Internal Rate of Return (IRR) of the investment and the Net Present Value (NPV) of future cash flows.

• Prepare a Day-Zero Balance Sheet

Develop a balance sheet that represents the project's financial position at the outset (day zero). This financial snapshot should account for all assets, liabilities, and equity to provide a clear overview of the project's financial situation before it begins.

• Analyze Different Alternatives for Feasibility

Explore various alternatives and scenarios for the project's feasibility. Assess different approaches, technologies, or business models to identify the most viable option. Consider the potential impact of these alternatives on the project's success. Make sensibilities to potentila risks.

• Make a Go/No-Go Decision

Based on the findings and analysis conducted throughout the feasibility study, make a well-informed decision on whether to proceed with the project (a "Go" decision) or abandon it (a "No-Go" decision). Ensure that the decision aligns with the project's goals and aligns with the information presented in the study.

These steps provide a structured approach to conducting a feasibility study, ensuring that all relevant aspects of the project are thoroughly assessed and considered before making a decision on its viability.

In conclusion, a feasibility study is an indispensable tool for any project, business venture, or initiative. It serves as the critical bridge between a concept and a well-informed decision. By following a systematic process that includes a preliminary analysis, technical assessment, commercial evaluation, financial projections, and a careful consideration of alternatives, stakeholders can gain a comprehensive understanding of a project's viability.

The feasibility study's ability to assess market demand, technical feasibility, operational requirements, financial viability, and potential risks empowers decision-makers to make informed choices. Whether it's a real estate development, a new product launch, a manufacturing expansion, an IT system upgrade, or any other endeavor, a feasibility study helps in risk management, efficient resource allocation, and, ultimately, the successful realization of the project's goals.

It's important to remember that a well-conducted feasibility study not only serves the purpose of greenlighting a project but also provides a foundation for its long-term success. It gives stakeholders the confidence that the project is based on sound analysis and planning. In a world of complex challenges and opportunities, the feasibility study is a guiding compass for those seeking to turn innovative ideas into reality.

Make sure you hire the right consultants to deliver your feasibility study or business plan. Our firm, Aninver Development Partners, specializes in designing bankable feasibility studies  to make sure projects continue to their following phase. 

Send us a message on our contact page and we can discuss how we can help you. 

Some of our experience conducting feasibility studies can be seen below:

• Feasibility Study for a new marina in the island of San Andrés through PPP
• Pre-feasibility study for construction of silo storages in Northern Ghana through PPP
• Feasibility study of a real estate WAQF project in Cotonou (Benin)
• Feasibility study and analysis of strategic alternatives of a touristic development in Natal
• Feasibility study for creation of an Investment and Export Promotion Agency of Health services in Tunisia
• Feasibility Study for car parks in Bishkek though PPP
• Feasibility study of markets in Benin and Togo under PPP scheme
• Feasibility Study for the establishment of a Large-Scale Cashew Processing Plant in Zambia
• Public Private Partnership (PPPs) study in the Housing Sector
• Review of Business Case for Manila Central Subway
• First Mover PPP Prefeasibility Study
• Review of the feasibility study of the PPP project Complejo El Brillante, in Cordoba (Spain)
• Review of pre-feasibility study of a Health PPP project

Alvaro de la Maza is one the founding partners of Aninver Development Partners. Alvaro is a Civil Engineer, MS on Infrastructure Management and MBA by IESE Business School.Alvaro has extensive experience in Infrastructure and Public Private Partnerships. Alvaro has worked and led multiple consulting projects for clients such as the World Bank, the African Development Bank and other donors.Alvaro enjoys creating digital products and he has led the development of market intelligence platforms in d...

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