Resources for Entrepreneurs
Business Feasibility: A First Cut Analysis
Are you thinking about starting a business? Have you wondered whether it is the right time to start a business and whether it is the right business for you and your family? Are you concerned whether their is a sufficient market to support your business and meet your profit objectives? Do you have profit objectives? Business Feasibility: A First Cut Analysis was developed to help you answer critical questions like these:
What are the trends in my industry market?
Who are my potential customers?
How big is my market?
How will this businss affect my family?
Who are my potential suppliers?
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Business Feasibility: A First Cut Analysis was developed to help value-added agricultural entrepereneurs analyze their business ideas. However, the principles and methods you will learn in this guidebook will help you analyze almost any business opportunity.
What if you are already in business? The tools and techniques in Business Feasibility will help you identify opportunties in the marketplace and potential threats to your business before they happen so you can take advantage of the opportunities and take steps to minimize the threats.
Case studies are used to demostrate how to conduct the analysis. In Business Feasibility, we do not simply tell you what you should do, we show you how to do it. Gina and Al provide detailed examples of how to put what you learn into practice.
Want a Sample? Here is a brief sample of each chapter:
Chapter 1: Objective Self Analysis is a Critical First Step
Chapter 2: Preliminary Market Research
Chapter 3: Associations, Similar Businesses, and Suppliers
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Chapter 1: Objective Self-Analysis is a Critical First Step
Every book on starting a business that we have ever reviewed has included a section designed to help readers evaluate their readiness to operate a business. Unfortunately, it is usually glossed over or skipped in the rush to complete the financial projections needed for the loan package. Most people make the mistake of focusing their attention on financing the project—instead of taking a careful look in the mirror.
Few people start a conversation with: “I need to critically examine my motivation for wanting to start a business, my expectations, and my strengths and weaknesses." Even fewer people go on to say: “I need to think about how this will affect my family—financially and personally—in the short term and the long term.”
Many entrepreneurs—like most people—would rather not do this sort of soul searching. And yet, that is exactly what should take place at this point. Why? Because all too often, people invest everything they have—their money, their time, their reputation—before they fully understand how starting a business will affect their families, their personal lives, or their futures.
Few people look in the mirror long enough to realize that that they may be operating on assumptions such as these:
• My wife will change her mind.
• I’m doing this for my kids. I’m sure they’ll appreciate it someday.
• I’m sure that prices and profits will go up.
Few people who start businesses can honestly say that they are motivated to take advantage of opportunities, adapt to changes, or minimize threats.
It is much more common to have motivations like these:• “I hate working for someone else.”
• “I am bored and tired of what I'm doing now.”
• “There has to be an easier way to make money.”
Here is a story that may have a familiar ring: The farm that is adjacent to John’s came up for sale unexpectedly after the owner experienced a near fatal heart attack. John had always dreamed of expanding his operation so that his sons could farm with him someday. Farm land in his area rarely comes on the market, and adjoining land had never been available before in his lifetime. John was ready to talk with his banker when his wife, Mary, suggested that they spend an evening looking in the mirror.
She pointed out that doubling the size of his farm would probably double the time and energy they would need to spend working on it, unless they decided to hire help, which is something they've been reluctant to do in the past. The new commitment would most likely mean that they would have less time for their kids. Their youngest son had just been diagnosed with a learning disability, and his teacher suggested that they consider letting him repeat the sixth grade. He seemed to get along better when both parents spent a lot of time with him in the evenings, helping him with his homework and teaching him how to get organized and stay focused. Their oldest son, who was a junior in high school, had a pattern of drifting into a rougher crowd of kids from time to time. He, too, seemed to make better choices when his parents provided more structure and attention.So, what should they do? John and Mary realized that this was a decision that they could not make lightly or easily. It was not just a business decision. It was also a family decision. In addition, it was a family business decision that was shaped by the legacy of the family farm—with its history and its expectations for the future.
Chapter 2: Preliminary Market Research
After you have completed your first draft of the cost-benefit analysis in Chapter One, it is time to take the next step and begin conducting preliminary market research.
There are two types of business research: primary, which means collecting data and information (as in surveys or interviews) and secondary, which means using information that has already been collected by someone else. This chapter focuses on secondary research because we recommend starting with information that already exists and has been published on the Internet. There is an enormous amount of useful, important, reliable data that is available to anyone who has access to the Internet. In this chapter, we will show you how to find and use information that can help you answer questions about your market.
But first, we would like to discuss why doing market research is important. Typically, the focus of market research is to develop sales projections. It is certainly true that the more you know about the market for the products and services you will be selling, the better you will be able to make realistic and reliable sales forecasts.However, the real value of market analysis is even more fundamental than serving as the basis for your sales projections: simply, the better you understand the market for the products and services you plan to offer, the more likely your business will succeed. Before you begin developing your sales projections, we recommend that you conduct a preliminary market analysis to learn more about your industry, your customers, and your niche market. This information will provide an important context for your sales analysis.
Who Needs to Do Market Analysis? Everyone! Often, people who are in the process of creating a new business make the mistake of spending too little time on market research.
One reason is the very nature of market analysis. It provides few definitive answers, which be frustrating. Also, doing market research takes time and prospective entrepreneurs have many other demands on their time. Obtaining financing, identifying potential locations, meeting with potential suppliers and shopping for equipment all take time, and seem much more pressing that conducting market research. Finally, there is simply too much information available. It’s easy to become overwhelmed and frustrated by the sheer volume of information.
Chapter 3: Associations, Similar Businesses, and Suppliers
After you have completed your personal cost-benefit analysis in Chapter One, and have also completed your preliminary market research in Chapter Two, it is time to conduct your informal primary market research. We recommend that you begin your research by contacting your industry’s associations, talking with people who operate businesses that are similar to the type that you have in mind, and meeting suppliers and wholesalers.
In our experience, these are the three most productive sources for information when you are in the preliminary stages of exploring your business idea. The information you can obtain at this stage will help you make an informed decision about how to proceed.
You may be wondering why we recommend you focus on these areas instead of doing customer surveys. We have two reasons. First, we believe that this information should be a higher priority earlier in the process because it can help you make your first-cut decisions. Second, we recognize that survey research is a science. Survey design determines their accuracy and value. Trained professions can create reliable assessment tools; amateurs might not. Paying for expertise is an important step to take after you have completed this preliminary analysis and have determined that you are ready to proceed with a full-scale business plan.
