One of the most important things to think about is whether there is a market for your idea for a product or service. There are three aspects to be considered that include how big the market is, the percentage you are likely to earn, and the time frame for launching.
Conduct some research on the industry to determine the market size of the product you offer or service. Let’s say your product is a dress-type shoe for women. Through some basic research online, the industry of footwear in 2012 was worth $64 billion, with 13% of it dressing for women. You know that you’re in the $8 billion industry. Now, you must figure out what percentage of that market you can easily achieve. There are a variety of brands of dress shoes for women, and you must be extremely cautious in your estimation. In such a huge market, and with numerous well-known competitors, any new business can’t be expected to earn to be able to compete with a tiny fraction of its business. Let’s say one-third of one per cent at most. It’s about $26,400,000. It is likely that you are paying royalties to a well-established shoe manufacturer. A reasonable amount would be around 8 per cent. That leaves you with $2,112,000 of revenue.
You must now examine the opportunities available to you. Also, are the people in a position financially to purchase your product? And does your product be a hit with people? Let’s say it’s an original design with the heel shaft detachable that allows women to alter the shoes to heal shoe or flat. It certainly sets your product apart from others. You can safely suppose that women are likely to be able to afford and require formal shoes for all occasions. Your market research suggests that women are likely to quit buying formal shoes. Therefore, it’s safe to say that the door to opportunity is wide open for your innovative product concept.
Management Team Capital
It is essential to evaluate who is in charge of your business in order to determine if it is managed effectively. A lot of businesses fail not because of insufficient revenues but rather because the management team doesn’t have the right skills or attitude to manage the company. Three areas to evaluate the people capital, social capital and mental capital.
Human capital refers to the value of the skills, knowledge or skills the person has to offer to a company. When deciding who to add to the top leadership team for an entrepreneurial company, the candidates are typically assessed based on factors such as prior entrepreneurial experience as well as their knowledge of the business and market, their years of schooling, previous working experience, and skills directly linked to a service, product or procedure.
The next is social capital, which refers to the worth of the actual (or potential) assets or resources that a person could acquire for an organization, based on whom they know, especially in your field. When deciding who to add to the executive team at the top of an entrepreneurial venture, the candidates are typically evaluated based on aspects like their standing in the business world, what organizations they belong to and the people they know who could supply financial assets, data or other assets to the business.
The last part can be described as psychological capital. Human capital is “what you are aware of”, while social capital refers to “who you know” Psychological capital is expressed in a self-image or self-esteem. Therefore, one can consider psychological capital as the person’s perception of their capacity to use the social and human capital that they bring to an enterprise in a successful way.
In each of the three categories, where do your management team perform? Not every manager needs to be a pro in all three areas. However, there should be a balance between each of the three categories among people on the management staff in order to make sure you’re capable of managing your company.
The last aspect of a feasibility study is financial viability. There are four essential elements to take into consideration: the amount of capital is required to begin your business, the number of profits per unit you could anticipate as well as how quickly revenues are likely to be earned by repeat customers and how fast the business is predicted to grow over the next three to five years.
Start-up capital is a one-time investment in start-up costs like major equipment or real estate and a minimum of three months’ worth of operating capital like employee wages and inventory items. It is important to determine this in order to determine if you have enough capital to start the company.
Profit per unit is another aspect to take into consideration. In the past, it was believed that $2,112,000 was the minimum amount of income you could achieve in your first year of operating. How much profit can you make on each shoe, and will it be enough to pay for the shoes, minus the other costs that are tied to the company, like the cost of paying employees, leasing or management team’s salary and other operating costs?
Repeat business brings more profits for a new business than new customers in the long run. What is the frequency at which potential customers purchase your shoes? Do they typically buy one pair every year, or do they buy several pairs? Do some research to find out how many pairs of formal shoes a woman purchases in a year and then apply it to your business. The more frequent purchases you make and the more profitable your business’s financial stability.
Growth in the industry over the coming 3 to 5 years will be a different reason to study. Are the industries you are entering expected to expand, stay stable, or decrease? This is a subject that requires more research by your management group. It is likely that you are in an industry that is growing or that has remained stable over some time.
Before you begin to write your business plan for the business plan, perform a feasibility assessment to determine whether your market is suitable, if your management team is competent in managing the business, and whether it’s financially feasible for you to begin your company. If it proves to be viable, then you can make use of the majority of the data you gathered to create your plan for business.