Many business owners do not see the value in documenting what they intend to do before they do it. Take for example the idea of a feasibility study. What does this actually mean. Well in fact a feasibility study can be a valuable tool to give the business market insight prior to investing their precious cash to develop new products or to market to new customer segments.
Here is what I put on my check list of things to do when looking at developing a feasibility study for clients,
- what does the market segment look like, how large, how many competitors, what is their value proposition and what is your point of differentiation
- what are the market forces at play, use something like porters 5 forces or PESTE or a value chain analysis to assess the market
- get the numbers, really dig in and see how big the market is and what percentage of the market you think you can realistically obtain, then
- Plug those numbers into a NPV or RoI model and see if you can actually make any money based on the up front investment required
Why do this? well it can be a sobering process. It will show you how large the sales pipeline needs to be and how quickly you need to build sales. Often we set forth being prepared to invest dollars into a product and then when it is time to go to market, we expect sales to jump into our lap. The feasibility study should give you a sense for how big the pipeline needs to be on launch day.
Ignoring this can leave you will a big headache. What is that headache you ask? well needing to go to a funder for more dollars . Funders can be your shareholders, the bank or your wife who is growing impatient about the fact that the bottomless pit called your business is not delivering results fast enough.
I usually find that there are weak connections in the value chain particularly around suppliers who the business relies on to deliver materials and even clients. Never under-estimate how long it takes to get these parties aligned.
From this I think spending time on a marketing plan is the next logical step. More on that in my next blog
