How to do Feasibility Study for a new business?

A feasibility study is an analysis that investigates the viability of a proposed project or business venture. It looks at all aspects of the concept to determine if it is logical, practical, and could be successful.

The key elements of a feasibility study include:

  • Market Feasibility – This looks at the potential market and demand for the product or service. It includes competitor analysis, target customer research, and sales forecasts.
  • Technical Feasibility – This evaluates if the required technology, equipment, systems, and processes are available and can be implemented within budget.
  • Financial Feasibility – This involves making cost and revenue projections to estimate profitability. Factors like startup costs, operating expenses, and potential sales/revenue are analysed.
  • Legal & Regulatory Feasibility – This determines if legal and regulatory requirements can be met. Licensing, permits, zoning, trademarks, etc. are researched.
  • Organizational Feasibility – This assesses if the right team with the required skills can be put together to implement the project.

Here is an example introduction for a feasibility study for a new business:

This feasibility study evaluates the viability of opening a new coffee shop called The Daily Grind in the downtown area of [City]. The Daily Grind will be focused on providing high-quality artisanal coffee drinks and light breakfast and lunch options in a relaxing cafe environment.

The goal of this feasibility study is to analyse if opening The Daily Grind in [City’s] downtown area will likely be a sustainable and profitable business venture given the start-up and operational costs. Research was conducted through surveys, interviews with potential customers and industry experts, and analysis of current market trends and expenses.

Market Analysis:

The market analysis includes an evaluation of the overall market and target customers for the proposed coffee shop, The Daily Grind. This encompasses the current market conditions, size, growth potential, and an overview of the competitive landscape.

Current Market Conditions

  • The specialty coffee shop industry has seen steady growth over the past 5 years as consumer preferences shift toward quality, premium coffee drinks. Approximately 65% of adults in the U.S. drink coffee daily.
  • The artisanal, sit-down coffee shop sector is growing rapidly. The number of small, independent coffee shops increased by over 15% last year according to industry research.
  • Demand for premium and single-origin coffee beans and ethical, fair-trade coffee is rising. Customers are willing to pay higher prices for quality products.

Market Size & Growth Potential

  • The total addressable market for coffee shops in the downtown area is estimated at $22 million currently, with projected growth to $31 million over the next 3-5 years.
  • Market research indicates there is capacity for 2-3 additional coffee shops similar to The Daily Grind based on current unmet demand.
  • Forecasted market growth of 6% year-over-year provides strong expansion opportunities.

Target Customers

  • The target customers are urban professionals, students, creative types, and discerning coffee drinkers who appreciate specialty coffee drinks and artisanal food options.
  • Survey results estimate 43% of downtown office workers visit coffee shops 2+ times per week, representing a solid customer base within walking distance.

Competitive Analysis:

The competitive analysis identifies direct and indirect competitors to the proposed coffee shop, The Daily Grind, and evaluates their positioning and strengths in the downtown market.

Direct Competitors-

  • Starbucks – Established chain with strong brand recognition. Offers wide range of coffee and tea beverages but often crowded and lacks local community feel.
  • Roasters Coffeehouse – Focused on specialty coffee and breakfast sandwiches. Minimal seating and limited menu. Takeout focused.
  • The Morning Perk – Quaint independent shop with bakery items. Known for lattes and cappuccinos. Limited street visibility.
  • City Café – Cafe inside large bakery location. Not specialty coffee focused. Caters to bakery’s customer base.

Indirect Competitors-

  • Dinosaurs Coffee – Specialty coffee shop 3 miles away. Only direct premium coffee competitor but not downtown.
  • Busy Bean Café – On university campus 5 miles away. Draws student crowd.

Location Analysis:

An analysis of potential locations was conducted to determine the ideal site for The Daily Grind based on visibility, foot traffic, proximity to customers, parking, costs, and competition.

Several spaces were evaluated in the downtown area between Main Street and Commerce Blvd, which represents the prime target area due to its high office worker density, pedestrian activity, and storefront visibility.

The location at 123 Main Street was selected as the top choice for the following reasons:

  • On a corner lot with excellent street-facing windows to display branding
  • Close proximity – within 2 blocks – of major office buildings, city hall, and new apartment complex
  • Public parking garage around the corner can accommodate parking needs
  • Rental rate per square foot is reasonable compared to similar spaces
  • Surrounded by complementary businesses like wine bar, bakery, and lunch spots that drive additional foot traffic
  • Space layout can accommodate seating for 28 inside and 12 outside
  • Next door retail space provides room for future expansion

Financial Feasibility

The financial feasibility assessment involves projecting revenues and expenses to evaluate the profitability and funding requirements for The Daily Grind. Key factors analyzed include:

  • Startup Costs – Estimated at $185,000 which includes renovation, rent deposit, equipment, inventory, licensing, marketing, etc.
  • Revenue Drivers – Sales projections based on location capacity of 150 customers per day average ticket of $8.50 totals $473,000 in year 1 revenue. This increases by 5% annually with market growth.
  • Key Expenses – Cost of goods sold is estimated at 40% of revenue. Labor is projected at 27% of revenue. Occupancy costs at 16%.
  • Funding – We are seeking $100,000 in small business loans and will invest $85,000 in owner equity.
  • Profitability – Net profit is forecasted at 7% of revenue or $33,000 in year 1, rising to 15% profitability by year 3.
  • Breakeven Point – With fixed and variable costs included, the breakeven point is estimated at $340,000 in revenue, which we expect to achieve in the first 5 months.
  • Return on Investment – With strong net profit margins, the ROI is projected at 25% by year 3.

Based on the sales forecasts across various scenarios, The Daily Grind can become highly profitable within 2-3 years. The funding needs and costs are also reasonable to move forward.

How to do Feasibility Study for a new business?

SWOT analysis:

SWOT analysis is a structured framework used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a business venture or project. It serves as an important step in planning and decision-making.

Here are some tips for conducting a SWOT analysis for a new business feasibility study:

Strengths:

  • Consider competitive advantages the business has or could leverage – technology, innovations, USPs, resources, capabilities, location etc.
  • Identify strengths of the management team like expertise, relevant experience, networks etc.

Weaknesses:

  • Look at potential operational, organizational, financial weaknesses that need to be addressed
  • Identify gaps in capabilities of the team

Opportunities:

  • Research trends, demand increases, underserved segments that the business can capitalize on
  • External changes like technology adoption, favorable regulations, access to grants/funds

Threats:

  • Study factors that can negatively affect operations – competition, market decline, supply bottlenecks
  • Consider substitute products that may limit market share
  • Regulatory, technological threats

Use a SWOT matrix to map the interactions between these strategic factors and derive implications. It allows analyzing internal preparedness to pursue opportunities or counter external threats. Updating the SWOT as progress is made is recommended.

Here are some tips for developing conclusions in a new business feasibility study:

  1. Restate the main goals/objectives – Remind the reader of the key questions you wanted to address regarding the viability and prospects of this business.
  2. Summarize key findings – Touch upon the main takeaways from each major section – market potential, competitor analysis, operational requirements, financial projections etc.
  3. Highlight strengths and competitive advantage – Note the strong points working in favor of the business like innovations, superior solutions, capabilities, experienced team etc.
  4. Discuss significant risks and challenges – Spell out major make-or-break factors like changing technology, access to funds, ability to acquire customers etc.
  5. Share overall evaluation – State clearly whether your findings and analysis indicate an opportunity worth pursuing or not. Quantify viability citing expected ROIs, breakeven timelines etc.
  6. Provide recommendations – Offer actionable advice on next steps per your assessment regarding investing in the venture or not. Outline prerequisites to increase likelihood of success.
  7. Call out critical assumptions – List key assumptions made especially in sales forecasts and financial modelling to set realistic expectations on projections.

The conclusion should present an objective balanced perspective on the expected pros and cons so stakeholders can make informed go/no-go decisions about moving forward. Focus on highlighting pivotal findings.

Contact us today for a free consultation and let’s discuss how we can help you turn your E- Commerce vision into a sustainable success story.

Feasibility Study Services

Retail:

  • Bakery
  • Catering Company
  • Convenience Store
  • Clothing Boutique
  • Department Store
  • Florist
  • Furniture Store
  • Jewelry Store
  • Sporting Goods Store
  • Toy Store

Hospitality & Tourism:

  • Hotel
  • Resort
  • Bed and Breakfast
  • Travel Agency
  • Tour Operator
  • Theme Park
  • Amusement Park
  • Hotel Apartment

Services:

  • Car Rental
  • Cleaning Service
  • Construction Management
  • Consulting
  • Event Planning
  • Facility Management
  • Gym/Fitness Center
  • Hair Salon
  • IT Services
  • Landscaping
  • Legal Services
  • Marketing Agency
  • Pet Sitting/Walking
  • Property Management
  • Real Estate
  • Security Services
  • Spa
  • Taxi Service, Limousine Service

Education:

  • School
  • University
  • Online Education Platform
  • Language Learning Center

Healthcare:

  • Clinic (variety of specialties)
  • Hospital
  • Dental Practice
  • Veterinary Clinic
  • Medical Devices Manufacturer
  • Pharmaceutical Company
  • Mental Health Services

Finance:

  • Fintech Startup
  • Insurance Company

Technology:

  • Software Development Company
  • App Development Company
  • Artificial Intelligence Company
  • Data Analytics Company

Food & Beverage:

  • Restaurant (various cuisines)
  • Cafe
  • Food Truck
  • Catering Company
  • Grocery Store

Logistics:

  • Warehouse
  • Freight Forwarding Company
  • Delivery Service
  • Shipping Company

Manufacturing:

  • Food & Beverage Manufacturing
  • Clothing Manufacturing
  • Construction Materials Manufacturing

Other:

  • Supermarket
  • Agricultural Farm
  • Construction Company
  • Media & Entertainment Company
  • Renewable Energy Company (solar panel installation)
  • Non-profit Organization
  • Childcare Center
  • Coworking Space
  • Car Wash
  • Recycling Plant

This list is not exhaustive, but it gives a much broader picture of team’s expertise in conducting feasibility studies across a diverse range of industries.

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