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Feasibility Analysis, Part One
Putting personal resources on the line for the sake of starting a
business is a scary prospect for many entrepreneurs. In fact, these
fears are one of the main things that prevent new small businesses
from developing. It is easy to be overwhelmed the notion that
failure will result in personal financial ruin. The best way to put
your mind at ease is to conduct a feasibility analysis. This will
allow you to assess your own probabilities and risk.
The first and most important rule of the feasibility analysis is to
be honest with yourself. If you're not sure of something, find the
truth of the matter, and don't forget to question assumptions. The
second, equally important rule is to assume the worst when you're
dealing with uncertain factors. These two rules can not be stressed
enough.
The first actual steps of a feasibility analysis are the idea and
the personal checklist. The idea is the inspiration part of starting
a business; it's the idea that you're basing your start-up on.
Additionally, you'll also need technical knowledge, industry
knowledge, and a plan to go along with that idea. The personal
checklist consists of questions you should ask yourself before going
further in your feasibility analysis. The first question to ask is
whether you have any management skills, and if you do, what are
they? The second is asking yourself where your start-up will be in
five years. The third is how you expect your lifestyle to change
once you start a business (you're expected to make considerable
sacrifices for it). This is where being honest with yourself is of
the utmost importance.
The second step is research. You'll want to research as many aspects
of your potential start up as you can reasonably manage beforehand.
Still, there are a few fields of particular importance for any
business owner. The first is researching the demand for your
business at the time and place you're planning to found it. A low
demand is not necessarily something that should stop you entirely
(unless you're trying to sell something with so little demand that
it's obvious you can't form a business), and you will want to
consider the low demand for the future. You'll also want to research
the competition in your start-up's industry, as well as research
ways that you can do better than your competitors. You'll also want
to look into other factors that make an impact on the general
setting your business will be in (called the business environment),
such as distribution matters (for retail-based businesses), supplier
issues, and other effects that might help or harm your business.
Finally, you'll want to get a clear picture of your industry's
demographics (statistics showing you who your potential customers
are).
Now that you have taken the time do some introspective research, you
can move forward with your feasibility analysis. Going forward, you
will be addressing more theoretical issues. In the remaining three
steps, you will rely on what you have learned about yourself to help
you make informed and accurate decisions about your business.
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