Is Your Startup Feasible?
By Darrell Jones
OK, so you’ve got a killer idea. It’s brilliant, if you do say so yourself. But will the market agree, and come running to you spending money hand-over-fist?
While there’s no magic answer, you can get an initial idea of how successful your company may eventually be by conducting a quick startup feasibility study. Here’s a checklist of items to consider as you determine your possibility for success. This is an important pre-business planning step, so do your homework before investing your time (and money) into the business. It will also help you save time when it’s time to write your business plan.
What makes your startup stand out?
Does your potential business have the unique ability to attract customers? Here are some aspects that may help you separate yourself and your core competencies from others:
Is your startup a cash generator? Do you anticipate a large demand, or a high price for your product or service?
Is your startup one-in-a-million? Do you offer a rare product or service not easily found elsewhere?
Is your start-up hard to duplicate? Can others jump on the bandwagon and offer the same product (or an improved version) for less money?
What does the market you’ll be entering look like?
A fair indicator to future success is how dynamic the space is. Green tech is hot now, as are mobile sharing apps. But who knows what the future holds …
Is your startup in a growth area? Although things change quickly with supply and demand, does the market you’re entering currently have a positive upside?
Is it a buyer’s or seller’s market? If your market is underserved, you have the advantage of offering your product or service at a premium price.
What is your outlook for mergers and acquisitions? Do you foresee the possibility of being bought by a larger company, or weaving a competitor into your business to be more competitive?
Have you done your due diligence in competitive research?
How crowded is your space? Do some research to see who the market leader is and who is hot on their tail. You may want to look for low-hanging fruit being ignored by larger companies who are too preoccupied with their big fish, or shoot for the second largest company’s customers as they’re focusing on larger initiatives and not their current customers.
How large do you estimate your market to be? A little research on the internet will give you an idea of how many companies are in the space and the dollar figures their customers are spending.
What percent of this market can you carve out for yourself? Realistically, how much business can you pry away from others, given your unique offering?
How are going to move from customer #1 to customer #1,000? Do you see a simple path to escalate your startup’s growth curve, taking customers away from others in your space?
Have you done a Proof of Concept test?
Create a rough working concept of the product or service you want to offer, and bounce it off a few potential customers (perhaps 25 or so). It can be as rough as a sketch on a napkin, simply to convey the idea. Hopefully you can go to a physical place where potential customers may gather? Or if you have a way to contact customers via the web, sites like Survey Monkey give you a way to get feedback.
Take the feedback to heart, and reiterate on your initial thinking to more closely align to what the market is looking for. Also consider what you can get a patent for.
How are your financials shaping up?
Do the math and see how realistic it is to get up-and-running. Usually it’s easier to get a service started than a product, given the need to buy and assemble a physical product.
Estimate your total costs. Be sure to include fixed costs (rent and salaries and such) as well as variable costs (marketing and promotions programs and such).
Estimate your sales. Be realistic (in fact, conservative) to guesstimate how much money you’ll be pulling in monthly once your startup opens its doors.
Estimate your break-even point. Using the two figures above, how long will it take for you to become profitable? While breaking-even is OK if you’re passionate, you may won’t to teak things if you notice it could be a long time to earn money for other investors.
Does your startup have organizational feasibility?
What’s your plan for building a team to shepherd your startup today and tomorrow? Being a man/woman band is OK for starters, but eventually you’ll need additional expertise. Factor these points into your feasibility study:
Do you have a plan for building a team? How many full-time workers will you hire, and when. How much of your business can be built using online freelancers.
Is there a plan for adding to your leadership team? How easily will you be able to attract managers to continue growing the business?
So take a few of these steps and gauge for yourself if your startup has a good chance to fly. And remember, there’s substitute for passion. If you’re a real go-getter you can make up for a few sub-par findings you may come across. Don’t be discouraged, but do be realistic.
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