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Posted on Oct 23, 2013 in Financial

Checking the financial feasibility of your business idea

Many people can have a good business idea or even more than one, but few can actually turn their ideas into a real, successful business, as not many people have what it takes to do it, which is entrepreneurial skills, nor do they resort to the advice and expertise of those who do. However, individuals who do know what it means to turn an idea into a business are also aware of the importance that a financial feasibility study takes and what are the steps that lead to it. Before doing a complex financial feasibility analysis, you need to check the feasibility of the business idea, which can be done in five simple steps.


Step 1. Checking your business idea. 

Deciding whether a business idea is good or bad is very difficult, especially since business history shows that some peculiar ideas have had tremendous success, while what seemed like practical ideas have failed. When it comes to deciding whether you should invest your money and your time in a business idea, you have to look at it from an impartial point of view, which is why many people resort to a business advisor, such as the Bournemouth accountant services, who can take passion out of the equation and provide an objective perspective.

Step 2. Analyzing your business idea. 

The analysis of a business idea goes beyond the simple or not answer to the question “Is this a good idea or not?” or the advice given by the Bournemouth accountant services. This analysis is a pillar of your feasibility study and it should determine at what extent the business will be profitable. The analysis of the business idea must have as objectives assessing the competitive advantage of your business idea and the size of the market, as well as the capital requirements, obtaining independent endorsement and finding out if the idea is unique or if someone else already tried it. If you someone did, then you need to find what whether they succeeded and how or they failed and why.

Step 3. Market analysis. If you determine that there is in fact a market for the service or product you want to offer, then you need extended market research in order to obtain relevant information for the feasibility study. The market research must include demand analysis, which means identifying the type of existing demand and the size of the market, as well as its capacity to grow, supply analysis, which should tell you if the life cycle of the industry is favorable for you to entry and how the industry is structured, and relationship analysis, which evaluates the way buyers and suppliers within the industry interact and what is the threat to your business.


Step 4. Competitive advantage analysis. After you’ve established that the business idea has real grounds and there is indeed a market for it, you need to make sure that you bring something different to the table, in order to ensure a competitive advantage in front of the other suppliers that provide the same type of service or product. To that extent, you should also gather information and analyze the competition and their success or lack of it.

Step 5. Financial feasibility analysis. The final part of the study is the actual financial feasibility analysis, which means the preparation of a sales forecast, the estimation of capital requirements both in terms of money and in terms of working force, the estimation of profitability and the assessment of financial viability of the business.