Tag Archives: small business

Assessing Small Business Feasibility

Although it’s difficult to know in advance, it’s essential to gather enough information to predict your business’ chances of survival; this is the black art of feasibility. You can compare to other businesses, you can devise your action plans, and you can crunch the numbers to create multiple future scenarios.

You can sleuth and slash through the marketplace maze, start your business, then discover afterward that the business simply isn’t feasible. A business’s appearance of feasibility is no guarantee that it will succeed. This is not reassuring to those faced with feasibility analysis, but start-ups are still far better off assessing feasibility than not.

A feasibility study precedes the business plan. It’s not uncommon to conduct feasibility studies for several different businesses before deciding to move on to the business planning stage.

The information you gather for your feasibility study will be useful should you decide to proceed with a business plan. Some feasibility studies can be quick and inexpensive; others can take months, or even years, and cost thousands of dollars. It’s ok to use round numbers and approximations – be sure to err on the high side for your expenses and estimate sales much lower than you expect they might be.

It’s natural to feel as though you’re guessing as you start to determine feasibility. Continue researching and learning until you are confident in your numbers and assumptions.

It takes an alert mind, a healthy dosage of curiosity, and a clear idea of what you need to research in order to determine feasibility. Although we tend to think of money as a main consideration when assessing feasibility, there are a number of other factors that might influence your decision.

Here are a few questions small business start-ups might ask when attempting to determine whether a business idea is feasible.

  • Is this a life-style choice for you?
  • Do you have other choices?
  • Do you love the kind of work you will be doing?
  • Does your health factor into your decision?
  • Will you be able to employ other family members?
  • Is it a life-long fire that will burn until you quench it?
  • Will it enable you to locate in an area you wish to live in?
  • Are there less risky opportunities?
  • How comfortable are you with the level of risk?
  • Can you afford to lose the investment?
  • Will you miss out of other opportunities?

Entrepreneurs have much to consider before deciding to start a business. A feasibility analysis will help you learn about your business and provide you with enough information to make the right decision.

Business Models Morphing

Working business models live and thrive all around us in the marketplace. In the world of business—manufacturers, wholesalers, distributors, retailers, and services—there are many tried and true business models. With the mass adoption of technology and the internet, old business models are morphing and new business models are emerging.

A business model is a brief explanation of how a business concept makes money. It describes who buys the products or services, how much they pay, and how often they purchase. It is the logic of a business.

Unfortunately, not all businesses are logical. A poorly conceived business model quickly becomes a liability and unless it’s fixed, can bring a business down.

The same products and services can be marketed through several different business models. For example, the transportation of people can be achieved through different means. You can buy and own a vehicle, you can lease a vehicle for a specific term, or you can rent a vehicle for short-term use. Car dealerships, leasing companies, and rental agencies are three different proven business models that connect cars with customers and enable people to get where they’re going.

Another business model, the razor and blade model, gives away razor handles and earns its revenue by selling the user blades or refills. A different model sells electric razors to customers at a much higher initial cost, but without the ongoing costs for refills. These two business models serve the same market through different strategies.

The artisan business model describes how artists, musicians, and writers market their wares. Many artisans simply create their works and sell them to local shops. Some set up as vendors on busy streets or at space rented at a farmer’s market, while others become part of a marketing cooperative. These are all variations on the artisan business model.

Franchising is the practice of using another firm’s successful business model. For the franchisor, the franchise is an alternative to building chain stores to distribute goods and avoid the investment and liability that comes with owning a chain. The franchisees benefit from the franchisor’s success and pay royalties for that benefit. Franchisees are thought to have a greater incentive than direct employees because they are invested in the business.

The freemium business model works by offering basic web services, or a basic downloadable digital product, for free, while charging a premium for advanced or special services or features. This model is made possible in part by the fact that there is little or no cost of costs for the products, once created.

The online auction is a prime example of a business model that didn’t exist a few short years ago. Customers bid online for products and services. Buying and selling in the auction format is made possible through auction software which handles the various processes involved.

A number of new business models are emerging in the e-business realm. E-businesses earn revenue through strategies such as subscriptions, sale of advertising, and transaction commissions. Search engines, for example, provide their services to the end user for free—rumour has it that they manage to make ends meet through the sale of advertising.

The business model of choice must serve the owner’s needs, enable the business to stay competitive, and meet the needs of customers.

Financial Reports That Help You Understand Your Business

Too often, business owners who get into trouble don’t even know they’re insolvent until the landlord puts a lock on the door.

A business plan sets the owner up with a basic understanding of business financials, and helps avoid the carnage. All business plans should include a cash flow forecast, pro forma income statements and balance sheets. In addition to these three critical components, there are a number of other financial reports that can help entrepreneurs understand how their business works.

Here are nine financial reports and a brief explanation of each.

  1. 1.    Sales Forecast. A first year, 12-month projection of the number of units and the values for each product or service you will sell. A good sales forecast shows slower times, busier times and growth or shrinkage – it is the basic building block that enables owners to determine whether or not the business will bring in enough money to meet their financial expectations.

Continue reading Financial Reports That Help You Understand Your Business

To Business Plan or Not: Is That Really the Question?

After coaching many people through the eye of the business planning needle, I’m intrigued and bewildered by the gap between “what business planning is” and “what people seem to think it is.” Time and again I see intelligent people going to great lengths to avoid business planning when it’s exactly what they need to navigate the complexities of start-up.

Whether they admit it or not, those who succeed in business do some sort of planning – or hire someone to do it for them. The pieces of a successful business don’t fall into place perfectly by themselves without some kind of high-level roadmap to get them flying in formation. The elements of success come together because someone—usually the business owner—plans, agonizes, organizes, pampers, and weaves the threads together to achieve the desired positive result.

So, what is this aggravation called business planning? Continue reading To Business Plan or Not: Is That Really the Question?