What Does It Take To Be a Start-Up? A Feasibility Study Guide

Business is going to be a gritty world for any start-up. You have to make solid preparations before an idea is sold to investors. A feasibility study will help you identify if the idea is problematic or if there is the promise of a sizable profit in it for you and your investors.

Feasibility studies help start-ups by defining and refining the goals of the company. They allow the proponents of the project to really consider how the money they raise is going to be spent. They also provide a blueprint for a brand-new company in any instance where it ends up growing too fast. These studies take between a few months to years to complete. It sounds long, but the money you save yourself and everyone else will be worth it. Here is an outline of what you’ll need to consider in a feasibility study:

 

1. Management Aspects

Aside from preparing an executive summary and a project timetable for your investors, you need to consider a more formal organizational structure for your company. It will help make sure that all bases are covered in terms of tasks. An organizational structure will allow you to delegate more efficiently because you can use it to identify the responsibilities for each position.

Management aspects also include considerations for compensation, labor laws, the number of people you need to fill certain positions, and relevant hiring laws. It might help to contact the local government for some assistance regarding these aspects.

 

2. Technical Aspects

Considering the technical aspects of your company allows you to focus on the kind of service or product the start-up will offer. It will provide estimations on how big an office space you’ll need, as well as the size of the factory in which you’ll be manufacturing your product.¬†This gives you time to look at the equipment your company will need and how productive the equipment and staff will be on a day-to-day basis. This will also allow you to look into how the equipment you purchase will require maintenance, such as estimating how often the PCs of your team need to visit a computer repair shop.

 

3. Marketing Aspects

The marketing aspects allow you to determine whether there is a market for the product or service you intend to sell and the strategies you will adapt to sell it. You will be able to identify the market gap once you calculate the differences between the supply and demand (both historically and in the future).

Analyzing the market will also include conducting a price study. A price study will look into current market prices if your product or service is already being sold by someone else. It will also consider the costs of manufacturing the product or service. This will help reduce the risks that can hurt a business when they undersell.

 

4. Taxation Aspects

Unless you’re looking into becoming the next Al Capone, checking out the local tax codes will help keep your business from being shut down. You can also hire an accountant for a short while to figure it out. You might even be able to ask them which papers you need to prepare when you hire them again to file your taxes.

 

5. Financing Aspects

If you haven’t saved up enough money to start your business but you know that you need to start it right now, considering some financing might help. This means that you will need to prepare a list of short-term sources of finance, such as credit, or long-term sources of finance, such as a loan.

A line of credit at the start of your business might just be the flush of cash you need to get the ball rolling. But credit as a short-term source of finance could also entail asking your supplier if you can pay them later. If you’re manufacturing a product, funding purchase orders will require you and your supplier to set some payment terms if you can get them to agree to the IOU.

 

6. Financial Aspects

Once the other aspects are considered, you should be able to prepare a complete cash flow forecast for your business. You will be able to identify the capital that you need to start, as well as any assets or liabilities to attach the business to along the way. You will need to balance your books, so it’s understandable if you need an accountant for this one.

There is also the part of the study where you should be able to identify whether the business is profitable, as well as its payback time and return of investment.

 

It sounds like a grueling workout for your mind, but creating a feasibility study is one way you can reduce risks for yourself, your business, and your investors. Always remember that the survival of the fittest rings true in the business world.

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