Conducting a Feasibility Analysis & Business Model

Melakukan Cek Analisa Kelayakan bisnis, dapat melihat dari beberapa sisi yaitu diantaranya adalah

•        Idea Assessment / Penilaian Ide

Successful entrepreneurs understand that the process of going from ideas to the launch of a new business venture is like a funnel. When the entrepreneur observes a need in the market, using the creative process generates many business ideas that might address this need. Each step in the new business planning process narrows down the number of ideas until the entrepreneur is ready to launch a business that he or she has carefully researched and tested. An idea assessment helps the entrepreneur efficiently evaluate the numerous ideas that come out of the creative process before committing the time and effort to craft a business plan, design a business model, or even conduct a feasibility analysis. One effective tool used to help assess ideas is the idea sketch pad.

The idea sketch pad helps an entrepreneur assess ideas in a relatively short period of time.

When using the sketch pad, the entrepreneur asks a series of key questions addressing five key parameters.

Sketch Pad

 

Use an idea sketch pad to ask key questions addressing:

1.      Customers.

Start with a group of customers who have a clear need that is not being addressed. This may be a need that no business is currently addressing, or it may be a need that no business is fully or adequately meeting for these customers. The entrepreneur assesses the customers by answering basic questions about the potential users of the product or service and the potential buyers if they are different than the users. For instance, for sugary cereals, children are the users and their parents are the buyers. Specifically who would be the users of the offering? 

How would they use the offering? 

How many potential customers are there?

2.      Offering

Describe your idea for a product or service to offer the customers. 

Are you offering a product, a service, an experience, or a combination of one or more of these? 

What are its key features? 

Describe it in detail and sketch out an image of it if you can.

3.      Value Proposition

Explain why your product or service will be important to the customers. 

Why would your offering be valuable to the user and/or buyer? 

How does it address the need these customers currently have that is not being met?

4.      Core competencies

Does your offering include any technologies or unique features that will help differentiate it from competitors? 

Is it based on intellectual property that you can protect?

5.      People

Identify the key people on the team who will launch this business

Feasibility Analysis

After conducting the idea assessment, an entrepreneur scrutinizes the idea further through a feasibility analysis. A feasibility analysis consists of four interrelated components: an industry and market feasibility analysis, a product or service feasibility analysis, a financial feasibility analysis, and an entrepreneur feasibility analysis Look at this picture.

Product Feasibility Analysis

•        Determines the degree to which a product or service idea appeals to potential customers and identifies the resources necessary to produce it. 

•        Two questions:

1.      Are customers willing to purchase our product or service?

2.      Can we provide the product or
service to customers at a profit?

Financial Feasibility Analysis

•        Capital requirements: an estimate of how much start-up capital is required to launch the business.

•        Estimated earnings: forecasted income statements.

•        Time out of cash: the total cash it will take to sustain the business until the business achieves break-even cash flow. 

•        Return on investment: combining the previous two estimates to determine how much investors can expect their investments to return.

•        Is this idea right for me?

–       Assess entrepreneurial readiness: knowledge, experience, and skills necessary for entrepreneurs to be successful.

–       Assess whether the business will be able to generate enough profit to support everyone’s income needs.

•        Entrepreneur Feasibility

 Research:

–       Primary research:
Collect data firsthand and analyze it.

Primary Research Techniques :

•        Customer surveys and questionnaires

•        Focus groups

•        Prototypes

•        In-home trials

•        “Windshield” research

–       Secondary research:
Gather data that already has been compiled and analyze it.

Secondary Research Techniques:

•        Trade associations and business directories

•        Industry databases

•        Demographic data

•        Forecasts

•        Articles

•        Local data

•        Internet

Rhonda Abrams, nationally syndicated columnist, author, and successful entrepreneur, says that feasibility analysis is an opportunity to take a hard look at your idea to see whether it needs minor or major pivots, or if warranted, to be completely abandoned so you can move on to another idea

When evaluating the feasibility of a business idea, an analysis of the industry and targeted market segments serves as the starting point for the remaining three components of a feasibility analysis. The focus in this phase is two-fold:

(1) To determine how attractive an industry is overall as a “home” for a new business and

(2) to evaluate possible niches a small business can occupy profitably.

Industry and Market Feasibility

The first step in assessing industry attractiveness is to paint a picture of the industry in broad strokes, assessing it from a “macro” level. Most opportunities for new businesses within an industry are due to changes taking place in that industry.

If the entrepreneur does not adapt the business to meet the changes these macro forces create in the industry and market, even the most innovative new business may become outdated and left behind in the competitive landscape.

Environtment Forces and New Venture

Industry and Market  Feasibility Analysis

•        Assess industry attractiveness using six macro forces:

1.      Sociocultural

This cultural change led to the birth of the daycare industry. It also resulted in a new segment within the women’s fashion industry for women’s business attire. It led to rapid growth in the restaurant industry as families began eating in restaurants much more frequently than previous generations and to a growth period for the auto industry as the percentage of families with two cars doubled from 1960 to 2011

2.      Technological

Technological breakthroughs lead to the development of new products and entirely new industries The Internet also changed how people consume information. As the news became available online, there was a dramatic decrease in the number of people reading print newspapers. As result, advertising revenues have plummeted for print newspapers, while online newspapers have experienced steady growth in advertising.

3.      Demographic

Changing demographics create opportunities for entrepreneurs, e in Generation Z will seek products and services that offer value. In a survey of members of Generation Z conducted by the Intelligence Group, 57 percent said they would rather save money than spend it!

4.      Economic

Although many companies struggle during economic downturns, some businesses are able to grow, Companies that provide high quality Web-based e-learning at a fraction of the cost of traditional university-based education filled this gap in the market.

5.      Political and legal

The enactment of new legislation creates opportunities for entrepreneurs, Because pay-for-performance is new to healthcare, savvy entrepreneurs are creating new companies that help healthcare providers and hospitals to track and report performancerelated metrics based on the value of the healthcare they provide, measure and improve quality of healthcare outcomes, and enhance efficiency in their healthcare delivery systems

6.      Global

Global trends create opportunities for even the smallest of companies. More open global markets allow businesses to seek customers and suppliers from all corners of the world

Porter’s Five Forces Model

Five forces interact with one another to determine the setting in which companies compete and, hence, the attractiveness of the industry:

1. Rivalry among companies in the industry

Strongest of the five forces

Industry is more attractive when:

1. Number of competitors is large, or, at the other extreme, quite small
2. Competitors are not similar in size or capacity
3. Industry is growing fast
4. Opportunity to sell a differentiated product or service exists

2. Bargaining power of suppliers

The greater the leverage of suppliers, the less attractive the industry.

Industry is more attractive when:

1. Many suppliers sell a commodity product
2. Substitutes are available
3. Switching costs are low
4. Items account for a small portion of the cost of finished products

3. Bargaining power of buyers

Buyers’ influence is high when number of customers is small and cost of switching to a competitor’s product is low.

Industry is more attractive when:

1. Customers’ switching costs are high
2. Number of buyers is large
3. Customers want differentiated products
4. Customers find it difficult to collect information for comparing suppliers
5. Items account for a small portion of customers’ finished products

4. Threat of new entrants

The larger the pool of potential new entrants, the less attractive an industry is.

Industry is more attractive to new entrants when:

Advantages of economies of scale are absent

Capital requirements to enter are low

Cost advantages are not related to company size

Buyers are not loyal to existing brands

Government does not restrict the entrance of new companies

5. Threat of substitute products or services

Substitute products or services can turn an industry on its head.

Industry is more attractive to new entrants when:

1. Quality substitutes are not readily available
2. Prices of substitute products are not significantly lower than those of the industry’s products
3. Buyers’ switching costs are high

Conclusion

•        The best business ideas start with a common problem or need.

•        The ideas assessment process helps an entrepreneur more efficiently and effectively examine multiple ideas to identify the solution with the most potential.

•        A feasibility analysis helps the entrepreneur determine whether an idea can be transformed into a viable business.

BUSINESS MODEL

Developing and Testing a Business Model

When building a business model, the entrepreneur addresses a series of key questions that

will explain how a business will become successful. 

In their study, Osterwalder and Pigneur found a pattern of how entrepreneurs use a visual

representation of their business model to answer these questions. They used these findings to

develop a Business Model Canvas that provides entrepreneurs with a dynamic framework to

guide them through the process of developing, testing, and refining their business models

The canvas is comprised of nine elements:

1.Customer segments
A good business model always starts with the customer. The entrepreneur’s first step is to identify a segment of customers who have a clearly defined need. In the previous steps outlined in this chapter, the entrepreneur begins to define the market for the new business. For most entrepreneurs, the initial market is defined much too broadly
Who is it, specifically, that has the needs the new business will be addressing with its products and/or services? It may be a market niche. It may be a mass market. Or it may be a segmented market based on age, gender, geography, or socioeconomic grouping.

2.Value proposition
The value proposition is the collection of products and/or services the business will offer to meet the needs of the customers. It is all the things that will set the business apart from its competitors, such as pricing, quality, features, product availability, and other features.

3.Customer relationships
This is what defines the customer relationship in the business model. For example, several effective business models provide meals to consumers. Customers may choose to buy food from a vending machine, a fast-food restaurant, a fast casual sit-down restaurant, or an exclusive fine dining establishment.
There is no one best approach to customer relationship for all businesses, but there usually is one best approach for each particular business model.

4.Channels
Communication channels define how the customers seek out information about this type of product. Where do potential customers go to when they want to get information about products and services? It could be Web sites, social networks, blogs, advertisements, experts, and so forth

5.Key activities.
What important things must the entrepreneur do to ensure a successful launch and to sustain the growth of the business? In the business model, the goal is to build a basic checklist of what needs to be done to open the business and what activities are necessary to ensure its long-term success. The development of the business plan will then take this list and expand on it in much greater detail

6.Key resources
serve as an initial checklist to ensure that the entrepreneur has identified all key resources necessary to support a successful launch and to sustain the business as it grows. The business plan provides the opportunity to explain these in much greater detail and develop all necessary cost estimates for the financial forecasts

7.Key partners
This segment of the business model includes key suppliers, key outsourcing partners, investors, industry partners, advisers, and all other external businesses or entities that are critical to make the business model work. Entrepreneurs cannot expect to become successful all by themselves. They must build a network of relationships when launching and growing their businesses.

8.Revenue streams.
The revenue streams information serves as the framework for the more detailed revenue forecasts developed for the business plan.

The third phase is to test the solution to the problem in the market. One technique to test the solution offered by the business model involves business prototyping, in which entrepreneurs test their business models on a small scale before committing significant resources to launch a business that might not work. Business prototyping recognizes that every business idea is a hypothesis that must be tested before an entrepreneur takes it to full scale. If the test supports the hypothesis and its accompanying assumptions, the entrepreneur takes the next step of building a business plan. If the prototype flops, the entrepreneur scraps the business idea with only minimal losses and turns to the next idea.

Conclusion

Entrepreneurs can follow five steps to guide the process of turning a great new idea into a successful business. This chapter examines the first three steps in this process. The best business ideas start with a group of customers with a common problem or need. Once entrepreneurs develop ideas for new businesses, the first step is to assess these ideas by examining a need in the market, developing a solution for that need, and determining the entrepreneur’s ability to successfully turn the idea into a business. The idea assessment process helps an entrepreneur more efficiently and effectively examine multiple ideas to identify the solution with the most potential. The second step is to conduct a feasibility analysis to determine whether the entrepreneur can transform the idea into a viable business. The role of a feasibility analysis is to serve as a filter, screening out ideas that lack the potential for building a successful business, before an entrepreneur commits the necessary resources to develop and test a business model or to build a business plan.