Go or No-Go

You have the next great business idea. Or so you think. How do you know if you should jump over the edge and pursue it, or if you should kill the idea quickly and quietly? In my mind, there are two different ways:

  1. Write a feasibility analysis.
  2. Go ahead and jump. Fail fast, fail early; and get back on the horse.

The second approach needs more luck than explanation, so we’ll focus on the first.

Feasibility Analysis Basics

Situation What social, environmental, or cultural trends led to your business idea? Are potential competitors innovating on something similar? Do you encounter a problem daily and can’t believe someone hasn’t thought of a solution? Beyond the genesis of your idea, consider your potential customers (target market), current competitors,  and characteristics of the the marketplace you plan to enter.

Concept What exactly will you be doing? Give an elevator pitch version of your plan, including your mission, key operating facts (what you’re doing and for whom), and a couple goals that will guide you during planning.

Pro-Forma Financials Start with start-up costs. Move in to the first six-months of operations. I wouldn’t go any further than that at this point. Your idea is in a very preliminary phase. You have no idea how much things will really cost, how long they will take, and how the market will respond. Projections for the first six months of operations will give you a clear enough picture to see if the venture has potential to be profitable.

Go or No-Go After the above analysis, where does your idea stand? Will you move on to the next launch steps, business planning, incorporation, and licensing; or will you move on to another idea?

Advertisements

3 thoughts on “Go or No-Go

  1. How can you afford to wait 6 months before you can really determine cost? Will investers support this wait time?

  2. When I say 6 months, I mean that you should project your costs and revenues for each of your first 6 months of operations. For example, if in month one, I believe that Sweet Cream Cupcakery can produce $2,000 in revenue and will incur $1,000 in costs, my net income would be approximately $1,000. In the feasibility analysis, you should determine this information for your business.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s