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:
- Write a feasibility analysis.
- 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?