If you’ve decided to support your new business venture by first assessing the market’s health with a market feasibility study, then congratulations! Most entrepreneurs, and established businesses for that matter, completely ignore this important first step. However, for the feasibility study to have merit, it is essential that you hire an impartial consultant. The results of the market analysis must come from someone who is indifferent to its outcome. An impartial consultant doesn’t care where the results of the market assessment are favorable or not. All they care about is providing a thorough analysis on the market’s health and the information needed to make a “go/no-go” decision on the new business venture.
Market feasibility studies are the essential first step in starting a new business, or pursuing a new market. The feasibility study is far more important than the business plan because it provides the impetus on whether or not to proceed with that business plan. It aims to answer questions about the market’s growth rate, or lack thereof, the new venture’s future competitors, the customers in the market, and ultimately, whether the conditions for business success are present. However, a number of companies make serious errors when looking to hire someone to perform the feasibility study. Here are some tips.
1. Stay Away From Studies Performed by Interested Parties
One of the biggest mistakes is to employ a consultant with a vested interest in the outcome of the market feasibility study. This occurs when companies hire original equipment manufacturers (OEM) consultants, or sources provided by equipment manufacturers whose sole purpose is to provide a favorable outcome. The idea is to show that the business venture can work provided the equipment manufacturer's machinery and expertise are used.
2. Stick With Industry and Marketing Experts
While I’ve always advocated giving new consultants an opportunity to prove themselves, in the case of a market feasibility study, it’s essential to stick with someone who has the relevant industry experience. Now, this doesn’t mean you can’t save money by hiring someone who is new to consulting, but who has years of pertinent experience in the same industry. It simply means that you should focus in on industry experts to perform the study itself.
3. Be Willing to Accept Bad Results
A number of entrepreneurs are reluctant to hear that the business may not be worth pursuing. While it’s important to remain positive and optimistic, it’s essential to be open to the possibility that the conditions aren’t conducive to success. One must have the intestinal fortitude and openness to accept that the business venture may not be worthy of investment.
4. Understand the Purpose of the Market Feasibility Study
The purpose of the market feasibility study is not to justify the business pursuit. The purpose of the study is to outline the conditions for success by systematically identifying the possible causes of business failure. By identifying possible roadblocks, new business ventures are better able to hand the ups and downs of their business cycles and to better prepared once they enter their new market.
Calling upon an impartial consultant is the essential first step in making sure the market feasibility study not only provides relevant information, but that the information speaks directly to the new venture’s future. Most companies and entrepreneurs forego the feasibility study as they see it as an unnecessary expenditure.
To these individuals, the feasibility will only confirm what they already know – that the business venture will succeed. However, what if it can’t? Isn’t it better to know that before investing all that money and time? Of course it is. To read more about the importance of a market feasibility study, please refer to the attached post: Is a Market Feasibility Study More Important than a Business Plan?
The benefit of performing a value-chain analysis when defining your new business venture's core competencies.
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