Assessing the feasibility of your idea
Use feasibility tests to measure the financial risks of your business ideas before you commit to them.
To be feasible, your idea must cover its costs and produce a profit. How much profit depends on your requirements.
Conduct a feasibility study to help you:
- Define realistic targets.
- Discover compliance and legal issues.
- Assess when your business will start making profit.
- Assess long-term sustainability.
In this example, we meet Anthony and Andie Gamboni, of Gamboni’s Deli in Karori, Wellington.
Mitigate risk for a brighter business future
Create a strong, unique brand
The more your business will be able to stand out from the crowd, the better. A strong brand is integral to doing this.
Gamboni’s Deli is a well-known Karori mainstay with a strong and unmistakeable brand that can’t be confused with others.
How should you guard against conflicting with the name of an existing business?
Someone, somewhere is probably already using my intended business name and it's unlikely to be an issue so no action is necessary.
Use the intellectual property registers provided online by the Intellectual Property Office of New Zealand (IPONZ).
Business plans are never a bad idea.
Business plans help you cover all your bases. They improve your chances of success and inspire confidence in others.
When the Gambonis first planned their deli, they set out the details in a comprehensive business plan to help them identify risks.
What kind of business plan should you use?
Effective usps can provide solid foundations for a business
Unique selling points (USPs) are things that differentiate your business from your competitors, like an exclusive product or superior service.
Gamboni’s Deli is known for its attentive service, exclusive high-quality products and a local Karori vibe.
What unique selling points could you take to market?
Always keep an eye on your start-up costs
Feasibility tests provide you with the opportunity to really drill down into all your potential costs before you commit yourself to seeing an idea through.
The Gambonis avoided excessive start-up debt by keeping a close eye on capital expenditure when they investigated feasibility.
How should you carry out research in this area?
Budget your ongoing running costs accurately
When creating a budget for your running costs, like power (a fixed cost) and materials (a variable cost), it’s important to explore all your options.
Gamboni’s Deli has to account for various running costs, from product procurement to small ticket items like till rolls.
How should you research your potential running costs?
Measure demand instead of assuming it
It’s important to find out which customer segments will respond most positively to your offering and target them so you can market your business cost-effectively.
Gamboni’s Deli is a passion project for its owners, but it’s also a healthy, functioning business meeting a demand for quality, premium food.
How should you research demand?
Define target segments of the market, such as local office workers, and research their numbers and purchasing habits.
Set your business apart from the competition
Competitor analysis is an essential skill to learn. If you know what your competitors offer and how effective they are at doing so, you know how to set your stall apart.
Gamboni’s Deli has been a success because the Gambonis spotted a gap in the market. To do that, they researched the competition.
How should you research your competition?
Profit forecasting is essential
When it comes to financial forecasts of any kind, drilling down into the detail is vital. The more ambiguous your forecasts, the less accurate they’ll be.
Profit forecasts were essential to Anthony and Andie Gamboni’s business planning for their popular Wellington deli.
How should you forecast income?
Just buy an existing business and use its performance history as a benchmark – it’ll save on start-up costs too.
Define target market value, estimate the share my business will take from my competitors and configure my pricing.
Forecasting is seldom accurate and as my business is a lifestyle choice there’s not much point in forecasting anyway.
Up-skill to hit the ground running
Assessing your own abilities and finding areas in which you can improve your business skills and knowledge improves the feasibility of your idea.
The Gambonis had run another business before their deli, so they knew they had many of the skills to make their new venture work.
How should you assess your skills?
Seek advice from an experienced industry professional and find out the skills and qualifications they have.
Find out if many other business owners had no experience when they started. If so, I shouldn’t worry about it either.
Address compliance to improve feasibility
Feasibility testing requires detail, right down to the costs and operational implications of following the required compliance standards set for your type of business.
Gamboni’s Deli installed a certified commercial kitchen and trained its staff in food hygiene to help it comply with regulations.
How should you research your compliance obligations?
Assessing the feasibility of your idea
Detail is the most important aspect of assessing the feasibility of a business idea, especially when it comes to estimating capital and running costs.
Without conducting accurate research into start-up costs, running costs and your potential to generate revenue, you won’t get the complete picture.
However, feasibility is also dependent on your own business skills and experiences, and those of your competitors, not to mention the wider landscape of the industry you’re stepping into.
So no matter what kind of business idea you’re fleshing out, make sure that when you assess its feasibility, you go through it with a fine-toothed comb.
Find out more about starting a business.