Determine the Feasibility of Your Business Idea
In 2002, when Farshad Tafazzoli started Delray Beach, Florida-based Zoli Corp., it was made up of little more than a series of hip-shooting analyses and his willingness to take a chance. “I looked at everything with an open mind and made a gut decision,” says Tafazzoli, 35, who projects 2007 revenue of $3.1 million for his high-end plumbing products company.
Entrepreneurs typically take a similar approach to evaluating the feasibility of ideas for new businesses, focusing on developing their product or service instead of assessing the business’s feasibility.
Bruce Barringer, a professor at the University of Central Florida and co-author of Entrepreneurship: Successfully Launching New Businesses, says a well-done feasibility analysis not only looks at the technical feasibility of creating the product or service, but also tests the potential of the market and industry, the ability of the entrepreneur to create an organization that can run the business, and the financial prospects of the planned venture. While many entrepreneurs address these issues when writing a business plan, that’s not the same as examining the venture’s feasibility, he says. “They get an idea and immediately proceed to the stage of writing a business plan,” says Barringer. “At that point, they’re in the mode of looking for facts that support their idea, rather than testing it.” While writing a business plan is a good idea, Barringer says it should be preceded by feasibility testing.