21 Questions A Feasibility Study Must Answer For Startups

A feasibility study is a crucial tool for evaluating the viability of a startup. It defines and tests the conditions that impact a startup’s feasibility, covering key areas such as marketing, technical, organizational, and financial components. For startup projects, the focus is on developing and validating the business concept – the problem-solution fit, product-market fit, and the scalability of the business model. In terms of the marketing analysis, the study defines the market concept (problem, solution, problem-solution fit, product description, value propositions, target customers and market, etc), strategy, and key operation metrics. The technical analysis outlines the options for creating and delivering core business values to customers. The organizational study defines the best legal status of the company, organizational structure, team of founders, and human resources. The financial analysis assesses the business’s viability and project future financial performance. For entrepreneurial ventures, the feasibility study primarily seeks to answer critical questions related to the business concept, customer validation, and business model. Unlike traditional feasibility studies, which often focus on established markets and operational efficiency, startup feasibility studies emphasize innovation, market validation, and rapid scalability. In this article, I will outline the key questions and guiding frameworks required to conduct a thorough feasibility study.

Q1: Who are the target customer segments?

Information needed on customer segments should include:

Category of customer segments- Whether the target segment is business-to-consumer (B2C) and/or business-to-business (B2B).
Personal information- Such as age, gender, location, and other demographic details.
Educational information- Including the level of education and relevant field of study.
Professional information- Including profession, job title, and industry.
Job goals– What do target customers strive to achieve in their professional, social, or emotional life relevant to the business idea?
Pains– Including undesired outcomes such as challenges and obstacles target customers face in doing their jobs or completing tasks relevant to the business idea.
Gains– What do target customers seek, expect, or desire from the perspective solution, including required and unexpected benefits?
Priorities– Including how target customers rank their jobs, pains, and gains relevant to the business idea in terms of importance.
Product requirements– Including the key factors influencing customers to decide and buy a product, such as the design, functionality, price, service, etc.
Motivation and fear factors– What are the drivers that make customers take action or hold back from making decisions to buy a relevant product or service?
Hobbies & interests– Including relevant interests that may influence their purchasing behaviours.
Unique characteristics– What are the key propositions that make customers distinct and easily identifiable?
Additional factors– Any other relevant information that may impact customers’ decisions to buy your product/service.

This structured approach ensures a comprehensive understanding of your target customer segments.

Q2: What is the target market?

A comprehensive description of the target market (or launching market) will be provided, covering the key aspects such as major players and their market shares, existing products and services (product mix), selling prices, competition structure, estimation of the market size, anticipated market growth, market trends, weaknesses, strengths and critical issues for further consideration. These details will serve as a foundation for strategic planning and market positioning.

Q3: What is the problem?

The problem will be clearly defined gathering answers to these key questions: What is the pressing problem that your invention (or product) aims to solve? How has this problem been addressed so far? Who are the main competitors or suppliers? What are the shortfalls with current suppliers? Why do you believe this problem is critical for your target customers? Does this intended problem impact a large number of people, and if so, how? Using the “5-Whys” technique is recommended to dig deeper into the problem and gain a clearer understanding of its root causes. For the problem testing or validation, the study must provide evidence of customer recognition and acceptance of the defined problem. Testing should demonstrate that the problem is significant, affects a large group of people, and demands an urgent and effective solution.

Q4: What is the solution?

The study will explain how the business concept will solve the pressing problem? What are your solution options, recommendations, and justifications. For testing the solution, you will need to craft the solution into a visible object such as a sketch or a prototype, where you can allow stakeholders, e.g., target customers, to experiment your solution and conclude feedback.

Q5: What is the evidence for Problem-Solution fit?

The study will provide evidence derived from market validation of the problem-solution fit. Test results will be judged for their reliability and consistency to ensure their credibility before it is being accepted.

Q6: What is the unique value proposition?

The study will provide detailed insights into the proposed solution’s value proposition, highlighting the unique benefits and advantages that differentiate your concept from the competitors. A value proposition such as lower prices, reduced costs, innovative distribution channels, or superior product quality, offer a clear rationale for why customers would choose your product over others. The study will explain why the project can provide customers with a unique solution that competitors cannot replicate, emphasizing on the aspects that make your offering distinct and difficult to imitate. Additionally, it will show the specific reasons why customers are more likely to buy your product instead of alternatives, showcasing what sets your offering apart. The feasibility study will outline the key benefits of the product, and how those translate into tangible value for the customer. This analysis should quantitatively demonstrate how your product, for instance, helps customers become more efficient, faster, or more cost-effective. By conducting this exercise, you will be better positioned to convince customers to choose your product, and the insights gained will also help in further refining your product to better meet customer needs.

Q7: What is the product’s specifications?

A comprehensive description of the product’s specifications will be provided, detailing its benefits, functions, design, and other key features. It is recommended to transform these specifications into a visible object, such as a brochure, prototype, or web landing page, enabling stakeholders to access and review the product. For product testing, a prototype will be developed and subject to both market testing (i.e., customer validation or desirability testing) and technical testing (i.e., product validation or feasibility testing). The study must present reliable and consistent evidence demonstrating that the product has been tested and approved by potential customers.

Q8: What is the evidence for product-market fit?

The study will provide detailed evidence demonstrating how the product’s offering- including its specifications, value propositions, commercial offering, or distribution channels- aligns with the target market and meets the needs of the customer segments. The study must present reliable and consistent proof that a significant group of potential customers is likely to purchase the product.

Q9: What are the distribution channels?

The study must provide comprehensive details on how to effectively distribute and sell the proposed product or service to the target customers. Various distribution distribution options will be tested, with recommendations and justifications provided for each. These options may include using agents, distributors, direct sales, or a combination of channels. Key factors in selecting the most suitable distribution channels include alignment with the preferences of the target customers, market knowledge, sales dedication, distribution cost, and other relevant considerations.

Q10: What are the revenue streams and plan for selling?

A comprehensive description of revenue streams and selling plans will be provided, including how the product will be sold (i.e., transactional or recurring), the pricing model (e.g., license fees, leasing, product price), offered credit facilities, cash flow projections, sales plan, marketing plan & budget, sales projections and more. The study must show details on how the business intends to capture values, monetize them, and generate healthy cash flows. This section is strongly tied to the overall viability of the project, as it directly impacts profitability and sustainability.

Q11: What is the competitive positioning?

The study will evaluate the competitive landscape of the target market and define the project’s competitive positioning. The positioning is crucial, as it will be driven by the competitive advantages that the project can develop and leverage. To chart the competitive position, the study will identify the top two or three competitive factors ( e.g., price, quality, and market share) and evaluate the project’s offering in relation to these factors. These competitive bases may vary depending on the product’s nature, market structure, competition landscape, customer priorities and others. The study must provide reliable evidence showing how well the project’s product aligns with the target customer’s top priorities, and compare this to how the existing products meet those same needs. it will also analyze whether the market opportunity chosen (product) fits well with both the project’s cores and the customer’s priorities. Finally, the study will chart the competitive positioning, illustrating how how the proposed product compares with competitors in fulfilling the top priorities of the target customers.

Q12: What are the resources and plan for acquisition?

The study will provide details on the resources required to create and operate the business. Resources are typically tangible assets, people, money, and intangible assets (e.g., Patent, know-how, invention, copyright, IP, or goodwill). The study will estimate the resources required and how to acquire them. It will also analyse partnership requirements, justifications, and how to get them. Resource requirements will be also estimated in terms of money to measure the project’s operating costs, capital requirements, and overall viability of the project.

Q13: What is the cost structure?

The study will provide comprehensive details on the project’s cost structure, demonstrating the yearly cost estimates, and its projection for e.g., 3-5 years. It will also provide estimations of the production cost of products, detailing variables and fixed costs. additionally, the study will estimate both the operating and capital costs required for the project, along with the potential funding options and associated cost projections. Specifically, it will provide estimates on the cost of manufacturing a product (£/ product), projection of production costs, segregation of costs (e.g., variables and fixed), evaluation of funding options along with their cost of funding, and recommendation of the most suitable funding options.

Q14: How do you develop and capture the values?

The study will outline the detailed processes by which the project creates, delivers and captures value. This includes acquiring resources, managing teams, validating the business concept, testing the product-market fit, crafting a scalable business model, launching the business, executing marketing and sales strategy, developing customers, selling and moneytising values, generating cash flows, and managing operations. Each step will be clearly defined to demonstrate how the project will sustain growth and profitability.

Q15: How do you develop, retain, and grow customers?

The study will analyse how the project plans to launch the product, acquire new customers, retain them, and grow customers. It should outline the key assumptions and strategies for customer development, focussing on essential activities such as increasing brand awareness, building customer loyalty, and driving customer growth. Additionally, the study will describe the specific tactics for each customer development initiative, along with key operating metrics to monitor and control performance.

Q16: What is the project’s investment cost, and how do you fund it?

The study will estimate the project’s investment cost, including the working capital and fixed assets, along with the most effective funding strategies. Understanding the initial investment costs is essential for establishing the project, developing the product, and operating it successfully.

Q17: How do you validate your business model?

Identify key assumptions: Clearly define the key assumptions in the business model, covering business factors like the customer segment, channels, customer relation, unique value propositions, revenue streams, resources, partnerships, processes, and costing structure. These assumptions are crucial for the validation of the business model.
Identify your next 10-20 customers: Identify at least 10 potential customers who match your target customer profile. Contact them to validate their fit with your customer profile and gauge their interest in buying your product. Conduct interviews with potential customers using a set of questions based on your assumptions, gather their feedback, and use it to validate or adjust your business model.
Test key assumptions: Decide on potential customers to interview and test your key assumptions. Set a plan for testing, conduct a test, collect information and analyze them. Use these insights to validate or refine your assumptions and adjust your business model accordingly.
Refine the business model: Based on the results of testing, update the business model by removing or modifying assumptions as necessary. Implement the refined assumptions to improve the model.

Q18: What is the Minimum Viable Business Product MVBP?

The study will outline the assumptions required to develop the project’s minimum viable product (MVBP), which will be tested before commercialization. It will define the MVP, describe its physical prototyping, and outline the testing process. Following these steps, the final product will be developed and launched. The study must provide comprehensive details on MVBP, enabling prototyping, testing, and showcasing the product’s specifications, benefits and uses.

Q19: What are the financial projections?

The study should outline the assumptions and provide the financial projections for a minimum of 5 years. These projections will cover basic financial statements such as the income statement, balance sheet, and cash flow. The reliability and consistency of these projections will be crucial for judging their accuracy and gaining acceptance.

Q20: What is the evidence of viability?

The study will analyse the project’s viability by examining key financial aspects. This analysis will involve setting the key assumptions, calculating the Net Present Value NPV, Internal Rate of Return IRR, Payback Period, financial ratio analysis, and assessing viability under various risk conditions. The reliability of the viability assessment will largely depend on the accuracy of the assumptions and precision of the testing methods.

Q21: What is the implementation plan?

Upon the successful completion of the stages outlined above- such as the problem-solution fit, product-market fit, and business model testing, the study will present the following implementation plan:

Define the project scope of work: Outline the key assumptions, deliverables, the final product (e.g., facilitating the project for operation), schedule of completion, as well as project boundaries and constraints.
Develop the project schedule: Draw a detailed timeline showing deliverables and key activities, required resources, and time schedule for implementation.
Estimate the project cost: Provide the cost estimate for executing the implementation plan and explore funding options.
Manage team formation: Forming the founding team, assigning roles, responsibilities, and authority. This includes hiring key headcounts required for project success, as well as appointing the board of directors to guide the management team in running the business.
license and formalize the business: Complete legal formalities such as obtaining licenses, drafting the article of association, and fulfilling any other legal requirements. Secure an office platform to manage and operate the business.
Raise seed funds: Estimate the capital requirements and outline strategies to raise funds. This process includes crafting the project document, engaging potential investors, communicating the project for funding, and evaluating funding offers.
Identify and communicate the business: Establish the company’s vision, mission, goals, high-level strategy, and market positioning for both the company and the product.
Organize the business governance: Develop well-defined policies, procedures, work instructions, and forms, detailing who is responsible for what in day-to-day operations.
Articulate business strategy: Define the mission, vision, strategic directions, marketing positioning, strategic objectives, initiatives, action plan, resources, and control measures to ensure alignment with the long-term goals.
Develop a business plan: Set clear targets, action plans, and controls for a one-year operation.
Create a budget: Outline the financial resources needed to execute the business activities over the first year, along with exploring funding options.
Launch the business: Develop a detailed launch plan and ensure proper execution control.
Pilot commercialization: Secure storage and production facilities or explore outsourcing production to begin the pilot commercialization phase.

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Prepared by Munther Al Dawood

GrowEnterprise

www.growenterprise.co.uk

maldawood@growenterprise.co.uk

Reading, UK

1 thought on “21 Questions A Feasibility Study Must Answer For Startups”

ahrayahalvarran89 September 7, 2024 — 5:59 pm

wow!! 10021 Questions A Feasibility Study Must Answer For Startups

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