Adapted from the Peace Corps manual Doing a Feasibility Study: Training Activities for Starting or Reviewing a Small Business
The first business idea someone has may not be the best one. So to find out if a business can work, do a feasibility study. It will help you answer the question: Are we able to produce a product or service that people want to buy and that we can sell for a profit?
To begin, gather and analyze information that will help you clarify:
• What product or service you want to sell.
• If people will buy the product or service.
• How your business will operate.
• Your estimated sales income.
• Your estimated business expenses.
Find information on the economy of the community in which you want to operate. This information might be in reports from government offices or a university. Or you might talk to people who have a lot of contact with community members, such as extension agents or health workers. Identify products or services that the community may need but does not have now.
Here is what one group did. Its members wanted to start a small grocery store. First, they found out if people would buy food and other items from their store. Then they found out how much it would cost to start the store and keep it operating. Next, they estimated how much they would sell and what their sales income and profits would be.
But in doing their feasibility study, they realized there were already three stores in the community and concluded that the grocery competition was so strong that their business might fail. They also realized that they needed more startup money than they had or could borrow. So the group rejected the grocery store idea.
Then they thought about other business possibilities. They settled on the idea of a furniture repair service. Since there was little local competition, they decided the business was feasible.
Another group of would-be entrepreneurs raised and marketed pigs. They used a feasibility study to review their operation and found that high feed costs were decreasing their profits. So they decided to look into cheaper kinds of feed, as well as other ways to reduce their business expenses.
Doing a feasibility study will help you assess the viability of your business ideas or review your current business performance.