Chapter 5
Feasibility Analysis:
Testing an Opportunity
Developing A Business Concept
A Business Concept -is a clear and
concise description of an opportunity. If
you have an idea for a business you
need to turn it into an opportunity. A
business concept has four elements:
the product or service, the customer,
the benefit, and the distribution.
Business Concept
1. The Product/Service- what is the product
or service you want to offer your
customers.
2. The Customer- who will target as your
customer base?
3. The Benefits- what will the features or
distinctive aspects of the product have.
What is the main benefit of the product.
Business Concept


Features- distinctive aspects,
qualities, or characteristics of a
product or service
Benefit- things that promote or
enhance the value of a product or a
service to the customer
Business Concept
4. Delivery of Benefits- How will the
benefits be delivered to the customer.
Will it be through a retail store,
wholesaler, mail order, the internet, or
door to door delivery.
Business Concept
Writing a Concept StatementAt this time, go to your computers and
write a concept statement about the
business you chose to run and the
product or service. See page 95 for an
example.
Testing the Concept in the Market
The process to test a business concept is called
feasibility analysis. This analysis helps the
entrepreneur decide whether a new business
concept has potential. It helps you decide if
you have enough demand for your product. It
also determines whether business conditions
are appropriate for you to go forward with
the business. The following are seven key
elements to a feasibility analysis:
Testing the Concept in the Market
1.
2.
Testing the Industry- the analysis will
look at the industry in which the business
will operate.
Talking to Customers- testing the
customer may be the most important part
of the analysis. Talk to customers to
measure their interest in your product. Who
are your target customers?
Testing the Concept in the Market
3.
Testing product or service requirements-
What will it take to produce your product? A
prototype or a test version of the product must
be produced to see how it works. If you are
going to run a hair salon, then a prototype of
that service will be placed on blueprints to see
how the store will be laid out.
Testing the Concept in the Market
4. Evaluate the Founding TeamA) Many successful businesses today
are founded by teams-two or more
people working together to launch a
new venture.
B) Teams bring together the knowledge
and skills of the people involved.
Testing the Concept in the Market
C) A founding team must gather the
necessary resources to begin
development.
D) A successful team can get a new
business off the ground.
E) A strong team is also attractive to
investors.
Testing the Concept in the Market
5. Studying the Competition
An easy way to study the competition is to
create a grid. A competitive grid is a tool for
organizing important information about the
competition. You can get information about
your competition by reading about them,
talking to them, and talking to their
customers and suppliers. See page 98.
Look over the grid.
Testing the Concept in the Market
6. Looking at the Start-Up Resource Needs
Jeff Bezos, the owner of Amazon.com, was
able to raise money for his business because
he could show strong financial projections and
a business model that could work. A business
model describes how you intend to make
money with your business concept.
Testing the Concept in the Market
For a feasibility study, you need to calculate
how much money is needed to do the
following
 Purchase or lease equipment
 Buy starting inventory
 Pay employees
 Finish product development
 Cover the business expenses until the sales
can cover them.
Testing the Concept in the Market
7. Analyzing the Value Chain
there are many ways to deliver a benefit to
your customers. A value chain is the
distribution channel through which your
product or service travels. The value chain
includes the manufacturer, wholesaler, and
retailer. The goal is to deliver maximum for
the least possible cost. Entrepreneurs look at
each step of the chain, and find ways to
make each step as efficient as possible.