How to test a new business idea: Part 1 of 2

Have you ever spent a lot of time, money and energy on a “great new idea”, but wondered later what you ever saw in it? New business ideas are exciting. After all, they are new!

One way is to do a quick feasibility study to test the idea. Feasibility studies serve three key purposes:

1)  Evaluate good business ideas from bad by writing the idea on paper. This forces you to really begin thinking the idea through.

2)  Create the initial research on market sizing, industry stability/growth and answer the question: will it make money over time? How long until we get our investment back?

3)  Saves time and money by determining if an idea is good enough to spend the effort and expense of developing full blown plan and due diligence.

Time: how long will it take?

A feasibility study is meant as a “quick & dirty” vetting of a business idea. A good general rule of thumb is to spend no more than 16 hours on it.

Money: how much should I spend on a feasibility study?

For the entrepreneur – spending next to nothing is the ideal. Remember, the purpose is to test an idea. Most information for this top-line review is readily available through sources like the Internet, free white papers, industry trade journal articles, surveys (on line or real time). There may be an occasional report that makes sense to buy ($49+) if the information will provide you with the insights needed to make a decision to move forward or not. Generally speaking, a few dollars spent for good information is cheaper than moving forward with ignorance.

What does a feasibility plan look like?

There is no “set in stone” format for a feasibility plan. Good plans are on paper or digital – and some great plans have sketched out on the back of napkins (literally).

If the idea looks good, what is the next step?

A “yes” on the feasibility study leads to developing a more comprehensive business plan – with detailed financials, milestones, etc. Business plans usually take 80-100 hours in time, may require investment in information studies and include staffing, production, sales, distribution, marketing and finance plans.


-Published October 27th, 2011

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  1. […] week, I wrote about the basics of crafting a feasibility study to test a new business idea before investing too much time and money in it. This week, we look at […]

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