7 step “Customer Driven Feasibility Study”

Few months back, I came up with an article titled “What before a Business Plan”.Today, we would focus on something which is inseparable from the Business Plan called “Feasibility Study”. It is true that once we have the B-Plan ready, the very next step is to get going and focus on how to achieve the optimistic figures mentioned in the B-Plan However, few things mentioned the B-Plan is written keeping the investor’s in mind but along the entire journey; Customer is and will remain the HERO. !!! This leads to a report titled “Customer-Driven Feasibility Study” [from this point referred as Customer-Driven F.S. ] and my current read The New Business Road Test by John Mullins explained that to the core of it !!!

This article is divided into three parts namely:

1. What is Customer Driven F.S ?
2. Thin line of difference between B-Plan and Customer Driven F.S
3. Contents of Customer Driven F.S

What is Customer Driven Feasibility Study
During the course of any opportunity, the Market Analysis/Study phase always remains iterative.However, at one point of time, the evidence gathered through the research would help us understand whether the opportunity is REALLY an opportunity.This feasibility study is Customer Driven because , unlike most organization charts which has the founder/ CEO at the top and people serving the customer at the bottom, the feasibility study begins with the target customer, without whom there would be no business. It is an internal document that should cater to the seven requirements which are discussed later.

Difference between Business Plan and Customer Driven Feasibility Study
Though there are a number of overlaps in the B-Plan and Customer Driven F.S , there are three major areas where they tend to differ :

1. Customer Focus :
The purpose of any business it to win customers and the Feasibility Study completely caters to that requirement which is quite different from that of most B-Plans – to win an investor. If there is no likelihood for customers, there would not be any investors.

2. Fundamental Economics :
The feasibility study addresses the fundamental economics of the business, by identifying the key drivers of cash flow: revenue, required capital investment, gross margins etc. If these drivers are satisfactory, than detailed strategies like marketing, operations and financing can probably be developed to make the venture economically viable.

3. Mindset :
The purpose of the study is not to sell the venture’s merit whereas a B-Plan organizes the answers delivered by the feasibility study and goes on to develop marketing, operating and financing strategies in an effort to sell the opportunity, in a focussed way, to the investors and other stakeholders.

7 step “Customer Driven Feasibility Study”

1. EXECUTIVE SUMMARY :
This briefly describes what follows [tells the reader(s) what you are going to tell them]

2. MICRO- level MARKET assessment :

• TARGET market and it’s pain identified; benefits of your solution identified, with evidence that those in this segment are willing to pay a price that works.
• Target market segment, size and growth rate.
• Options to grow into other segments.

3. MACRO- level MARKET assessment :

• OVERALL market size and growth rate.
• Macro trends analysis to assess future market growth and attractiveness.

4. MACRO – Level INDUSTRY assessment :

• Five forces analysis : Whether or not the industry is attractive.
• Likely changes that may happen going forward.

5. MICRO – Level INDUSTRY assessment :

• Any proprietary elements.
• Any superior organizational processes, capabilities or resources identified that are not easily duplicated or imitated.
• Economic viability of business model established :

– Revenue Forecast.
– Customer acquisition & retention costs and time required to obtain a customer.
– Gross margins.
– Break even analysis.
– Operating Cash Cycle characteristics.

6. TEAM assessment :

• Team’s mission, aspirations and tendency for risk.
• Team’s ability to execute the mission.
• Team’s connectedness up, down and across the value chain.

7. SUMMARY and Conclusions :
Tell the reader(s) the key highlights of what you have told them – why this is/is not – opportunity attractive and future prospects of the opportunity.