People who get ahead in life, generally, are those who are willing to pay the price to do things right. They don't take shortcuts, and they recognize the value of doing homework before they spend their valuable time or money on a project.

One of the critical issues associated with an investment is information. When a new product or service is being considered for introduction to the market, or a merger or acquisition appears attractive, or when a private company wants to go public to raise expansion capital, how do you do your homework to know if the concept is sound? And critically, how do you justify it to bankers and investors?

How do you find out who the players are in the industry? How do you find out about the competition? How do you determine how the product or service should be marketed? On what basis can you project market share and ROI? Whether a consumer or business-to-business company -- on what valid basis will you project sales and operating income?

Generally, there is no one place to get all the information you need -- not even the Internet. One of the best ways to analyze an investment is with a feasibility study. A feasibility study will investigate the following types of considerations:

1. industry overview
2. key market trends and direction
3. market potential
4. barriers to market entry
5. target markets
6. sales and marketing methods
7. distribution methods
8. competition
9. pricing strategy
10. operating profitability
11. investment/budget parameters
12. return on investment

These considerations lead to a comprehensive final report answering the key questions of where the industry has been (and why it has evolved this way), and it defines the current trends and business operating conditions of successfully doing business now. But most importantly, it defines the requisite business and marketing operations mandatory for future success -- the tools, procedures and corporate stance to optimally capitalize on the upcoming market demands, desires, conditions and trends (or to lead them in some cases).

Valid information directs successful decisions, projections and growth – unlike well intended but naturally biased encouragement of business associates, friends and subordinates who typically paint an idyllic picture of the industry or opportunity and conjure record-breaking projections in their efforts to personally bolster the company or its managers. While egos have a tendency to thrive on such input, the P&L and ROI statements don’t.

How do feasibility studies work? Initially, methodology and procedures are developed with objectives identified and the scope of the study put in writing so both parties have an understanding of what is to be researched and what type of information is to be expected. Depending on the nature of the product or company, a feasibility study might consist of secondary research (investigating available literature, reports, statistical data, etc.) and primary research (interviews with industry experts, survey of potential customers, etc.). The proper format, types of needed market analysis, and the scope of valid financial projections are then formalized.

A typical feasibility study requires about six to eight weeks. Once the study is completed, potential investors and bankers then have a defensible report which can serve as the basis for: 1) a ‘go’ or ‘no go’ decision, 2) evaluating the various aspects of the product or company for areas that need specific attention, 3) formulating a business or marketing plan (or evaluating an existing one). And, for the new or existing company, the feasibility study is likely to be the single most important document and investment the company will ever make.

Most people wouldn't buy a new car without objectively taking a test drive to know more about it -- why should they invest in a product or company without similar valid information?


M.J. Barney Associates, Certified Professional Consultants To Management, is a fifteen year old market research company that has performed business development and feasibility studies for investors, venture capitalists, start-ups and existing companies. More information may be obtained at (858) 484-9595 or at www.mjbarney.com and www.feasibilitystudies.com