2022 Q3-4 Using Market Research for Strategy Development
How large is the industry in which your company competes? What is the current growth rate? How about projected growth rates over the next three years? Which market niches in the industry are growing the fastest? What are the real drivers in your industry? Which of your competitors is getting most of the new business and why?
These types of questions typically surface during strategic planning sessions. Usually, senior level managers base the answers to these questions on “educated guesses”. Seldom is there sufficient information available because it is perceived that the information is either impossible to compile or that it will be very costly to obtain.
Frequently, this type of information can be obtained in a timely and cost effective manner through market research and is used by many companies to make better decisions and take some of the guesswork out of assessing the market. In one survey of several hundred companies conducted by the American Marketing Association, many of the respondents indicated that they use market research. Listed in the following chart are a few of the more common reasons cited by these companies for conducting research.
In addition to the reasons cited above, SPG has observed that many companies seek to have a better understanding of their customers including satisfaction and loyalty levels, services valued most and perceived strengths as viewed through the customers’ eyes.
Recognizing that managers will never have 100% of the information available to make a business decision, it does improve your batting average by compiling information about your industry, markets and competitors.
Typically, the research can take two approaches, primary and secondary. Primary research consists of interviewing or surveying users, competitors and industry experts regarding specific information needs. Secondary research involves the compiling of published information including publications, trade association data, existing research studies, etc. Combining the two types of research results in a clearer picture of industry trends, market niches and early detection of where the industry is heading. Armed with this knowledge, executives have the competitive edge for developing strategies to exploit market opportunities.
2022 Q1-2 Top 10 List for Business Success
From David Letterman’s nightly top 10 list when he was hosting Late Night, to football rankings, to book and streaming bestseller lists, top 10 lists are a popular way to convey priorities or rankings. The list is meant to generate discussion about what a company needs to do in order for it achieve exceptional performance. Depending upon your industry and company situation, the order of the list may vary significantly. Ask yourself what you are doing in each of the 10 areas to improve your company. You can be reasonably sure that your competitors are working on their own list of priorities.
10. Competitive Intelligence– Understanding what your competitors are doing and why. Where are they vulnerable? What competitive advantage do they have and how are they leveraging those advantages?
9. Core Competency– What does your company do extremely well that is giving you a competitive advantage? It may be a specific skill set, brand equity, technical know-how, etc. Without a core competency a company is highly vulnerable to losing any competitive advantages it may have had.
8. Benchmarking– Comparing yourself against the leaders in other industries provides a measurement of the gap between your company’s performance and those companies considered to be the best in a specific process.
7. Empowered Work Force– Developing your employees by providing them with the knowledge, skills and resources to make decisions at the lowest possible levels within your company.
6. Continuous Improvement– Both product and service quality is important. Striving for continuous improvement in your business can be made by following Dr. Deming’s 14-point program.
5. Customer Loyalty– It has been demonstrated that the most loyal customers are also a company’s most profitable customers. Tracking the Net Promoter Score (NPS) can be a reliable indicator of a company’s future growth.
4. Capital– During the current economic climate, having an adequate supply of capital – both equity and credit line – is critical not only for survival but also for positioning your company for growth as market conditions improve.
3. Communications– Effective communications help employees work together and breeds trust within an organization by sharing ideas and concerns. Our research continues to indicate that lack of communications is the #1 issue in over 90% of companies surveyed.
2. Shared Vision– Everyone in the organization must understand the vision for the business and have a genuine commitment, not compliance, to see it happen. Employees are much more productive when they understand the importance of their role in helping achieve the company’s vision.
1. Leadership– Developing a culture that encourages leadership at all levels in an organization is a long-term process. Modeling the behavior that is critical to your company’s success is an important first step.
2021 Q3-4 Strategic Questions in Market Identification
When market opportunities are identified, it becomes critical to assess the market to the fullest extent possible, recognizing that managers seldom have all the information necessary to make perfect strategic decisions prior to investing capital and resources. Acknowledging this deficiency, the accompanying list represents a list of questions that should be asked as an integral part of the market identification / feasibility process.
Who are the customers for our product or service?
What are the customers’ likes and dislikes about the existing product offering (including buying motives)?
What product forms are customers presently using? Why?
Why do they want it in its present forms? Do they have a choice? Are there alternative forms that better serve their needs?
What motives drive customer purchase habits today? Tomorrow?
What is the prevailing pricing structure?
Who are the sophisticated customers who both understand and care about product benefits?
Who are the unsophisticated customers whom time and resources should not be wasted against?
Through what distribution channels are customers obtaining existing products in the market?
How should our products be differentiated and positioned?
Who are present and potential competitors and why are they successful?
What are the perceived objectives, strengths and weaknesses of key competitors?
What brands are established in the market? How strong and expanded are they?
What can be done with our product or services that are unique, profitable and hard to duplicate?
What is the market potential ($ and units) for a supplier of high quality?
What are the key category growth trends and how can they be capitalized on?
Which target markets offer the most attractive growth potential?
What markets are desirable to reach in the future? Why? What are their needs?
What key success factors drive success in each market segment?
Which distribution channels offer the best market opportunities? Short/long term?
What options exist for developing, processing, selling, marketing, and distributing?
What obstacles are likely to be encountered? How can they be circumvented before it costs money?
What is the financial potential?
Using this checklist of questions will help minimize surprises once a decision is made to move forward with the market opportunity.
2021 Q1-2 New Year’s Checklist
Prior to the beginning of each calendar year it is not uncommon for individuals to make a list of goals, resolutions, etc. that they hope to accomplish during the New Year. Similarly, organizations go through a process of planning what they hope to accomplish in the forthcoming year. Over the past three decades SPG has formulated a list of the top actions that organizations can take to ensure success in the coming year. This list is an update to our prior checklists and is not meant to be all-inclusive but rather to serve as a catalyst for improvement.
- Engage the entire organization in implementing the business plan.Have each department manager review the business plan and identify three to five department goals that support the overall goals of the company. This will ensure that department goals are aligned with company goals. Once identified, then meet on a monthly basis to review and monitor progress toward the completion of goals. The experiences of other organizations strongly indicate that implementation and monitoring of the business plan is the most critical part of the planning process. Be aware that planning is a continuous process, not an event.
- Search out what your customers really think about your products and services.Spend some time with them, either by visiting them or having them tour your facility. If that is too time consuming or impractical because of logistical reasons, then consider conducting a survey to determine their level of satisfaction with your products or services. Include in your survey what your customers’ value most about your products or services. Focus improvements in those areas considered most valuable to your customers. Customer value management and customer loyalty cannot be separated.
- Improve communications throughout the organization. In 9 out of 10 organizations, communications continue to receive the lowest marks during employee surveys. Communications can be improved drastically if each employee takes ownership in becoming more effective listeners and remembers that communications is a two-way street. Furthermore, some communications are more effective if the key elements are reduced to writing so that misunderstandings about what was said can be minimized and/or avoided.
- Enhance quality and productivity in your organization by identifying processes that can be streamlined. Begin by identifying one system for review. Once identified, look at all the processes within that system and search out ways to improve the processes. At all times ask the question, “How does this process enhance the value to the customer?” If it doesn’t add value by reducing costs, shortening delivery times, etc., then take a serious look at eliminating the process. By eliminating “red tape” and creating a hassle free environment, both employees and customers will appreciate the results.
By following these suggestions your company can achieve greater success in 2021. The key is focus, i.e. everyone understanding what needs to be accomplished AND how they plan to accomplish it.
2020 Q3-Q4 Despite COVID-19, The Entrepreneurial Spirit in America Remains Strong
How many times have you thought or heard, “Why didn’t I come up with that idea?” Despite COVID-19, from our vantage point it is evident that the entrepreneurial spirit in America is vibrant and healthy. Entrepreneurs and business owners inquiring about independent, third party feasibility studies continue to remain strong over the last year.
A sampling of ideas that Strategic Performance Group LLC (SPG) has been engaged to assess from a feasibility perspective illustrates the creativity and resourcefulness of entrepreneurs and established companies. Some of these ideas involve patents based on unique products or services. Other creative ideas include an innovative way of manufacturing products in a state-of-the-art 335,000 sq. ft. aluminum extrusion billet production plant or the development of a system for recapturing billions of gallons of potable water that currently go to waste. Other considerations involve the exploring the feasibility of constructing a performing arts center in Texas, a cycling resort for Americans in Gerona, Spain, an assisted living facility on Staten Island, a sports arena in Arizona, a wedding venue in Minnesota, a Brewpub in Ohio, a culinary arts program for a college in Illinois, a convenience store in Tennessee, a world-renowned preschool in Panama City, Panama, a Trampoline Park in Mississippi and many other projects.
Entrepreneurs are motivated for a number of reasons – some are idealistic, perhaps some attitude is involved in creating something tangible, in some cases, never attempted before. Never the less, our nation has benefited by the entrepreneurial spirit of small businesses in America for generations. Small business as typically defined by the Small Business Administration (SBA) is an enterprise with 500 or fewer employees. The majority of the workforce owes their livelihood to small business since the SBA estimates that over half of the American workforce is employed by them.
Whether you’re an aspiring entrepreneur pitching a product on Shark Tank or seeking funding from the SBA, all successful business start-ups have some commonalities, including vision, discipline, market awareness and execution. Why are several hundred thousand businesses established in the U.S. each year? For some it is to seek fortune or independence, for others it may be to lose a boss in a job they so longer find fulfilling, while others may want to impact society in a positive way.
Furthermore, why do so many businesses fail? I recall two primary reasons – management error and insufficient capital. Although that is true to some degree and we can all probably cite specific cases, let’s also recognize that many businesses fail because the marketplace never valued their ventures, products or services in the first place. Ideas, like people, come and go. Some ideas translate into economic viability while others are DOA. Listening to the marketplace will uncover where hidden barriers lie and opportunities exist. Typically, lenders and investors will not embrace a new business venture unless it has a well-constructed business plan anchored by a comprehensive feasibility study. Recognizing when to pursue your business venture and when to fold before spending your life savings requires a critical GO / NO GO decision.
If you have an interest in launching a business venture, here’s a few initial steps to undertake:
-Assess your motivation and interest in starting a business
-Analyze the market to determine if your venture, product or service has an application
-Review the competitive landscape
-Conduct a classical SWOT analysis (Strengths, Weaknesses, Opportunities and Threats)
-Establish realistic revenue and profit projections backed by a sound business plan
After you have exhausted these critical steps, seek out investors or lenders to acquire the capital to launch your business venture.
2020 Q1-2 Customer Attrition Surveys
How many customers has your company lost in the past year? And how much has it cost your company in lost revenues and operating margins. Most companies keep track of the number of new customers gained in the prior year but many do not measure the number of customer defections. Customer attrition surveys represent an in-depth review into the reasons for lost business and customer dissatisfaction. The surveys help the company identify a direct link between service and product related issues and lost revenues.
Customers who closed accounts or substantially reduced business are surveyed shortly after that decision in order to determine the reasons. Telephone surveys are the best way of surveying lost customers. Typically, the survey is more qualitative in nature since the primary purpose is to probe for the underlying reasons that the company no longer does business with you.
There are many reasons cited by prior customers for no longer using your company’s products or services and a professional interviewer will get at the underlying causes. Certainly, price can play an integral factor but that needs to be balanced as part of the price/value relationship. Was the value received commensurate with the fee charged? On-going service can play a huge role in assessing future business activity with a customer and all dimensions of service must be probed during the telephone interview.
Sometimes, as a result of the interview, a customer is willing to give the company another chance to make things right. When you factor in the cost of acquiring new customers; the time, money and effort used to retain customers can provide an optimal return on capital.
2019 Q3-4 Competitive Intelligence
When was the last time your business formally performed competitive intelligence (CI)? For many companies, it occurs too infrequently. Mostly it is due to either time constraints or the inability to effectively compile information of value to your organization. Most managers would agree that they have an inadequate amount of information about their markets and competition.
A broad definition of CI is the action of defining, gathering, analyzing, and distributing intelligence on products, customers, competitors and any aspect of the environment needed to support executives and managers in making strategic decisions for an organization. The overall objective of CI is to identify events, trends, and other issues that will impact your organization.
One of the obvious trends in business today is increased competition. As a result of increased competition, the rate of change taking place in business is increasing exponentially. If you expect to keep-up and survive in this fast paced competitive environment, you must know what the competition is doing.
Organizations use CI to compare themselves to other organizations, i.e. benchmarking, identify risks and opportunities in their markets, and to assess potential market response which enable them to make informed decisions. Most firms today realize the importance of knowing what their competitors are doing, how the industry is changing, and the information gathered allows organizations to understand their strengths and weaknesses.
As part of the CI process it is critical to understand your organizations strengths and weaknesses compared to the competition. This is usually completed through a SWOT Analysis. The SWOT Analysis consists of the following:
• Strengths: characteristics of the business that give it an advantage over others
• Weaknesses: characteristics that place the business at a disadvantage relative to others
• Opportunities: external chances to improve performance (e.g. make greater profits) in the environment
• Threats: external elements in the environment that could cause trouble for the business
The best way to implement CI is to focus on critical questions confronting your organization. For example, how will the economy, government regulation, new competitors, etc. change our business or how will the introduction of a competing or substitute product impact our business? You must continually monitor critical issues if you expect to compete. If you fail to implement CI, than you run the risk of operating in a reactive mode.
2019 Q1-2 Market Surveys Create Strategic Advantage
A market survey is a comprehensive (360 degree) look at the marketplace by anonymously surveying a representative sample of purchasers (current or prospective) of products or services offered by you or your competitors. It is broader than a customer survey in that it assesses not only the perceptions of your company but also that of your competitors. Since it is done anonymously by a 3rd party research firm, the results are based on candid and objective feedback with the elimination of bias.
Market surveys provide the following insights and can be useful as input into the strategic planning process undertaken by most businesses.
• Identify strengths and weaknesses of your company and competitors
• Assess satisfaction with products and/or services
• Understand vendor selection process
• Identify primary supplier and the reason for using them most
• Analyze the price/value relationship
• Create opportunities to increase sales
• Determine market shares of your company and competitors
• Identify growth trends in the industry
• Calculate Net Promoter Score – a key indicator of customer loyalty
• Assess brand image
• Detect shifts in product usage
• Determine product or service features considered most important
A contact list is compiled consisting of known purchasers/users of the type of products and services that are sold by the company and its competitors. A random survey is conducted usually by telephone until the desired number of interviews is completed. Client anonymity is protected – no reference is made to the name of the client in order to eliminate bias.
2018 Q3-4 Net Promoter Score Interpretation
Following research on Net Promoter Score (NPS) that was first reported in the December 2004 issue of Harvard Business Review, SPG has introduced the concept to numerous clients for more than a decade. The NPS is based on adding the percentage of customers that would highly recommend your company to others (promoters) and subtracting the percentage of customers that are not likely to recommend your company (detractors).
The resultant score is the NPS which has been demonstrated to correlate to the growth prospects for a company and is a good indicator of customer loyalty. In addition, knowing the difference between your company’s NPS and that of competitors, i.e. Net Promoter Delta, can help you determine the speed of your market penetration relative to the competition. The maximum attainable NPS is 100 and the lowest NPS is -100. Within SPG’s database the average NPS is currently at 38.1. The highest NPS in SPG’s database is 88.7 and the lowest NPS is 14.5. To help our clients’ interpret their scores, SPG has created the accompanying rating scale.
Spectacular: 85 to 99
Excellent: 70 to 84
Very Good: 55 to 69
Good: 40 to 54
Average: 25 to 39
Mediocre: 0 to 24
Poor: -25 to -1
Terrible: -50 to -26
Abysmal: -100 to -51
2018 Q1-2 SPG 100 Benchmark Index
The results are compiled for our annual customer satisfaction index based on a composite of the most recent 100 customer satisfaction surveys conducted by SPG and is representative of a broad cross-section of American businesses, i.e., large vs. small, manufacturing vs. service, and geographically.
The methodology for conducting the surveys is primarily telephone surveys supplemented with some on-line and mail surveys. Feedback ranges from companies with as few as 50 customers to those with over 5,000 customers. A typical survey consists of approximately 25 questions using a scale of one to ten with one representing extremely dissatisfied and ten representing extremely satisfied. For more information about our proprietary database, please send e-mail to email@example.com
Customer Satisfaction Index (CSI): SPG High 9.32; SPG Average 8.33; SPG Low 7.49
Sales Process: SPG High 9.41; SPG Average 8.39; SPG Low 7.83
Product / Service Quality: SPG High 9.17; SPG Average 8.04; SPG Low 7.36
Customer Service: SPG High 9.45; SPG Average 8.56; SPG Low 7.81
Administration: SPG High 9.39; SPG Average 8.61; SPG Low 8.03
2017 Q3-4 Linking Performance to Strategy
The source of frustration for many managers is the failure of the company to implement its overall business strategy. This is not uncommon because it is difficult for many to see the linkage between the business strategy that senior level managers establish and the performance expected of employees to implement it. Carrying out business strategy requires commitment, accountability and focus by employees and a strategic measurement system that links performance to strategy. Employees need to understand the explicit expectations required of them and how it interfaces with the business strategy.
By following a 3 step process you can significantly increase your chances of implementing strategy.
Communicate strategic direction and business strategy.
Establish a strategic measurement system based on key success factors.
Create performance agreements between employees and the company.
Typically, a company devises an overall business strategy as part of its strategic planning process. Included in the strategy is a vision, mission, key success factors and overall company goals. Although the plan may be well developed it often times fails to be implemented because there is no alignment of the company’s vision, mission, and goals at the departmental and individual levels. Without supporting goals, a strategic plan is doomed to failure. In conjunction with the alignment process there must be a strategic measurement system, often times called a balanced scorecard, which consists of measuring key success factors.
Many companies are tracking measurements that have little to do with business strategy and were most likely convenient measurements that were generated from a transaction processing system installed years ago. Measuring the right things will change just as your business strategy changes. For example, if your company’s vision is to become a technological leader in your industry then it is imperative to establish the key success factors and performance measurements that will help you accomplish it.
Typically, there are four broad categories within which to establish measurements:
Customer perspective e.g., quality and customer satisfaction
Internal perspective e.g., manufacturing excellence
Innovation/learning perspective e.g., technological leadership
Financial perspective e.g., profitability and growth
The strategic measurement system should be focused more on measuring those factors that are caused and not a result. For maximum effectiveness team and individual performance measurements are established using performance agreements. Performance agreements contain the desired results in terms of short and long term goals, guidelines within which to operate, identification of the resources available, and a review process that monitors progress on a regular basis. Performance agreements become part of the performance appraisal process and tie directly to performance based compensation.
2017 Q1-2 Managing Change for Competitive Advantage
Some see the new millennium as a state of chaos in business. For many companies’ chaos has led to the question of survival in a highly competitive environment. As the rules of the game have changed dramatically over the past few years, managers have been forced to focus on a new set of issues, using management techniques foreign to most until recent years. Although overused in today’s business jargon, the concepts behind terms such as synergy, best practices, thinking outside the box, paradigm shift, etc. have required us to change the way we conduct business.
Successful companies appear to thrive on change because of their flexible organizational structure and a leadership style that serves as a catalyst for change. Typically, change within an organization is hard on employees. Many have been disillusioned in the past due to downsizing, redeployment, etc. and are therefore very skeptical about embracing change. Change is received much more enthusiastically if it is positioned in terms of rallying the staff around a shared vision or a central theme. However, in many companies’ employees do not know either their competitors or understand the overall direction of the company according to the results of a typical employee survey.
Change must be driven by the key success factors required to succeed in a particular industry. Understanding those key success factors that drive your business and measuring them on a regular basis precedes competitive advantage. Linking the performance of all employees to the overall business strategy of a business by establishing performance criteria revolving around your industry’s key success factors results in all employees understanding their role for the company to survive and grow.
What can executives do to transform their organizations for competitive advantage? Here are a few preliminary steps.
1. Implement a strategic planning process that serves as a framework for anticipating and addressing change. This should not be an elaborate framework but one that is flexible, fluid and allows you to recognize and respond rapidly to changes within your industry and competition.
2. Stay as close to your customers as possible. Understand their current and future needs. Form collaborative relationships wherever possible and strive for customer loyalty. Concentrate on making continuous improvements in those areas that are most important to your customers. Studies show that a 5% change in the rate of customer retention can shift profits from 25% to 100% in either direction.
3. Develop a flexible work force that rewards employees based on the skills that each has gained, not the position itself. As changes occur you can respond more rapidly by having a well-trained and motivated workforce.
4. Determine the right size for your company. Bigger is not necessarily better if it impedes your capability to respond to market conditions faster than your competitors. As Peter Drucker stated “Some businesses will have to be very big, but I see more and more businesses where medium size is much better, and where it simply diffuses results and destroys profitability to try to be big.”
2016 Q3-4 Customer Value & Performance Gaps
Most customer surveys usually revolve around customer satisfaction or loyalty as the primary objective. However, another type of customer survey, based on what customers’ value most about a product or service, can be very useful in developing brand loyalty.
In one of the customer surveys we conducted, the objective was to rate the product attributes in terms of value, and secondly, to assess how the company performed for each attribute. The higher the value assigned to a particular attribute the greater the focus should be on the performance. In some situations, a significant gap can exist between what customer’s value most and how a business performs in that area. For example, not meeting customer expectations in something that is valued as a 10 (most important) indicates an opportunity/problem that must be immediately addressed.
Once the performance gaps are identified, action plans can be created that will close those gaps over time. Gaps that fail to be closed will eventually lead to customers taking their business away. Finding out what customers’ value most is an integral part of measuring performance gaps.
Businesses should never assume they know what customers value most; if they do, they may be spending their limited resources on things of minimal value to customers. We recall a situation where a company invested a significant amount of capital in order to streamline a process thought important to customers, not knowing that the customer cared little about the assumed benefits. Rather, the company would have been better off broadening the product selection which is what customers really wanted. Performing a customer value survey provides a systematic and customer focused approach to allocating resources more effectively.
2016 Q1-2 Feasibility Study
Often times, an entrepreneur is seeking assistance in determining the market feasibility of establishing a business within a specific market area. The business may be a restaurant, an assisted living facility, a health and fitness center, a storage facility, a hotel, a specialty food store, a bowling center, a convenience store with gas station, etc.
Knowing the demographics of the population residing in the target market area is critical to assessing market potential. Population and 5 year growth trends, household income, population by age group, etc. are key components to establish a demographic profile. A summary of business establishments and employees in the specified trade area and the spending habits of consumers residing in the area can be useful to making a sound business decision before you invest large sums of capital in your new business venture. Identifying the following components can be useful in determining market feasibility.
Through various databases, demographic information containing the profile of residents within a trade area can be useful. Understanding household size, number of housing units, household income, population by age, gender, educational attainment, etc. for the current year and a 5 year projection is critical to profiling your customer potential. In addition to the demographics, the psychographics are equally important. The clustering of lifestyles can be identified based on similar purchasing habits among residents.
Business summaries by either SIC or NAICS reveals the types of businesses within the trade area. Further detail highlights the actual number of businesses by type along with the number of employees. Assessing the number of competitors in your proposed trade territory must always be considered. Coupling Dun and Bradstreet reports with interviews from key managers can be insightful for understanding sales volume, trends, etc.
In addition to current and 5 year projected population and household income, the market potential is based on the likelihood of the adults in the specified trade area are to exhibit certain consumer behavior or purchasing patterns compared to the U.S. average. In other words, what is an average household expected to spend on specific consumer goods and services, nor only for the current year but a 5 year projection.
Analysis and Conclusions
Once all of the information about the specified trade area is compiled, the challenge becomes one of sorting through a detailed analysis of trends, opportunities, purchasing habits, etc. At the completion of the analysis, a GO / NO GO decision can be made with the confidence of knowing that a thorough evaluation of your business opportunity is based on the most reliable data available.
2015 Q3-4 Where’s the Money?
A newspaper headline reads “Small-business loans start to ease.” Well, it’s about time. Certainly, it has been discouraging for small businesses and aspiring entrepreneurs to have an idea, concept, patent or project in mind and are unable to acquire the financing necessary to bring it to market. Financing is a critical part of the business equation, but just as important, the venture must be credible and marketable before a lending institution will pay much attention. In other words, how feasible is it? Sure, it’s okay to hear what your friends, relatives and colleagues think about your business proposition or venture but don’t take their advice as the final word. They are useful as sounding boards, but when staking your career, lifestyle or savings on the idea, you will need an unbiased assessment of the market potential.
Most likely, you will need an objective, independent feasibility study to validate your assumptions. Likewise, if you are seeking bank or investor financing, more often than not, many are now demanding a feasibility study, especially after the economic devastation many have encountered over the last few years. Thankfully, according to the Federal Reserve, banking regulators are applying pressure to get more credit flowing to small businesses, who hire more than half of American workers.
So what is a feasibility study? Typically, a feasibility study will determine whether or not it makes sound business sense to move forward with the venture, i.e., a GO or NO GO decision. As a key component of the feasibility study you will need to assess the market demand for your product, service or project. Secondly, an overall assessment of the industry in which you will compete is essential. What is the market size, growth trends, niche opportunities, etc.? Where will your business fit in? A review of the competition including strengths and weaknesses is mandatory. Sometimes a market survey will be required to gauge interest among prospective customers.
Feasibility studies provide the impetus for crystallizing your ideas into well thought out objectives. Knowing which way to turn requires an in-depth understanding of the marketplace and making the wrong turn (decision) can lead to a disastrous outcome.
For a moment, visualize yourself as a lender or investor. Which of the following business ‘opportunities’ would you have invested in?
• Selling fractional ownerships in very light jets at a 35% reduction in operating costs
• Opening several restaurants throughout the U.S. under the EB-5 program
• Raising Wagyu beef cattle to supply high-end restaurants along the east coast with an alternative to Kobe beef
• Establishing a preschool facility in Panama City, Panama
• Opening a retail store in an upscale Houston suburb offering custom fit jeans in 30 minutes while you wait
• Constructing an assisted living facility in Maryland
• Opening a 400,000 sq. ft. amateur sports center in the San Francisco Bay area
• Creating a ‘ManCave’ condo style storage units for high-end tenants
• Establishing pain management clinics throughout the Southeast
• Operating a cable wakeboard park in Florida
• Constructing a $20 million off campus student housing project at a highly recognized Southeastern university.
• Exploring the global market for functional drinks that have unique and beneficial additives such as co-enzymes, omega fatty acids, amino acids and their derivatives.
• Operating a cycling resort in Girona, Spain
Those examples are a small sampling of projects for which Strategic Performance Group LLC (SPG) has performed feasibility studies. It’s not easy to predict which ventures will be successful. However, in those situations where the feasibility study proved favorable, financing became available and led to the successful launch of the business venture.
Recognizing when to pursue business expansion or venture start-up requires sound business judgment. Failure rates for new ventures, products or services run high so you can appreciate why banks are reluctant to invest unless they are convinced that they can earn an acceptable return and get their principal back. Before embarking on business expansion or starting a new venture, consider these steps to make sure it is feasible:
Conduct a macro assessment of the industry in which your business will be competing
Analyze the market to determine if your product or service has an application.
Review and assess the competitive landscape.
Conduct a classical SWOT analysis (Strengths, Weaknesses, Opportunities and Threats)
Establish realistic revenue and profit projections backed up by sound business strategy
After completing a feasibility study, seek out lenders to acquire the capital to launch your business expansion or new venture. As Ben Bernanke, former chairman of the Federal Reserve once stated, “making credit accessible to sound small businesses is crucial to our economic recovery.” Let’s hope the banks are listening.