Key takeaways
- A feasibility study should end in a decision: go, change or stop.
- Demand and location are tested before the financial model, not after.
- Every assumption in the model should be written down and sourced.
- Include the downside: what happens if revenue is lower or slower than planned.
Market and demand
- Who the customer is, described specifically
- Why they would buy, and why from you rather than an existing option
- How many such customers are within reach of the location
- What they pay today for the alternative
Competition
- Direct competitors near the site, and their offer and prices
- Indirect alternatives customers use instead
- What would make customers switch
Location
- Catchment, access, parking and visibility
- Rent and service charges against expected revenue
- Whether the premises suit the activity and its approvals
- Building constraints: size, layout, services, ceiling height
See site selection.
Operations
- Licence and approvals the activity needs
- The team needed at opening and at full trading, and its cost
- Suppliers, terms and lead times
- Opening hours and service standards
Financials
- Capital expenditure: fit-out, equipment, deposits and pre-opening costs
- Operating costs: rent, staff, utilities, supplies, maintenance, marketing
- Revenue scenarios: expected, slower and lower
- Break-even point and the time to reach it
- Peak cash requirement before the business pays for itself
Write every assumption down, with where it came from. A model is only as good as its least-examined assumption.
Risks and the decision
- Risks
- What could go wrong, how likely it is and what it would cost.
- Mitigations
- What would reduce each risk, and at what cost.
- Decision
- Go, change (a different site, format or size) or stop, with the reasons.
How New Line Investment can help
Our feasibility studies are written by a team that owns and runs businesses, so they are tested against what operations can deliver. If the answer is go, we can help design the business, find the site and open it.
Questions we get asked
What is the difference between a feasibility study and a business plan?
A feasibility study decides whether to proceed. A business plan sets out how to run and grow the business once you have decided to.
Can a feasibility study say no?
It should be able to. A study that cannot conclude “stop” or “change” is not testing anything.