If you’ve been in business long enough, you’ve likely come across two related but slightly different concepts: feasibility and viability. The words are sometimes used interchangeably but have slightly different meanings.
This article will go over how to conduct a feasibility study, ways to keep your startup viable, and what constitutes viability when it comes to a business.
Let’s dive in!
The differences between feasibility and viability
When you launch a startup, you’ll want to first ensure that your business idea can be achieved–this means that it’s feasible.
However, it must also be able to make a profit–this means it’s viable.
Viability comes from the Latin root “vita,” meaning “life.” Viability refers to how sustainable the business will be once it gets off the ground. To determine viability, an investor would typically look at the business plan to see what strategies are in place to grow and scale the business.
Feasibility can be determined by conducting a feasibility study to uncover the strengths and weaknesses of a proposed business venture. It considers the opportunities the business represents and whether they’re worth the risk.
What’s a feasibility study?
Founders face all kinds of challenges when getting their businesses off the ground. To make their ventures less risky, an entrepreneur may want to draft not only a business plan but also a feasibility study.
A feasibility study “can be defined as a controlled process for identifying problems and opportunities, determining objectives, describing situations, defining successful outcomes, and assessing the range of costs and benefits associated with several alternatives for solving a problem.”
A feasibility study answers the essential question: "should we proceed with the proposed idea?”
It can be a good idea to conduct a SWOT analysis to accompany the feasibility study. This type of analysis considers the weaknesses, strengths, opportunities, and threats present externally and internally.
A feasibility study will help you determine if your company has the required resources or technologies to successfully compete in the marketplace. It will also determine if the proposed idea offers a reasonable return on investment for the amount of risk it entails.
When conducting a feasibility study, startups may want to be careful not to blindly follow a template, as a well-designed study focuses on the specific needs of your business.
Determining that a business idea won't work sooner rather than later can help to save time, money, and energy.
Types of feasibility to consider
Here are the types of feasibility your study can assess:
- FINANCIAL: Uses economic analysis to compare benefits to cost. How much venture capital cash needs to be raised, and how likely are investors to provide it?
- ORGANIZATION: What is the overall competency of the management team?
- LEGAL: Can the business exist and trade under existing laws?
- OPERATIONAL: Are there any logistical issues present that might prevent a business from successfully operating?
- REAL ESTATE: Is the location of your enterprise a suitable fit for your industry?
- MARKET: Will the company have a reasonable chance of surviving against its competitors?
- RESOURCES: Can the necessary resources, including hardware and software, be easily and sustainably obtained?
Differences between a feasibility study and business plan
A feasibility study isn't the same thing as a business plan and typically needs to be completed before a business plan is created.
The function of a feasibility study is to investigate and weigh options. On the other hand, a business plan creates a blueprint and an accompanying set of action steps an enterprise takes to realize its entrepreneurial ambitions.
While a feasibility study isn’t the same thing as a business plan, the former can be easily converted to the latter.
Feasibility study steps
To effectively evaluate business ideas you’re considering, start by doing a pre-feasibility study. That way, you can eliminate the more impractical ideas before investing too much time in them.
During this preliminary analysis, you’ll reduce the number of alternatives, leaving you with only one or two ideas.
A market analysis determines whether enough people will buy your product, helps identify market demand and the price customers are willing to pay. If no market opportunities are found, there’s no reason to proceed further with the feasibility study.
Here, you’ll analyze the staffing needs of your organization. For example, how many workers are needed and for how long, and the organizational hierarchy required to bring life to your company’s vision. You may also want to create a strategic recruitment plan to fill any talent gaps.
Determine financial viability
In this step, you’ll list expenses and project revenues to ensure the company can be financially viable. One of the best ways to ensure financial viability is by formulating a business plan. This can help to determine whether your business can support itself financially.
Dissect your idea to see if you can find any weaknesses. If you come across any, brainstorm ways to overcome them. This can help to strengthen your concept, increasing the odds that it can become viable.
Formally document your conclusions and share them with others to get their input.
One option may not immediately leap off the page as being the best. As you accumulate information and investigate options, you will likely gain a clearer sense of which are the most feasible. The decision of whether to proceed with an idea isn't always clear-cut, and a feasibility study can help to provide you with the data you need to make an informed business decision.
Top ways to boost the viability of your startup
It can be exciting to see your business idea transform into reality.
However, while it’s challenging to get your startup off the ground, making it sustainable for the long term can be even more difficult.
If you want to be in business for a long time, you'll need to make all your stakeholders happy. Investors need to see a healthy return on their investment. Lenders need to be paid on time, customers need a reason to buy your brand, and employees need to feel appreciated.
Here are 4 top ways how to boost your startup’s viability:
Ensure you’re compliant
Regulatory requirements standardize how businesses conduct themselves.
They govern everything from data security and privacy to the code of conduct between enterprises. Compliance with governmental regulations not only prevents hefty fines and colossal embarrassment but also protects your startup from fraud and other illegal practices.
Proactively establishing compliance protocols enhances your business model, making your startup more desirable to potential investors.
Keep business data secure
A cyber breach can be as crippling to a business as a hurricane or flood. According to the Center for Strategic and International Studies (CSIS), almost $600 billion is lost to cybercrime each year. That number is expected to increase to $6 trillion by the end of this year.
Data theft can damage your reputation: "Cyber security is about creating trust in the marketplace," proclaims Bill Fanelli, the Better Business Bureau’s chief security officer. "It's being able to demonstrate to your customers that you are a safe vendor to do business with."
When a data breach occurs, customers desert the business in droves, and investors become wary. That’s why staying ahead of emerging security threats in your industry is a necessity. To do this, ensure that your cyber-security risk management is top-notch.
Keep investors happy
When you’re raising money for your business, it’s easy to forget what it’ll take to keep your investors happy after they give you their cash.
Investors not only help your business get off the ground, but they can also give you additional cash infusions if your business stutters. Keep your investors happy by providing them with updates on your progress. If they don't hear from you, they might become less engaged and willing to help.
A great team, a product that customers are eager to buy, and a lean operation can also help to keep investors content.
Have great customer service
Conducting exhaustive market research to determine what makes customers happy–and then putting your findings into action–can be a great way to demonstrate a commitment to quality customer service.
You can do this with surveys and asking for feedback. If you get a complaint or negative review, aim to respond professionally and make the needed improvements.
Create policies and procedures that outline how customers should be treated, and ensure all team members are on board.
Maintain your startup’s long-term viability with Hunt Club
At Hunt Club, we specialize in sourcing, screening, and hiring high-caliber candidates for startups. We’ve scaled teams and recruited top-tier talent for some terrific early-stage companies, and we can do the same for you.
If your recruiting process needs some fine-tuning, give us a call!