L3 Feasibility
Completion requirements
Unit F: Finance
Feasibility
Before opening the doors to a new business, much research and planning are required to create a business plan. Usually, starting a new business requires a business loan from a financial institution. To be approved for a loan, sufficient evidence is required to demonstrate that the business is needed in the community, the business will be profitable, and the business has a suitable location.
Even a promising small business idea will not work without customers and a need for that business. The first step after listing possible business ideas is to analyze the ideas to see if they are feasible. In order for a business to be successful, it must be sustainable and profitable. A potential business owner must consider the following factors.
- How large is the market (customers) for this business?
- How many other similar businesses are in the area?
- What is the profit margin for this business?
- What location is ideal for this business?
- Is a suitable location available? Is the business seasonal? When are the high and low times?
Aaron is aware of three families that could use his services to build new homes or shops. He is unsure if more of that type of work will be available in the future.
He can offer his services for smaller jobs such as trenching, digging holes for septic tanks, or demolition clean-up.
One other excavation business in the area is operated by a neighbour a few miles away. It runs mainly track hoes and focuses on large-scale digging. Aaron has heard rumours of the owner wanting to retire. The next closest excavation business is at least 50 km away.
Currently, Aaron lives in a small town and rents a house with a small yard. He stores his backhoe in a friend's farmyard. Aaron plans to buy or rent a small acreage close to town and near the highway so he can transport his machinery easily from job to job.
Discuss whether Aaron has proven his business is feasible with regard to the following factors:
He can offer his services for smaller jobs such as trenching, digging holes for septic tanks, or demolition clean-up.
One other excavation business in the area is operated by a neighbour a few miles away. It runs mainly track hoes and focuses on large-scale digging. Aaron has heard rumours of the owner wanting to retire. The next closest excavation business is at least 50 km away.
Currently, Aaron lives in a small town and rents a house with a small yard. He stores his backhoe in a friend's farmyard. Aaron plans to buy or rent a small acreage close to town and near the highway so he can transport his machinery easily from job to job.
Discuss whether Aaron has proven his business is feasible with regard to the following factors:
- location
- market (number of customers)
- competition
- Aaron considered the location of his business by planning to buy or rent land close to the highway to allow easy access to his customers.
- Aaron has potential customers who will need his services immediately to build homes or shops (large projects). Aaron has the option to complete smaller projects, such as trenching and digging holes, using his equipment. He should try
to determine the number of smaller jobs that are available in his community to see if there is enough demand for his services.
- Aaron is aware of one competitor in his community. He heard rumours of this competitor retiring but should investigate further. Aaron should also check to see if there are other excavation businesses in the area.