Pick up almost any document on starting a business and you’ll be advised that you should promptly undertake the creation of a business plan. I am a big fan of business planning but here I’ll disagree. A better idea is to complete a feasibility study. A feasibility study and a business plan share a lot in common but the feasibility study is much shorter and can be completed in less time than a full business plan.

The whole point of the feasibility study is to determine if the business concept is feasible. There is no need to go to all of the detail required by a business plan if a general testing of market numbers indicates the idea will not work.

It is alright to use educated guesses for the numbers. You can increase accuracy and detail in the business plan to follow if your initial study indicates it is warranted. A good feasibility study should answer at least the following questions:

• What is the size of the market (units sold)?
• What market share can we expect to gain (% of market)?
• How many will we sell?
• At what price?
• What expenses will we incur?

Try to make a list of the resources you’ll need to operate the business (land, buildings, equipment, training, employees, licenses, permits & fees, inventory, interest, marketing etc.). Do your expenses resemble within reason your consumption of these resources?

Next, Test your plan on a variety of inputs. Generate a worst case, probable and best case number for each input. This will provide you with a minimum threshold below which your idea is not feasible. This will prove immensely valuable if you move on to the business plan stage. When (if) you begin additional research, you’ll focus on the most critical number in the plan. For instance, if you determine you need a market size of at least 30,000 customers meeting a specific demographic to make the plan work and you find out that there are only 20,000 then either find a plan to make it work with 20,000 or stop working the plan.

Now have a knowledgeable third party evaluate your study. Incorporate their suggestions to make your plan more realistic.

After revision, ask yourself if the anticipated profits are worth the risks you will take? Does it make sense to invest your time and money in this manner? If so, move on to the full business plan with a clear insight into where to focus your research.