Question

In 200 words, Why is it important for a firm to test the feasibility of its business idea prior to writing a business plan? Give an example

Answer 1

Prior to writing a business plan it is important for a firm to test the feasibility of its business idea due to following reasons :

a. It provides guideline to know the certain risks, long term success of the business prior to writing a business plan so that one knows the possibility of success due to feasibility study.

b. Needs and wants of the target market will be studied before launching any business so that only the product or service which is required or can create a need in market gets approved.

c. Market research and survey is necessary as business ideas can come and fade away but only the business idea which has potential to survive and get funding will be known due to feasibility study.

d. It helps to achieve profitable stakeholders, shareholders while knowing if the business idea is worth the time, money, efforts of the business owner.

Example : Brain wanted to start a local coffee shop in the residential area so that he can achieve competitive advantage over the other coffee shops which are located at the market place. Instead of starting with writing a business plan it is necessary to conduct the feasibility study of his business idea which will consist of research, surveys etc in the local area to know if the coffee shop will be a success.