Entrepreneurship. Rhonda Abrams
directly to consumers. If your website attracts a lot of users, you may also want to sell advertising on that site to manufacturers of yoga clothing or other items that appeal to a yoga clientele. If you’re highly successful, you might decide to also open brick-and-mortar stores, design some of your own yoga products, or even offer yoga retreats.
It’s also probable that your business model will change over time. But it’s important that you have a clear sense of which business models will be primary at the time you launch your company.
See pages 44–45
If you submit your business plan for an online business to a potential investor, include a clear statement of your business model, specifying what percentage of your income will come from which business models.
HOW YOU SELL IT
Direct sales to consumer/end user: Either as B2C (business to consumer) sales as a retailer, on the Internet, in-person, and so on; or B2B (business to business) or B2G (business to government) by selling directly to other companies or governmental entities.
Wholesale sales: Using intermediaries, whether brick-and-mortar or online retailers, distributors, and so on, to reach customers.
Brokering: Bringing others together for transactions; taking a commission on sales (such as in real estate or financing), or providing your service on a subscription basis (such as with online dating sites), or charging a flat or hourly fee.
Leasing: Providing your product, service, or information to customers for a set period of time for a fee but without their taking ownership of the asset.
Shared ownership: Providing your product, service, or information to a group of customers who do not need access to it so frequently that they need or want to own their own personal version; in other words, several people “share” one commodity.
Subscription service: Providing your product, service, or information to customers on an ongoing basis.
Per use fee: Charging customers for your product, service, or information each time they use it, without an ongoing commitment or set period.
Advertising/sponsorships: Receiving payment from other businesses that make their company or products known to your customers.
Licensing/franchising: Allowing others to use your content, brand, design, or business practices in their own companies for a period of time.
Auction: Selling the product or service to the highest bidder.
Donations/grants: Receiving funds from others without their receiving goods or services in return, done because they support your cause or efforts; this is primarily a business model for not-for-profit, charitable businesses, but for-profit social ventures might also receive these.
Feasibility Analysis
At this early stage, when you are just fleshing out your business concept and business model, you will certainly not have all the information you need to know whether your business can succeed, whether you can execute on your idea, or how much money you can reasonably expect to make. You will not, for instance, have done a financial analysis at this point, so you won’t know what your costs and profits will likely be. To do that, you’ll develop a complete business plan—a critical step in your entrepreneurial process.
Nevertheless, a feasibility analysis provides a chance to begin to flesh out your initial business idea, see which components are already in place to make it possible, see which are not, and do a quick assessment of whether you can pull this off. Before you develop the in-depth, specific components of your business plan, take time to see if it seems feasible—and identify the roadblocks you’ll likely face.
Doing a feasibility analysis gives you the opportunity to open your eyes, ask yourself some tough questions, then determine whether your idea, as originally conceived, needs to be modified, refocused, or changed dramatically. (Or perhaps even scrapped altogether. It’s better to drop an unworkable idea early on and move on to a different, potentially more successful idea.)
How involved your feasibility analysis is will depend a bit on how unusual your idea is or how hard your market is to reach. The more novel your concept, or the more unproven your marketing and sales channel, the more investigation you’ll need to do to figure out whether the necessary building blocks are available to you or whether you’ll have to create those too.
Let’s say you’ve got an idea for an entirely new product—tasty meals that come in self-heating packages, no microwave required. You originally plan first to sell them in airports so passengers can carry hot meals on board to eat while they fly. You can look at many things fairly quickly to test the feasibility of this idea. Does such packaging already exist and is it proven? Would airlines allow such packages on planes? How expensive is it for you to get space in airports to sell these? That’s on top of the bigger question: Would flyers even want this? Doing a quick feasibility analysis, you might realize that, even if the concept of self-heating meals is workable, you’d be better off introducing them to college students, both because of the complications of dealing with airports and airlines, and because a younger target market might be more open to novel products.
A feasibility analysis vs. a business plan
How does a feasibility analysis differ from creating a full-fledged business plan? Think of developing and planning your business as entailing a few components:
1. VISION. Identifying and articulating your business idea and concept.
2. FEASIBILITY ANALYSIS. Challenging your concept, identifying which components are in place to make it realistic to easily execute, recognizing the biggest obstacles you’ll likely face.
3. BUSINESS PLAN. Clarifying your business strategy in detail, describing how you’re going to execute on your vision, developing the major components of your business, projecting detailed financial forecasts.
4. MARKETING/OPERATIONS/TECHNOLOGY PLANS. Describing in detail and developing budgets for the internal aspects of how you’ll run your business day-to-day.
But if you pursue something more proven—let’s say you’re opening an Italian restaurant on a street that’s already a major destination for diners—your feasibility analysis will be much less involved.