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M
ONTGUIDE
E-13
MT 9510 Human Resource Development
Healthy local economies stem
from the formation of new busi-
nesses. Unfortunately, the success
rates for small businesses are typi-
cally quite low. Depending on
which statistics you believe, the
chances of a new business surviv-
ing for five years are between 30
and 50 percent.
As an entrepreneur, you can
greatly increase your chances for
success by analyzing your idea,
your marketplace and your man-
agement team before beginning.
The Feasibility Analysis
Whether you plan to expand an
existing business, acquire an exist-
ing business or start your own new
business, this MontGuide will
show you how to perform a basic
economic feasibility analysis: a
preliminary evaluation of your
business idea to see if it’s worth
pursuing.
In performing your feasibility
analysis, you will:
• Evaluate whether you and
your management team possess
the characteristics most common
to entrepreneurial success;
• Assess the market for your
new business idea;
• Estimate the basic financial
feasibility of your business, in-
cluding potential sales revenues,
fixed and variable costs, and
break-even figures;
• Identify the pitfalls many new
small businesses encounter—and
study how you can avoid them; and
• Finally, make an informed
choice about whether or not your
idea is still attractive and practical.
Characteristics of
Successful Entrepreneurs
Studies show that the personali-
ties and individual characteristics
of the entrepreneurs who start new
businesses may be the most impor-
tant factors of success.
An individual’s management
skills have become so important
that venture capitalists have begun
to revise the way they look at po-
tential new venture deals. Rather
than betting on the “horse” (i.e.,
the business idea and the business
plan), they are now much more
likely to bet on the “jockey” and
look for someone who has a his-
tory of successful past entrepre-
neurial efforts. These investors
have come to realize that a good
business plan does not necessarily
make a good business, but a good
entrepreneur can, whether the
business plan is optimal or not.
Your management team—or the
one you will assemble—is also
extremely important. Compare the
key players in your potential busi-
ness to the ideals described on
page 2 of this guide and see how
many of these characteristics they
possess. Obviously, no one will
display all of the qualities, but this
worksheet can still help you assess
your potential for success as an
entrepreneur.
Starting a Small Business:
The Feasibility Analysis
by Michael D. Reilly, Ph.D. and Norman L. Millikin, Ph.D.
College of Business, Montana State University-Bozeman