One useful way to approach systematically the question of whether a novel business idea is feasible is to assume an investor’s perspective of the various risks. There are only a handful of major categories of risk; some may prove central in the feasibility of one business idea while others may be most important to some other venture. Building a useful risk profile starts by identifying the risks significant to the project at hand and then drilling down where issues emerge. The list below lays out a set of generic risks worth considering.
Technology Risk: Can the product actually be made to work (or service actually be delivered)? What evidence might illustrate that in a convincing way? Has it been done before? Are the production inputs available and economical? Does the production process raise environmental issues? Does any expert opinion or analysis support technical feasibility?
Regulatory Risk: What legal or regulatory barriers might significantly hamper an undertaking such as this? For example, could federal, state or local laws or regulations pose a barrier? Does the business idea pose any dangers? If so, how might the company address these matters?
Business Risk: Would the proposed business generate substantial profits? Back-of-the-envelope numbers need to appear quite attractive because “things always cost more and take longer than we first imagine.” Compare the expected price to the estimated costs and describe the assumptions that underlie these calculations.
Financing Risk: This is a sub-species of business risk: It asks whether the proposed venture might require so much initial capital that it poses a substantial financing barrier. Estimate how much capital is needed. What types of financing sources might be practical? How attractive is the investment return compared to other new ventures?
Market Risk: Would the target customers buy the proposed products at the anticipated price? Are there multiple constituencies that must be sold? What is the compelling value proposition for each target segment?
Business Environment Risk: How do major external forces affect the business climate for this idea? Address the influence of relevant trends in this industry, its technology, regulation, consumer behavior on the proposed business. Will other external forces such as demographics, climate change or scarcity influence success?
Management Risk: Not strictly a feasibility stage issue, most investors are especially keen on evaluating whether the management team appears likely to execute the plan successfully. Many smart investors bet on management teams even more than great ideas. At the feasibility stage, the inquiry needs to focus on what core skill profiles will be needed in the short and longer term. Can the present team adequately plan the venture without that talent?
Answering these risk questions first is one approach to focusing quickly on the most productive avenues for assessing the feasibility of novel business ideas and helping to identify the specific issues. A PowerPoint slide is about the right level of detail for the first pass at each of these.