Idea Assessment and Business Development Process | My Assignment Tutor

Idea Assessment and Business Development ProcessFile C5-02October 2009www.extension.iastate.edu/agdmDon Hofstrandco-director Ag Marketing Resource Centerextension value-added agriculture specialist641-423-0844, dhof@iastate.eduAn important aspect of successful business development is to follow a process of how you will assess a business idea or concept(project), decide whether to move forward with theproject and build a business, if it is decided to moveforward. The fve steps below help outline a simpleprocess you can follow. The steps are not a rigidstructure to follow. Rather they identify issues youneed to address and when to address them.Figure 1. Idea assessment and businessdevelopment process. Explore &Assess Ideas Refne &Assess Ideas(feasibility study?) Go/No-GoDecision(viable businessmodel?) Prepare &ImplementBusiness Plan BusinessOperationLess formal& detailedMore formal& detailedExitExitBusiness Development Decision Idea AssessmentIf you do not follow a process, you will fnd yourselfgoing in circles and revisiting the same issues overand over without making progress. In addition towasting time, the frustration may cause you to makepoor decisions that can haunt you later.Following the steps below does not guarantee business success. However, it can greatly increase yourchances of success.Step 1 – Initial Idea Exploration,Identifcation and AssessmentThe origination of a new business idea can comefrom a variety of sources. It may come from theboard room of an existing business or a group ofproducers sitting around the kitchen table. Regardless of the setting, you may want to use the followingapproach to formulate the business concept. Anytimeduring steps 1 and 2 you may decide that your idea isnot viable, in which case you may want to abandonthe idea.• Form a project committee – Creating a goodproject committee involves bringing together individuals who have the business development skillsneeded to investigate the idea/concept and carrythrough with business formation if the concept isviable.• Formulate general business idea(s) or concept(s)Defne your business idea/concept and describe whyit has merit. Your idea may involve flling an unmetneed in the marketplace with a new product, providing an existing product in a new form, producing aproduct better or cheaper than competitors, or otherways in which value can be added. Remember,an idea is only viable if people are willing to payyou for what it provides. For example, a premiumproduct is only viable if someone is willing to paymore for it.Page 2 File C5-02• Identify alternative business models or scenariosfor the idea(s) – A business model describes howthe business will function in producing the productor service and providing it to the customer. A business scenario is a logical assemblage of the essential business elements starting with raw materialsprocurement and ending with the sale of the fnalproduct, and all the stages in between.• Investigate idea/concept and alternative business scenarios – Conduct an initial informal investigation of the validity of your idea. Investigate thescenarios or models. Early in the process this maybe nothing more than a series of telephone calls toknowledgeable individuals. Does your idea makesense? Identify business scenarios/models for further study and eliminate those that are not viable.• Formal investigation – You may want to conducta formal assessment such as a pre-feasibility studyor a marketing study of the idea and various scenarios or models. This may involve using consultants to investigate various aspects of the project.It may involve eliminating additional scenarios/models or identifying new ones.• Refne scenarios – Select those scenarios that areviable for further study and eliminate the rest. Asyou go through Step 1 you should accomplish twothings:1. Through the process of elimination you willreduce the number of scenarios/models underconsideration for further study.2. Refne and flesh-out the remaining scenarios/models.Step 2 – Idea/Concept and Scenario/Model Deliberation and Assessment• Further refne the business scenarios/models – Ifyou have conducted any of the formal assessmentsdescribed above, you have information that canbe used to further refne your business scenario/models. By now you should have refned your ideato one or a small number of specifc and detailedbusiness scenario/models that you want to assess.This is critical before you move to the next step.• Conduct feasibility study – A feasibility studywill provide a comprehensive and detailed assessment of the market, operational, technical, managerial and fnancial aspects of your business project.These factors will feed into the economic assessment of your project (is it proftable?). If you havealready conducted a pre-feasibility study, marketing study or other study; these materials can beused in the feasibility study. Feasibility studies areusually prepared by consultants, so you will needto investigate consultants who are familiar withyour type of business and experienced in preparingfeasibility studies.• Analyze the feasibility study – When you receivethe feasibility report, the frst step is not to begindeliberations on whether to progress with the project. Rather, you need to determine the completeness and accuracy of the study. Does it address theissues you want addressed? Was there a thoroughinvestigation of the critical issues? Challenge theassumptions and conclusions of the study. Only after you have accepted the study as being completeand comprehensive can you move to Step 3. SeeInformation File C5-64, When to Do and How toUse a Feasibility Study for more information• Further refne the idea and scenario/modelHowever, before you proceed you may see theneed for further study of various aspects of thebusiness project. It is not uncommon for the feasibility study to uncover new issues that need to beinvestigated. This may create the need for additional negotiations with your consultants to expandon the original scope of the feasibility study.Step 3 – Go/No-Go DecisionThis is the most critical step in the entire businessdevelopment process. In a sense it is the point of noreturn. Once you start down the path of creating abusiness, it is diffcult to turn back. If you have unresolved doubts or reservations about the project, youshould not proceed. That is why it is important tohave an open, honest and thorough discussion whenmaking this decision.File C5-02 Page 3You may fnd that there is division in your committee. Some members may want to move forwardwhile others may want to end it. This is not uncommon. Each needs to take an honest look at the otherside’s arguments. If the issues cannot be resolved,each side needs to go its own way with no bad feelings. At this point the remaining members needto determine if they want to proceed with businesscreation.Commitment to the project is another importantfactor to consider before you proceed. Most beginners to business development greatly underestimatethe time and effort required to start a business. Afnancial commitment by project members at thistime (everyone throws some money in the pot) is animportant sign of commitment to creating the business.This step involves making one of the three possibledecisions listed below:• Decide that the project is viable and move forwardwith it.• Decide to do more study and or analyze additionalalternatives.• Decide that the project is not viable and abandon it.Step 4 – Business Plan Preparation andImplementationIf you decide to proceed with creating a business,you will need to prepare a business plan. A businessplan is an outline or blueprint of how you will createyour business. If you conducted a feasibility study,it will provide some of the information needed foryour business plan. Also, business planning ofteninvolves the use of consultants. However, don’tturn the process completely over to a consultant,you need to stay integrally involved in the planningprocess. Remember, it is your business.Although planning can involve considerable timeand effort, it is the easiest part. Implementing theplan is much more diffcult. Many prospectivebusinesses experience problems or failure due tothe improper implementation of their business plan.This step requires commitment and dedication. Unforeseen problems will emerge. Your persistence iscritical.Implementing your business plan will include, but isnot limited to:• Creating a legal structure• Securing market access• Raising equity and securing fnancing• Hiring management/staff• Constructing facility• OtherStep 5 – Business OperationsNow that you have successfully started your valueadded business, your work has just begun. Producergroups often forget that once the business is created,it takes constant attention for it to remain healthyand viable.Operating a business is very different than starting abusiness. It requires a different set of skills. So thepeople who create the business may not be the bestpeople to manage the business.ConclusionThese are the fve steps you will want to follow fortaking an idea and making a viable business from it.These steps will not guarantee success. However,they will increase your odds of success. Also, youwill make more effcient use of your time.. . . and justice for allThe U.S. Department of Agriculture (USDA) prohibits discrimination inall its programs and activities on the basis of race, color, national origin,gender, religion, age, disability, political beliefs, sexual orientation, andmarital or family status. (Not all prohibited bases apply to all programs.)Many materials can be made available in alternative formats for ADAclients. To fle a complaint of discrimination, write USDA, Offce ofCivil Rights, Room 326-W, Whitten Building, 14th and IndependenceAvenue, SW, Washington, DC 20250-9410 or call 202-720-5964.Issued in furtherance of Cooperative Extension work, Acts of May 8 andJune 30, 1914, in cooperation with the U.S. Department of Agriculture.Jack M. Payne, director, Cooperative Extension Service, Iowa StateUniversity of Science and Technology, Ames, Iowa.