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Article | 3-minute read

Conducting a business feasibility and market analysis

Business planning

 

As market conditions change, you might be thinking about whether your business idea is sound or considering new business ideas.

To understand whether there is a market for your business idea, you could conduct a business feasibility and market analysis. This will help you to closely analyse your target market and any external factors that may have changed in the current climate or that may mean that the market is susceptible to future change.

This page covers three steps to help you test the feasibility of your current or future business idea. 

Step one: Your market opportunity

To determine whether your business idea could deliver and exceed your break-even sales target, identify your target markets and assess their demand for your idea.

What type of customers will buy your products or services?

For example:

  • Working parents
  • Teenagers
  • Young adults
  • Business people 
  • Retirees

Will you reach them exclusively by selling direct in your local area or will you go online or through distributors? How will your target market access your offerings?

Once you know who your customers are likely to be, begin to establish if there will be enough of them and how often they’ll buy. Did your idea hold up? Great, here’s how you can set up a business in one day.

Step two: how much money do you need to make 

First, be clear on how much money you need to make to:

  • cover existing business operating expenses such as staff wages, utilities, marketing and professional services costs. 
  • cover personal expenses such as household basics e.g. food, bills, clothes
  • put something away each month

The ANZ cash flow forecast template can help you calculate the money you'll need for the good times and the bad. If your business idea can't deliver this, is it really right for you?

It’s tempting to reduce the amount you need to make to ‘fit’ a business idea that you really love. Be realistic about what you need to earn and when you need your business income to start flowing. This will help you to understand  what your business must deliver to support you day-to-day.

Calculating this figure accurately will be crucial to the success of your business.

 

Step three: your break-even point

Figure out your break-even point. To do this, you'll need to estimate some business basics like your product, price scenarios and the cost of production and supply.Calculating your break-even point is a vital step. Your business will reach its break-even point when total costs are equal to total sales. Then if sales continue to climb, you’ll begin to make a profit.

To work out your break-even point, first work out your fixed and variable costs.

  • Fixed costs – These costs don’t depend on the amount of goods or services your business produces. They can include rent, rates, power, phone, interest on debt, insurance, repairs and maintenance, stationery and wages of permanent staff.
  • Variable costs – Variable costs depend on the amount of products or services produced by your business, and fluctuate in proportion to the volume you produce or sell. They can typically include stock, supplies, freight and wages of temporary staff.
  • Price determination – What price might customers be prepared to pay for your offerings? Take into account the cost of producing and supplying your goods or services – then choose a couple of price scenarios. They could be prices that are ambitious, cautious and most likely.

Once you can reach your break-even point, your business can move onto the next step of creating profit.

 

 

Next steps

 

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Any advice does not take into account your personal needs, financial circumstances or objectives and you should consider whether it is appropriate for you.

ANZ recommends you read the applicable Terms and Conditions and the ANZ Financial Services Guide (PDF 104kB) before acquiring the product.

This page contains only general information which is subject to change and is not a substitute for commercial judgement or professional advice. This information does not take into account your personal and financial needs, particular objectives and/or circumstances, and you should seek appropriate independent advice (which may include property, legal, financial, taxation and accounting advice) before making any decisions, investing, or acting on it.

Tools, templates, checklists, and calculators (“ANZ Tools”) linked or referred to on this page, are only some of many ways to analyse a business or industry, or to assist your planning and business decision making. You should seek the assistance of your accountant, business or other advisor when either planning for or analysing your business.

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ANZ tools, templates and checklists are only some of many ways to analyse a business or industry to assist your planning and business decision making. You should seek the assistance of your business advisor or accountant when either planning for or analysing your business' performance. To the extent permitted by law, ANZ makes no warranty and has no liability, in respect of your use of and reliance on these tools.