RAC came to me for my small business consulting services. Their passion was unmatched, but their current business model wasn't profitable at the time.
They wanted me to write a business plan for the company to use as an internal document to guide their direction and growth.
The first action was to assess the company’s status and then do a full-scale feasibility study to determine whether the company should ‘preserve or pivot’ from their current business model.
In business, a feasibility study is an assessment of the practicality of a proposed business direction or revenue stream. This is used to guide a company through the decision making process for the launch of a new business model, or the expansion of an existing business model.
A feasibility study is meant to determine whether or not a single business model is viable within the market. Whereas a business plan details the company as a whole and its future direction.
When compared side-by-side, an in-depth feasibility study contains most of the same sections that are included within a business plan. However, a feasibility study usually just details one business model or product. The business plan will detail every business model, product and service that the company offers. Thus, a business plan will have more detailed financials because the financial section will encompass the entire business.
The first step in developing a feasibility study is to assess the current status of the business.
IN this case study RAC had hired me because the company received funding and grew their staff, but the company was not profitable because of their premature growth.
Together we took a look at the current revenue streams and operating expenses… this may seem very basic, but when you’re running the day-to-day operations of a business, simple things like this often get overlooked.
The problem was that RAC had hired multiple new staff members to ‘grow’ the company, but had overlooked the fact that in their current business model the service they offered had a maximum capacity for daily participants…meaning there was a clear ceiling for revenue potential.
Before deciding to preserve or pivot we went through their ‘Best-day Analysis’ and ‘Break-even Analysis’, and we found out that they needed to be operating at capacity every single day just to realize minimal profits.
In their current business model, RAC’s daily Maximum Potential Profit was just above their daily operating expenses…
We needed to pivot!!!
Goals… Hopes… Dreams… What is the Company Vision?
In most cases you can’t simply change a lemonade stand into a fine dining restaurant simply because you would make more money.
RAC was born from the idea that the nature of childhood has changed dramatically for the current generation of kids. American childhood has moved indoors during the last two decades. This has taken a mental and physical toll on today’s kids. The ultimate goal of the company was to provide a safe and supportive environment that offered kids a chance to connect with nature, while promoting academic, personal, social and recreational development.
Keeping this in mind, we started to formulate a list of business models and revenue streams that would follow the company’s vision, yet produce more profit. The goal wasn’t to assess the ideas yet, just to get them down on paper.
This is the ‘feasibility’ part of the feasibility study.
After formulating a list of possible directions to take the business, it was now time to assess the feasibility of each possibility.
I needed to ask the questions…
What is easiest to execute?
What costs the least money to realize the most profit?
These questions can only be answered through market research, demographics studies, and analysis of the competitive environment. This research will determine the feasibility of each new business model that is proposed.
In this particular case study, after researching each new business model, we decided to preserve AND pivot. RAC’s original business model was not the problem. The cost of the new staff was the problem. The launch of a new revenue stream using the existing staff was the answer. This allowed the company to preserve the core business model that the company was founded on, and grow the business at the same time.
This feasibility study led me to write a business plan for the company that detailed preserving the current business model, and launching a new business model the would provide the company with exponential growth within their target market.
The Barre Studio, Capitola was seeking approval for a $250,000 SBA 7(a) loan to start a barre fitness studio franchise. I was happy to provide the business plan consulting that helped secure the SBA loan, and strategize the launch of her own brand.
The owner was in a bit of a chicken and egg situation. She was actually trying to get approval to become a franchisee for a nationally recognized barre fitness chain. However, she needed to prove that she could get a bank loan before the franchisor would approve her for the new franchise location.
It was kind of like putting the cart before the horse. She needed a business plan in order to get approved for a bank loan before even knowing if she would be approved for the franchise. It made sense because the franchisor wanted to be certain they were approving a potential owner that would have the ability to open a franchise location in the first place. But, it was a tough spot to be in for a new business owner.
I was contracted to write her business plan for the $250,000 SBA 7(a) loan. However, she needed business plan consulting… not just a business plan writer. Together, we analyzed her potential market area, the demographics of that area, and really honed in on how many target customers she would be marketing to.
We also analyzed the Franchise Disclosure Documents, which included the financial numbers; taking into account the initial franchise fee, annual royalty fees and required local and national marketing fees imposed by the Franchisor Agreement.
During the whole process, the franchisor sent us the proposed sales area guarantee, which only included a 2-mile radius around her proposed location. This meant that the franchisor or another franchisee could open another franchise just 2 miles away! This was a red flag, so we decided to rethink the entire idea.
After reanalyzing the market and financials, we came to the conclusion it would be better to open a barre fitness studio independent of the franchisor. It would be a slightly bigger risk without the backing of a rapidly growing national brand name. However, all the money that would be paid to the franchisor would be better invested in a marketing campaign for a new brand.
We consulted with the bank, and they agreed to approve an SBA loan for a new barre studio brand. Although they were more comfortable with lending to a franchise model, they saw the value in starting a new brand as well.
The Barre Studio, Capitola is thriving today!
I seem to say this a lot to prospective clients, just remember… you can’t buy a business plan. The ideas in your head (your branding, your processes, etc.) are what make your business unique.
You can hire a business plan writer to compile a neatly-formatted and pretty document, but it takes in-depth business plan consulting to strategize the future of your business and really plan out the right business plan direction to help you secure funding.
I've written a few articles and developed some FREE materials to help you write a business plan that is unique and attractive to investors and banks.