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.
Maximum Potential Revenue - Operating Expenses = Maximum Potential Profit
For obvious reasons, you want the Maximum Potential Profit number to be as large as possible.
Minimum Customers Needed – Operating Expenses = 0
When doing a Break-even analysis, a lower minimum customers/services/products needed is better. This means that you only need X number of customers to break even on your operating expenses… every customer above X will equal profit.
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.