When we start talking with potential clients about their projects, one of the first things we discuss is the scope of our engagement. While budget is often a big focus, other important factors like timelines and research methods also come into play.
Clients might ask specific questions, such as, “Is this 500-unit apartment complex feasible at this exact location?” or they might be looking for broader insights, like, “What type of business would work well in this area?” These different kinds of questions show how the number of variables in a research project affects its overall scope.
Just like solving a math problem or conducting a science experiment, having more variables makes finding solutions more complex. Let’s dive into this idea with two examples by comparing a specific business venture with a more open-ended inquiry.
Case Study 1: What is the feasibility of building a 500-Unit Apartment Complex at this exact location?
When a client proposes a large development project, they often have a sense of its potential success based on their knowledge of the area and experience in the industry. They turn to a consulting firm like ours to validate their instincts. Having a specific business idea and location allows for a clearer definition of the project’s scope.
Our formal feasibility study typically includes the following analyses:
- Industry & Market Analysis: demographics, market trends, market growth, supply & demand analysis, competitive analysis
- Site Analysis: accessibility, visibility, traffic patterns, pedestrian traffic, zoning, utilities
- Target Market: Total Available Market (TAM), Serviceable Addressable Market (SAM), Serviceable Obtainable Market (SOM)
- Financial Projections
Industry and market analysis provides a comprehensive overview of the market landscape, including demographic information, current market trends, and growth projections. We assess supply and demand dynamics to determine if there is sufficient demand for a new apartment complex in the area. Additionally, a competitive analysis identifies existing and potential competitors, offering insights into their strengths and weaknesses, which helps gauge whether the proposed development will be competitive.
During the site analysis phase, we evaluate the chosen location’s accessibility and visibility, which are crucial for attracting potential residents. We analyze traffic patterns to understand how easily people can reach the site and assess pedestrian traffic to gauge footfall in the vicinity. Zoning regulations are also scrutinized to ensure the proposed project complies with local laws, while an examination of utilities assesses the availability of essential services like water, electricity, and sewage.
The target market analysis identifies the potential customer base for the apartment complex through a detailed analysis of three market segments: Total Available Market (TAM), which represents the overall revenue opportunity; Serviceable Addressable Market (SAM), which reflects the segment of the TAM targeted by the project; and Serviceable Obtainable Market (SOM), indicating the share of the market the project can realistically capture. Understanding these segments helps us tailor development recommendations to meet the specific needs of prospective tenants.
The financial projections include estimating the anticipated costs and revenues associated with the project. We prepare detailed forecasts of expenses, including construction costs, operational expenses, and marketing budgets. Income projections take into account rental rates based on market analysis, allowing us to assess the project’s potential profitability. These financial insights are essential for making informed decisions about the feasibility of the development.
Case Study 2: What business do I establish without a specific location in mind?
In contrast, an open-ended inquiry like trying to figure out what type of business would thrive in an unspecified location brings its own challenges to determine scope. During the research process, we ask the following questions:
- Demographics:
- What is the age distribution of the population in the town?
- What are the average income levels of residents?
- What is the educational attainment of the community?
- Consumer Needs:
- What types of products or services do residents feel are lacking in the area?
- What specific challenges do residents face that a new business could address?
- How do residents currently meet their needs for goods and services?
- Competitor Analysis:
- What existing businesses are currently serving the community?
- What are the strengths and weaknesses of these businesses?
- Are there seasonal fluctuations in demand for certain products or services?
- Local Economy:
- What are the key industries driving the local economy?
- What is the current unemployment rate in the town?
- How has the local economy changed over the past five years?
- Industry Trends:
- What are the current trends in business sectors that may be relevant to this community?
- How are consumer preferences shifting in relation to these industries?
- Local Organizations:
- What local organizations or chambers of commerce could provide support for new businesses?
- Are there existing partnerships between local businesses and community organizations?
- Partnership Opportunities:
- What potential collaborations could enhance the business idea?
- Are there local events or initiatives that could provide networking opportunities?
- Zoning and Permits:
- What zoning regulations apply to potential business locations?
- What permits or licenses are required to start a business in this town?
- Tax Incentives:
- Are there any local tax incentives or grants available for new businesses?
- What economic development programs exist that support startups in the area?
Determining What Business to Establish
To find out what kind of business is needed or wanted in the area, we can use several methods:
- Stakeholder Interviews: Talk to local stakeholders for insights.
- Surveys: Gather data from potential customers and community members.
- Public Hearings: Host discussions to collect community input.
- Dedicated Website: Create a platform to encourage interaction and provide information.
- Physical Site Visits: Organize guided tours with locals who know the area well.
Once we have some business ideas, we’ll need to evaluate which ones fit the local geography and demographics. Key considerations include the client’s preferences and the initial financial feasibility of each idea.
Locating Suitable Sites
After narrowing down potential business ideas, we shift our focus to specific locations. Here are some important things to consider:
- Available Locations: Identify land for sale or rental spaces.
- Physical Suitability: Assess whether any sites meet the project’s requirements.
Only after we find viable locations can we tackle the usual questions about zoning, infrastructure, market viability, and competition. Then, we’ll need to develop financial projections from scratch since we didn’t define the project specifics beforehand.
Conclusion
As we’ve seen, providing a client with a feasibility study is just one part of our consulting process. Helping them figure out what to study and where adds another layer of complexity and scope. Understanding how different variables interact is crucial for ensuring the success of the feasibility study and, ultimately, the project itself.