Planning to start a new business or expanding an existing business in a new area is an exciting endeavour, but not every idea is destined for success.
Before investing time and resources in such an activity it is necessary to conduct a feasibility study to determine whether the business concept is viable, sustainable, and profitable.
I often find that most feasibility studies are impractical, overly theoretical, and take too long to complete.
This is because they tend to focus too heavily on customer requirements and market demand projections, while overlooking the real-world challenges involved in execution especially when it comes to creating a unique business model.
I usually apply the practical methodology outlined in Figure 1 below when conducting feasibility studies for launching a new business or expanding an existing business into a new area.
Let us look at each of these sections in detail using the example of a charitable trust in Kerala that was planning to set up a new hospital.
The charitable trust was already running a 500-bed hospital successfully in Central Kerala for many years and was looking at expanding its services to a nearby town in the same state by putting up a new hospital.
The options before the charitable trust related to putting up the hospital building were as follows:
(i) Build a new standalone super-specialty hospital of 500 beds
(ii) Build a new feeder hospital of 50 beds
(iii) Buy an existing hospital of 50 beds to use as a feeder hospital
(iv) Lease out an existing hospital of 50 beds to use as a feeder hospital
The charitable trust also had the following options related to the Target Customer Segment
(i) Target the Premium Customer Segment
(ii) Target Value-focused Customer Segment
(iii) Target Low-cost customer segment
The charitable trust had the following options related funding the new hospital
(i) Use available own funds of Rs 50 Cr
(ii) Take term loans from the bank
The charitable trust decided to use the Practical Feasibility Study Methodology to evaluate this business idea.
World macro trends
The charitable trust first analysed the World Macro Trends using the Practical Feasibility Study Methodology.
Ray Dalio, founder of Bridgewater Associates, which is the world's largest hedge fund with about $124 billion in assets under management (AUM), has extensively analyzed historical economic patterns and identified a recurring phenomenon he terms the "Big Cycle.”
This cycle, spanning approximately 75 to 100 years, delineates the ascent and decline of dominant global powers and research indicates that these cycles are driven by a combination of economic, social, and political factors that collectively influence a nation's rise to prominence and eventual decline.
It was determined that we are at the last of the World Macro 100-year cycle which is characterised by the following:
Decrease in prosperity
High debt levels
Reduced productivity growth
Wealth inequality rises
Loss of global reserve currency status:
Decline in living standards
Overextended military and economic struggles
Rise of extreme politics
Increased political polarization
Breakdown of trust in institutions
Populism and nationalism surge
Erosion of democracy
Civil unrests and protests
Increased risk of wars
Internal conflicts
External wars for resources and powers
Economic warfare (Trade Wars and Sanctions)
Rising competitor nations
Final collapse or restructuring
The key takeaway from the World Macro Trend analysis related to starting a new hospital in Kerala was to avoid taking loans to fund the new hospital.
