When I was growing up, my mother introduced me to the music of Kenny Rogers. My sister and I loved twirling around our house, singing his songs at the top of our lungs. My favorite was “The Gambler” and the lyrics, “You’ve got to know when to hold ‘em / Know when to fold ‘em / Know when to walk away / And know when to run.” These lyrics have come back to me during COVID-19 – I even bought the album to play during the quarantine to lift my spirits.
In many ways, we are social sector gamblers – although data guides our decisions, we also use our instincts to determine which methods to use in our work. When I started in the nonprofit space 25 years ago, I acted largely on instinct. But, now that we have access to great research and more refined data, we can better predict which programs and practices will work best. However, every venture is still a gamble – you never quite know how it will turn out. This was one of the reasons I went to business school – to find tools to help me make better bets. A tool I often use with clients and students is the feasibility assessment. It is my go-to when I want to pursue a venture but also want to know as much as I can before the cards get played. To help you use feasibility assessments to make the best bets in your nonprofit, check out our Q&A below as well as our templates.
What is a feasibility assessment? How is it different from an opportunity assessment and a business plan?
Each of these tools provides nonprofit executives and social entrepreneurs with a degree of precision around a new business or program idea. Think of them this way:
An opportunity assessment is a test of viability
– it asks if the idea is right for you or your agency.
A feasibility assessment is a test of sustainability
– it asks if the idea is right for anyone.
A business plan (which can come in many forms – prospectus, plan, canvas) is a test of achievability
– it asks how you can get this idea right.
And, with each step, you ratchet up the degree of market research (starting with secondary and moving toward primary as you refine the model) and the impact on decision-making (using the research to guide decisions on the business model).
What goes into a feasibility assessment?
If you did an opportunity assessment, you are halfway toward a feasibility assessment. Both require market research, but a feasibility assessment goes one step further – moving from “back-of-the-envelope” guesses to more data-driven forecasting. Here are some of our favorite criteria and related questions to consider:
- What are the clients’ (or customers’) needs? Why do they exist and persist?
- What is the size of the market? Is it growing?
- How favorable are the trends impacting the clients and marketplace?
- What outside sources of money exist? Are they sustainable?
Competition & Impact
- What other comparables exist nationally? What is unique about their solution? How do they measure their impact? What can be learned?
- Does the idea provide significant benefit to the community? What are the ways we could collaborate? Does it create a multiplier effect or is it duplication of something that already exists?
Skills, Expertise & Resources
- Do we have the skills/expertise necessary to succeed? Do we have (or can we buy) the must-have resources?
- How easy will it be to launch? What are the necessities for this project to be successful?
- What are some structures that could best support the model? What are the risks as well as the opportunities moving forward?
- What are the costs associated with the model? Is the model sustainable?
With a feasibility assessment, you want a higher degree of objectivity rather than the educated guess you often make with opportunity assessments. We like to use a rubric for each question and grade the answers on a scale of A-E based on the degree of favorability. So, we conduct the research in each area and record our findings on a scorecard. We have included a sample scorecard for your reference.
How do you know when something is feasible and should move forward to a business plan?
This is a tough question – and why I connect this topic to gambling. An agency in one town can play the hand easily, but another won’t be as successful. It is all based on individual circumstances. For example, how much money do you have in the bank to pursue it? What is your risk tolerance based on other initiatives you have recently started? How do the actions of your funders and other nonprofits impact this decision? Are you in over your head or are you sitting at the right table based on your skill level? A feasibility assessment can help you work through these questions and determine which opportunities to bet or fold on.
When do you use a feasibility assessment?
I use them most often before a venture starts or a capital campaign begins. I also use them for existing ventures to decide if and when to exit or improve a venture to test degree of sustainability. For example, if more competitors have entered your marketplace, your degree of feasibility is likely less favorable.
How is a feasibility assessment different from a needs assessment?
A needs assessment is a systematic process for determining needs and can include surveys, focus groups and other market research. While valuable, the data then needs to be taken to the next level to determine what I call the “exist vs. persist” relationship – why does the need exist and why isn’t it being solved (a.k.a., why does it persist?). A feasibility assessment looks at the idea from all angles (one of which is a needs assessment) to see not only if the idea is warranted, but also if the idea will solve the identified problems and whether or not the idea’s implementation is sustainable. For example, in client surveys, clients say they need a lot of things, but that isn’t a proxy for supply and demand. You need a more refined process, like a feasibility assessment, to determine whether or not an idea is both viable and sustainable.
How can you conduct a feasibility assessment?
Similar to business plans, we strongly encourage a high degree of staff involvement in feasibility assessments. You can hire a coach or consultant (or student intern!) to help you with the deep dive into research, but only you can interpret the results for your agency and make the decision. It is both an art and science – you can hire for the science, but only you can craft the final product based on your instincts.
Because only 20% of ideas are viable, it is important to undertake these exercises to hedge your bets. In the short run, you will feel more confident in those bets. In the long run, you will have a better record of success. Or as “The Gambler” would say, “If you are gonna play the game, boy / You gotta learn to play it right.” We would love to hear more about your experience with feasibility assessments and whether they have upped your game in the social sector.