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How to Identify and Avoid Risks when Investing in a New Business

It is actually possible to evaluate an idea. To determine a business idea’s feasibility, a study is carried out, usually by a professional business consultant. The focus of a feasibility study is to evaluate a proposed business venture against existing competition, market demand and other relevant factors. In this article, we go over what factors should be considered, while investing in a new business.

About the reviewer

Alex Silensky, co-owner of OGS Capital, a leading business consulting agency, has years of experience in consulting businesses in questions of fundraising, feasibility evaluation for business ideas and carrying out due diligence.

Return on investment

Amongst other things, the success of a startup is determined by the profit of the business. A feasibility study evaluates various factors to determine the return on investment. If a business shows a return on investment or no profit, a business idea is deemed unfeasible.

Importance of a feasibility study

However, feasibility studies can also focus on evaluating a business idea from other points of interest for investors. For non-profit organizations, feasibility is not evaluated by profit; for example, the environmental impact of a business can be evaluated, as can its impact on the community. Businesses that play an important role for the local community can be feasible by creating employment and involving small local producers.

Consulting with a profession vs. doing the research on investing


For feasibility study services, it is better to turn to a professional business consulting agency for a number of reasons. A professional business consultant:

  • Has the skills and expertise to carry out a feasibility study;
  • Has the resources to carry out a thorough market analysis;
  • Can identify risks and weaknesses, as well as offer alternatives and solutions;
  • Can develop a contingency plan;
  • Gives a non-bias evaluation based on facts and research. 

Though an entrepreneur can carry out their own research, there are advantages to having a professional business consulting agency carry out a feasibility study. A professional evaluation of an idea can save money by avoiding identifiable risks. An objective evaluation allows one to identify and avoid risks, understand which aspects of a startup can be improved, and create a comparable advantage over existing competitors.

Professional assessments also provide strategic direction based on in-depth market knowledge that may not be available through informal, direct research. This may include trend analysis, competitive benchmarking and the behaviour of potential customers to determine the market readiness of a new business. With this vital data, entrepreneurs can make informed decisions that greatly increase the likelihood of business success.

In addition, professional organizations have access to a wider network of market resources and industry contacts and can play an important role in matching the ideas of budding entrepreneurs with market expectations and opportunities. They can also lend a degree of credibility to feasibility studies, which can be important in securing funding from investors, who are often inclined to rely on professional judgement.

In addition to financial feasibility studies, consultants can also assess legal, operational and technical options that individuals may not have considered. Their comprehensive assessment takes into account all the key factors necessary for the long-term viability of the business. For example, they can advise on the best legal structure for the business, potential regulatory issues or technological needs that are critical to operational efficiency.

Finally, while entrepreneurs may have a good understanding of their business idea, a broad and detailed analysis by a professional advisor can provide a thorough assessment. This can help to significantly reduce risk and make the business not only viable but also potentially more profitable and sustainable in a competitive market.

Conclusion on Investing

A feasibility study is not something a starting entrepreneur should be investing on. It is like a seat belt for a business idea. Having evaluated and analyzed various relevant factors, the study shows if the business has potential in terms of bringing in profit or achieving a set goal in the case of non-profit organizations. Consulting a professional will narrow down the scope of relevance for the feasibility study.

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