Feasibility before the business plan: four gates, one idea

You have VND 150 million in savings and an idea: collect bed linen and towels from homestays in a seaside tourist ward and return them within 24 hours. Friends tell you to write a business plan. But a plan describes how to do it, and the question you have not answered is whether the idea is worth doing. The four-gate feasibility analysis of Barringer and Ireland sits ahead of the plan to answer that.

What does feasibility analysis ask, and what is it not?

It asks one thing: should you go on with this idea? The framework entry in the library, which credits Barringer and Ireland (2018), puts that question through four gates in a row, and a failed gate leads to rework or dropping the idea.

It is not the plan: the library's outline has eleven sections, including a schedule and a design and development plan that the gates do not write. It is not a guarantee: passing means only that you have no reason yet to stop. It is not statistics: a few dozen conversations are a signal.

What questions does a hypothetical laundry have to answer?

Each gate needs the cheapest evidence, a pass line set before you collect it, and an action if it fails. The table is a worksheet you can refill.

A hypothetical example. Laundry A, its owner and every figure below are invented by me, not data from a real business. The owner once supervised hotel housekeeping, has VND 150 million and two friends who can work part-time.

The pass lines are mine; the library sets no thresholds.

Product gate: will anyone pay for this service?

Yes, if part of the target group will make a small commitment at a price that still leaves a profit.

The hypothetical owner talks to 12 homestay owners. Six are quoted VND 18,000 a kilo, six VND 22,000, and each is asked to sign a one-month trial letter. The signature matters because the glossary entry on the intention-behaviour gap says a self-reported "high priority" does not prove action.

Invented results: at 18,000, three of six sign; at 22,000, one of six. Only the lower price meets the pass line, so 18,000 goes forward. Demand is multiplication: an 8-room homestay at 60 per cent occupancy over 30 days is 144 room-nights; at an assumed 2.5 kg of linen a night, that is 360 kg a month. A fail would look like nobody signing at any price because idle staff already do the washing. Drop it.

A public example on price: Food Dive reported that Keurig's Kold system launched in September (2015, per the library case) at US$299–369 plus pods, and was "plagued from the start" by concern over its high suggested retail price. In June 2016 Keurig discontinued the first generation, offered refunds and cut about 130 jobs (Food Dive, 2016). The article does not say what Keurig tested before launch, so I do not conclude which gate was skipped. I take only this: price is the cheapest thing to test early. The post on reading Kold through the four gates covers the case in full.

Industry and target market gate: is there room for a small laundry?

There is, if rivals leave a gap you can fill cheaply and the target group is big enough that you need only a slice.

The owner prices five laundries: VND 14,000 to 20,000 a kilo, two collect from the door, none promises 24 hours. A map and a booking site show about 150 homestays in three wards, of which about 60 have six rooms or more. Winning 10 is 10/60, about 17 per cent, under the 20 per cent pass line.

In my analysis, a "door-to-door in 24 hours" gap is easy to copy, since anyone can buy a washing machine. A fail would look like three of the five already doing it at VND 15,000: switch to small hotels, or stop. With only 20 six-room homestays you would need half of them: drop.

Organisation gate: do you have the people, money and space?

You do when every main task has someone who can do it and your real resources reach the level needed.

The task list: collect at 7 a.m., wash, fold, deliver, bill, handle complaints, an owner against each. The owner knows hotel linen standards but has never scheduled collections. Both friends are free in the mornings, so collection is covered.

Then capacity: ten homestays are 3,600 kg a month, 120 kg a day. At an assumed 25 kg a load and 1.5 hours to wash and dry, five loads take 7.5 hours, so one pair of machines is nearly full. Money is left to the finance gate. Wastewater and permits are unknown to me, so they go on the list of questions for the ward office. The gate passes with a condition. A fail would look like nobody able to collect by 7 a.m.; the rework is to hire a rider by the trip.

Finance gate: how much start-up cash, and where is break-even?

In this example the idea needs VND 245 million of start-up cash, VND 95 million more than the owner has, and breaks even at 8 homestays. The library asks three things here: start-up cash, how similar businesses perform, and whether the project is financially attractive overall.

A month with 10 homestays: revenue is 10 × 360 kg × 18,000 = VND 64.8 million. Variable cost is assumed at 4,500 a kilo, or 16.2 million. Fixed cost is 35 million: premises, two part-timers, delivery, the owner's pay. Profit is 13.6 million. Each homestay contributes 360 × 13,500 = 4.86 million, so break-even is 35 / 4.86 ≈ 7.2, rounded up to 8.

"How similar businesses perform" is the outside view. Suppose two laundry owners say their variable cost is nearer 5,500 a kilo: break-even is still 8, and profit falls to 10 million. The slack season is different. At 35 per cent occupancy each homestay sends 210 kg, ten homestays contribute 28.35 million, the loss is 6.65 million a month, and 13 homestays are needed to break even. Six months of each season give 6 × 13.6 − 6 × 6.65 = VND 41.7 million a year, so payback on 245 million takes almost 6 years.

The gate fails on start-up cash. I rework rather than drop, because what is short can be changed: the way into the market.

My own rule: rework when the failure sits in a variable you can change (price, scale, route into the market) and the other gates still stand. Drop when it sits in something you cannot change: nobody has the problem, the market is too small even at full share, or the cash is short with no cheaper route. The six days already spent are a sunk cost, and keeping an idea only because of them is the sunk-cost trap.

How long does the check take, and why in this order?

About six working days spread over three weeks and VND 2.3 million, roughly 1 per cent of 245 million.

The library draws the gates in this order; the reasons below are my own. If an early gate fails, the later ones need not run. The finance gate needs price and customer numbers from the first two and staffing from the third, so it cannot go first. The order does not run from cheap to dear, because the product gate takes the most days. If your cash ceiling is a hard limit, estimate start-up cash first; half an hour is enough.

Which parts of the business plan does each gate fill in?

The figure shows how I match each gate to the library's business plan outline.

Three sections stay empty: the executive summary (the library says it is written last), the design and development plan, and the overall schedule.

Going deeper: where does the four-gate frame come from, and what does it leave unanswered?

The library credits the textbook Entrepreneurship: successfully launching new ventures (Barringer and Ireland, 2018, Pearson, 6th edition). The publisher's page lists chapter 3 as "Feasibility Analysis" and chapter 6 as "Writing a Business Plan". I could not read the book. I rely only on the publication details, that contents list and the library's framework entries, and do not quote it.

The critique below is mine, not from any academic work, because I have not read a study that tests this frame. First, no source I read shows that passing four gates predicts success. Second, the library sets no pass thresholds, so "pass" is your choice, and an easy bar lets every gate pass. Third, the cheapest evidence is a small sample you collect yourself: twelve conversations lean easily with the way the questions are asked.