Business Ideas and Opportunities

Lessons

Senior 4 · Entrepreneurship

Business Ideas and Opportunities

4 lessons

Lesson 2 of 4

Characteristics of viable business ideas

25 min

Case: three ideas, one small fund

A youth savings group in Gakenke District has Frw 1.5 million to lend to one member's business. Three members present their ideas:

Mugisha: a shop selling imported designer sneakers, because "young people love brands".
Ingabire: a smartphone app that tells farmers the day's crop prices, because "everyone has a phone".
Byiringiro: bottled juice made from tree tomatoes (ibinyomoro) that farmers in the area sell cheaply at harvest, because "the fruit is here and the schools nearby have no juice supplier".

The group's treasurer says: "All three ideas are good. Only one is viable for us." (Illustrative case: the people and figures are invented.)

Think about it: what questions would you ask each member before lending them the money?

Definition

Viable business idea: an idea that can be turned into a business that survives and grows, because customers want it and will pay for it, it can be carried out with the skills and resources available, and its income covers all its costs and leaves a profit, legally and acceptably.

Example: tree-tomato juice sold to nearby schools, if the numbers show it covers its costs.

Three lenses: desirable, feasible, viable

Designers and innovators often test an idea through three lenses, a framework made popular by the design firm IDEO. An idea worth starting sits where all three overlap.

The characteristics of a viable idea

Characteristic	The test question	Applied to the juice idea
Meets a real need (demand)	Is there a problem that enough people want solved?	Schools and shops nearby have no local juice supplier
Customers able and willing to pay	Can the buyers afford it, and will they pay this price?	Schools buy drinks for events; families buy at the market
Profitable	Does the price cover all costs and leave a profit?	Tested with a break-even calculation (Worked example 1)
Fits the entrepreneur	Does it match my skills, interests and experience?	Byiringiro has worked in his aunt's juice kitchen
Resources available	Can I obtain the capital, raw materials, equipment and technology?	Fruit grows locally; a blender and bottles are affordable
Competitive advantage	Why will customers choose me rather than others?	Fresh, local, cheaper than imported juice
Legal and ethical	Is it allowed, and can it get the permits it needs?	Processed food needs hygiene and quality approvals
Sustainable	Will demand last, and is it acceptable for society and the environment?	Fruit is seasonal: needs a plan for the dry months; bottles should be returnable
Manageable risk	If it fails, can I survive the loss?	Small start: one blender, sales to two schools first

Tip

Viability is decided by numbers, not enthusiasm. Whenever a question asks whether an idea is viable, calculate something: the price against the cost, the break-even quantity, or the number of buyers. A judgement backed by a calculation earns more marks than one backed by adjectives.

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Definition

Break-even point: the number of units a business must sell in a period so that total revenue exactly equals total costs, giving neither profit nor loss. It uses fixed costs (costs that do not change with output, such as rent) and variable cost per unit (costs for each unit made, such as fruit and bottles):

\text{Break-even quantity} = \frac{\text{Fixed costs}}{\text{Price per unit} - \text{Variable cost per unit}}

The bottom line, price minus variable cost, is the contribution each unit makes towards the fixed costs.

Worked example 1: is the juice idea profitable?

Byiringiro's fixed costs are Frw 180,000 a month (rent of a small kitchen, a helper's wage and the cost of the equipment spread over its life). A bottle sells for Frw 500, and the fruit, sugar, bottle and label cost Frw 300 per bottle. Two schools have promised to buy 40 bottles each per school day, and the market adds about 15 a day. There are 22 selling days in a month. Is the idea viable? (Illustrative figures.)

Contribution per bottle:

500 - 300 = 200 \ \text{Frw}

Break-even quantity per month and per day:

\frac{180\,000}{200} = 900 \ \text{bottles a month}, \qquad \frac{900}{22} \approx 41 \ \text{bottles a day}

Expected sales and profit:

(40 + 40 + 15) \times 22 = 95 \times 22 = 2\,090 \ \text{bottles a month}

\text{Profit} = 2\,090 \times 200 - 180\,000 = 418\,000 - 180\,000 = 238\,000 \ \text{Frw a month}

Judgement: expected sales are more than twice the break-even quantity, so even if one school stops buying (sales of 55 a day), the business still covers its costs. On these figures the idea is viable, provided the fruit can be supplied in the dry months.

Worked example 2: why the other two ideas fail

Designer sneakers: desirable to some young people, but few in a rural area can pay brand prices; Frw 1.5 million buys very little stock; well-known shops in Kigali compete; fakes raise legal and ethical problems. Weak on ability to pay, resources and competitive advantage.
Price app: farmers do want prices, but Ingabire cannot build an app herself, paying a developer would cost more than the fund, and farmers are unlikely to pay for information they can get free by calling a trader. Weak on feasibility and willingness to pay. It might suit a larger organisation, not this fund.

Warning

Three traps. (1) "Everyone will buy it": no product is bought by everyone; name the customers and count them. (2) Confusing revenue with profit: selling a lot at a price below cost loses money faster. (3) Ignoring the law: an idea that needs a licence or quality approval it cannot get is not viable, however profitable it looks on paper.

Swiss Innovation Booster (Innosuisse), "What are the risks in innovation? Learn about desirability, viability and feasibility". Watch how each lens is treated as a risk to be tested, then apply the three lenses to an idea of your own.

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Practice

Define a viable business idea and list six characteristics of one.
Explain the difference between an idea being desirable, feasible and viable.
A bakery has fixed costs of Frw 240,000 a month. A loaf sells for Frw 1,000 and costs Frw 700 to make. Calculate the break-even quantity per month.
In question 3, the bakery expects to sell 1,500 loaves a month. Calculate the expected profit and the margin of safety (expected sales minus break-even sales).
Explain why "competitive advantage" is a characteristic of a viable idea. Give a local example.
Assess the viability of a mobile phone-repair stall at a busy taxi park, using at least four characteristics.
"An idea that makes a profit is always a viable idea." Evaluate this statement.

Show answersHide answers

An idea that can become a business that survives and grows. Any six: meets a real need; customers able and willing to pay; profitable; fits the entrepreneur's skills; resources available; competitive advantage; legal and ethical; sustainable; manageable risk.
Desirable: customers want it and will pay. Feasible: the entrepreneur can make and deliver it with the skills, technology and resources available. Viable: income covers all costs and leaves a profit.
Contribution $= 1\,000 - 700 = 300$ Frw. Break-even $= \frac{240\,000}{300} = 800$ loaves a month.
Profit $= 1\,500 \times 300 - 240\,000 = 450\,000 - 240\,000 = 210\,000$ Frw. Margin of safety $= 1\,500 - 800 = 700$ loaves.
Customers have choices; without a reason to choose this business (lower price, better quality, convenience, a unique product), sales will go to competitors. Example: a mill that is open on Sundays when others are closed.
Demand: many passengers and drivers with phones. Ability to pay: small repairs are affordable. Skills: the owner needs repair training. Resources: tools and spare parts cost little; a small space at the park. Competition: other repairers may be present, so quality and speed matter. Legal: a trading licence and permission from the park. Overall likely viable if the owner has the skills.
Disagree in part: profit is necessary but not sufficient. An idea may be profitable but illegal, harmful to health or the environment, dependent on a short-lived fashion, or beyond the owner's skills and capital. A viable idea must also be legal, ethical, sustainable and feasible.

Quick check

Key points

A viable idea is desirable (customers want it and will pay), feasible (you can do it) and viable (it makes a profit), and is also legal, ethical and sustainable.
Test each characteristic with a question: demand, ability to pay, profit, fit, resources, advantage, legality, sustainability, risk.
Break-even quantity $= \frac{\text{fixed costs}}{\text{price} - \text{variable cost}}$ ; compare it with expected sales.
Revenue is not profit, and "everyone will buy it" is not evidence.

Sources and credits

Image: Ibinyomoro byasaruwe mu Rwanda, IGANZE, 2025, via Wikimedia Commons, CC0 1.0.
Video: What are the risks in innovation? Learn about desirability, viability and feasibility, Swiss Innovation Booster powered by Innosuisse, embedded from YouTube.

Written by Ganzaa: the Gakenke savings-group case, the three-lens diagram, the tables, the worked examples and the practice items. The people and figures are illustrative (2026).

1Case: three ideas, one small fund

2Three lenses: desirable, feasible, viable

3The characteristics of a viable idea

Case: three ideas, one small fund

Three lenses: desirable, feasible, viable

The characteristics of a viable idea