Most projects do not fail suddenly. Their decline begins before the doors ever open to customers. During the set-up phase, decisions are made that seem simple or self-evident, yet they shape the project's fate for years and are hard to reverse once money has been spent and contracts signed.
In this article we look at three wrong decisions we see repeatedly among entrepreneurs in Oman and elsewhere, explain why they seem logical at the time, and show how they can be replaced with decisions grounded in analysis.
Why focus on the pre-launch stage?
A decision made during set-up is cheap to correct. Changing a location on paper costs nothing, while changing it after fit-out, decoration and signing a lease can consume a large share of the capital. An hour of analysis before launch is worth months of remedial work afterwards.
The idea can be summarised in a simple table:
| Stage | Cost of correcting a decision | Flexibility of options |
|---|---|---|
| Idea and study | Very low | Wide |
| Contracting and fit-out | Medium to high | Limited |
| Actual operation | High | Very narrow |
Decision one: starting on enthusiasm instead of validation
What does this decision look like?
The founder sees a similar project succeed, or notices strong demand for a product, and decides to jump straight in. Friends and family are consulted, they offer encouragement, and the founder takes this as confirmation that a market exists.
Why is it wrong?
Because liking an idea is not the same as demand for it, and the success of an existing business does not necessarily mean there is room for a new one on the same terms. The successful business you see may have a better location, cheaper supply relationships, or a customer base it has built over years.
Moreover, the opinions of people close to you are naturally coloured by courtesy. Someone who tells you "great idea" carries no obligation to buy. The real market votes with its money, and it does not flatter.
The practical alternative
- Test demand with specific questions: Who will buy? How often? At what price? And why would they leave their current alternative?
- Analyse competitors by name, location, price and weaknesses.
- Start with a preliminary study that determines whether the idea merits investment in a comprehensive study; we explain the difference between the two in our article Preliminary vs. Comprehensive Feasibility Studies.
Decision two: costing the set-up and forgetting the cost of staying alive
What does this decision look like?
The owner adds up the costs of equipment, decoration and licences, raises the amount, and then opens the business with little cash in the bank, assuming that revenue will cover expenses from the first month.
Why is it wrong?
Because revenue takes time to grow, while rent, salaries and electricity start immediately. Some customers, especially corporate clients, pay on credit, so cash arrives late even when sales are good. This is what is known as working capital, and it is the budget item most often forgotten.
A hypothetical example
A specialty cafe with a set-up cost of OMR 35,000 and fixed monthly operating expenses of OMR 4,000.
- If we assume revenue covers 40% of expenses in the first month, then rises gradually until it covers them in full by the sixth month,
- the cumulative shortfall over those months comes to around OMR 7,200, before accounting for any unexpected expenses.
If that amount is not available, the owner may be forced to seek urgent financing on unfavourable terms, or to close even though the business was on its way to breaking even. The figures here are hypothetical and for illustration only.
The practical alternative
- Prepare a monthly cash flow statement for at least the first year, not just an annual one.
- Calculate the number of months to cash break-even, and add a safety margin.
- Test a scenario in which revenue is delayed, which we cover in detail in our article on sensitivity and scenario analysis.
Decision three: choosing the location and segment on emotion
What does this decision look like?
The location is chosen because it is close to the owner's home, because the rent is low, or because a family property happens to be available. The target segment is defined in broad terms such as "all segments of society".
Why is it wrong?
Because in many businesses the location is not just an address; it is part of the product itself: ease of access, parking, foot traffic, and proximity to the target segment. Low rent may be low for a good reason. A broad segment in practice means no segment at all, and it leaves pricing, marketing and design all unfocused.
The same mistake extends to choosing the market as a whole. An owner may be drawn to an activity that is popular in one governorate without checking whether the population or visitor numbers in their own area can absorb another business at the same costs. An activity may work in Muscat yet not be viable on the same terms in a smaller wilayat, or the reverse, if the smaller area has unmet demand.
Suggested criteria for comparing locations
| Criterion | Questions to answer |
|---|---|
| Proximity to the target customer | Do your customers live, work or pass through this area? |
| Ease of access and parking | Can customers get there and park without difficulty? |
| Surrounding competition | Do nearby competitors draw traffic, or split it? |
| Total occupancy cost | Rent plus service charges, fit-out, lease term and renewal conditions |
| Regulatory suitability | Does the property's permitted use allow this type of activity under the applicable requirements? |
The practical alternative
- Define your customer precisely: age, income, lifestyle, place of residence or work, and reason for buying.
- Compare at least two or three locations against written, weighted criteria.
- Visit the sites at different times of day and of the week, and observe the actual traffic.
What the three decisions have in common
Look closely at the three decisions and you will find they share one thing: relying on assumption rather than validation. Enthusiasm assumes demand exists, a pared-down budget assumes revenue will come quickly, and an emotional choice assumes the location will attract customers on its own.
At its core, a feasibility study is not a document produced to satisfy some authority; it is a tool for turning assumptions into tested hypotheses. If you want to explore how these decisions later turn into real losses in the market, read our article on why projects lose money in the market.
Quick test questions before deciding to launch
Before you sign any contract or pay any significant sum, answer these questions in writing:
- What documented evidence is there that someone will pay for my product at the price I am assuming?
- How many months can the business survive if revenue comes in at half the forecast?
- Why this particular location, and which alternatives did I rule out, and why?
- Who exactly is my first customer, and where will I find them?
- What would make me stop or modify the project, and have I defined that in advance?
These questions are not meant to discourage initiative but to protect it. Many successful projects were not carried out in their original form; they were modified after testing: the location changed, the segment narrowed, or the initial scale was reduced so the business could expand later from its own profits. An owner who adjusts the idea on paper saves both time and money, while others pay for the same adjustment after opening, usually under pressure from cash shortages and existing commitments.
It is also useful to put your answers to an impartial party with no reason to flatter you, whether a specialist adviser or someone experienced in the same line of business, because the founder's eye naturally tends to see what supports the idea.
If you find any of these questions hard to answer, that is a sign the project needs further study before implementation.
Conclusion
The three decisions we have covered, namely starting on enthusiasm without validation, neglecting the cost of staying alive, and choosing the location and segment on emotion, are not rare mistakes. They are the most common precisely because they seem logical at the time. The good news is that correcting them before launch is possible and relatively inexpensive, provided enough time is set aside for analysis and testing. If you are on the threshold of a new project and want to base your decisions on solid ground, we are here to help: request your study.
Frequently asked questions
Can a project built on a wrong initial decision be rescued?
In many cases, yes, if the flaw is discovered early and the project is reassessed objectively. This may require changing the business model, the location or the target segment. What matters is that the correction does not come so late that cash runs out.
Do small projects really need a feasibility study?
Yes, but one scaled to their size. A focused preliminary study may be enough for a small project, while larger or externally financed projects need a comprehensive study. The mistake is to skip validation altogether on the grounds that the project is small.
Which of the three mistakes is the most dangerous, in your view?
Misjudging working capital is the most deceptive, because it does not show up on opening day but months later, when the business is up and running, expenses are fixed and revenue has not yet stabilised.
