Feasibility planning

A feasibility study is valuable for:
Starting a new business
Expansion of an existing business
Adding an enterprise to an existing business
Purchasing an existing business.

1. FEASIBILITY PLANNING Prepared By : Nijaz N

2. FEASIBILITY PLANNING Is the process of determining if a business idea is viable. A feasibility study is valuable for: Starting a new business Expansion of an existing business Adding an enterprise to an existing business Purchasing an existing business.

3. FEASIBILITY PLANNING A feasible business will: Generate adequate cash flow and profits, Withstand risks, Remain viable in the long-term Meet the goals of the founders

4. Why do a Feasibility Study? Provide a thorough examination of all issues and assessment of probability of business success Give focus to the project and outline alternatives Narrow business alternatives Surface new opportunities through the investigative process Identify reasons NOT to proceed Enhance the probability of success by addressing and mitigating factors early on that could affect the project Provide quality information for decision making Help to increase investment in the company Provide documentation that the business venture was thoroughly investigated Help in securing funding from lending institutions and other monetary sources

5. Reasons Not to do a Study We already know it is feasible. We did a study a couple of years ago. Just a way for consultants to make money. The company selling us the equipment says it is feasible. Lets hire a general manager and have him do the study. Waste of time – we need to buy the site and begin construction.

6. Reasons to Do a Study Gives focus to the project. Narrows the business alternatives. Identifies new opportunities. Identifies reasons not to proceed. Provides valuable information for “go/no go” decision. Increases probability of business success by identifying weaknesses early. Provides documentation that the idea was thoroughly investigated. Helps attract funding from lenders, grant providers, etc. Helps attract equity investment

7. Data Sources for a Feasibility Assessment Data required for a feasibility study can come from primary or secondary sources Primary data can include formal interviews and surveys Collection of primary data can be expensive and time consuming Secondary data can include industry and trade publications, statistics of industry associations, and government agency reports

8. Levels of Feasibility Assessment A feasibility study of an idea is conducted at three levels Operational Feasibility “Will it work?” Technical Feasibility “Can it be built?” Economic Feasibility “Will it make economic sense if it works and is built?” “ Will it generate PROFITS?”

9. Steps for an Economic Feasibility Study Identify and Estimate all Capital Expenditures Identify and Estimate all Variable Costs related to the Proposed Business Venture Identify People and Skills required to operate Determine Wages, Salaries, and Benefits Identify and Estimate Project Related Costs Infrastructure development or improvements Advertising and Promotion Legal Fees Municipal & State Development taxes Identify and Estimate all Fixed Costs

10. Other Feasibility Study Outline Market Feasibility Industry description. Industry competitiveness. Market potential Access to market outlets.  Sales projection Technical Feasibility Determine facility needs. Suitability of production technology. Availability and suitable of site. Raw materials. Other inputs.

11. Feasibility Study v/s Business Plan Feasibility study answers the bottom line question—Is this venture going to make money? Feasibility study outlines and analyzes several alternatives or methods of achieving business success Feasibility study is conducted before a business plan Business plan is prepared only after the venture has been deemed to be feasible Business plan deals with only one alternative or scenario that is determined to be the “best” alternative Business plan considers the management side—goals and objectives of the planned business venture

12. Four Stage Growth Model Pre-Start-Up Stage Start-Up Stage Early Growth Stage Later Growth Stage The period during which entrepreneurs plan the venture and do the preliminary work of obtaining resources and getting organized prior to start-up The initial period of business when the entrepreneur must position the venture in a market and make necessary adjustments to assure survival A period of often rapid development and growth when the venture may undergo major changes in markets, finances and resource utilization The evolution of a venture into a large company with active competitors in an established industry when professional management may be important than entrepreneurial verve.

13. Elements in Feasibility Planning Executive Summary Venture defined, products or services identified, market characteristics (market size, location & customers), founders introduced with roles, financial summary (estimates of revenue & expense, founder’s equity, dept & capital needed). Business Concept Purpose of the venture, major objectives of founders, description of the distinct competency of the firm. Product / Service Function