This document outlines the key components of a feasibility study for a project, including market feasibility, technical feasibility, financial feasibility, and organizational feasibility. It discusses what should be included in each section, such as an industry description, sales projections, material and labor requirements, start-up capital needs, and legal business structure. The purpose of a feasibility study is to determine if an idea is viable and worth pursuing by identifying potential issues and answering if the project will work.
This document outlines the key components of a feasibility study for a project, including market feasibility, technical feasibility, financial feasibility, and organizational feasibility. It discusses what should be included in each section, such as an industry description, sales projections, material and labor requirements, start-up capital needs, and legal business structure. The purpose of a feasibility study is to determine if an idea is viable and worth pursuing by identifying potential issues and answering if the project will work.
This document outlines the key components of a feasibility study for a project, including market feasibility, technical feasibility, financial feasibility, and organizational feasibility. It discusses what should be included in each section, such as an industry description, sales projections, material and labor requirements, start-up capital needs, and legal business structure. The purpose of a feasibility study is to determine if an idea is viable and worth pursuing by identifying potential issues and answering if the project will work.
Instructor I What Is Feasibility Study? • A feasibility study looks at the variability of an idea with an emphasis on identifying potential problems and attempts to answer one main question: will the idea work and should proceed with it? - it address things like where and how the business will operate. Importance of Feasibility Study Information you gather and present Feasibility Study will help you: • List in detail all things you need to make the business plan • Identify logistical and other business-related problems and solutions • Develop marketing strategies to convince a bank or investor that your business is worth considering as an investment • Serve as a solid foundation for developing your business plan. Components of a Feasibility Study • Description of the Business - the product or services to be offered and how they will be delivered • Market Feasibility - includes a description of the industry, current market, anticipated future market potential, competition, sales projections, potential buyers • Technical Feasibility - details how will deliver a product or service • Financial Feasibility - projects how much start-up capital is needed, sources of capital • Organizational Feasibility - defines the legal and corporate structure of the business • Conclusion - discusses how the business can succeed. Be honest in your business assessment because investors won’t just look at your conclusions they will also look at the data and will question your conclusions if they are unrealistic. I- Market Feasibility Study • All feasibility Studies should look at how things work, if they will work, and identify potential problems
Things to include in a market feasibility study:
Description of the Industry Current Market Analysis Competition Anticipated Future Market Potential Potential Buyers and Sources of Revenues Sales Projections • How to write an Industry Description? - give a brief one to two-paragraph description of the industry your business is categorized • Analyzing your Current Market - section that describes the current market for your product or service. If you are offering something so unique that there are few market statistics, you can either use related industry information or even conduct your independent study Ways to conduct your research for new ideas include: Polling internet forums Questionnaires address to targeted consumer groups or the general population, or even customer surveys.
• Anticipated Future Market
- section that should include narrative description, as well as attached spreadsheets, graphs, or tables to showing trends, statistics or projections. • Sales Projections - should factor in how much time and money will be invested into the business, the markets you will be targeting • Identifying Potential Customers, Clients, and Contract Sources It should include: A list of current customers, clients, and contract and the potential for new or renewed contracts Any sales leads that may generate new customers or clients A list of government contracting agencies with a brief description of what type of contracts they solicit, and how they pertain to your industry. A list of market types your currently, or intend to target such as senior citizens, working mothers, organizations, specialty retailers Elements of a Good Feasibility Study There are basically six parts to any effective Feasibility Study: 1. The Project Scope ` - used to define the business problem and/or opportunity to be addressed. - should be definitive and to the point - define the parts of the business affected either directly or indirectly, including the project participants and end-user areas affected by the project - project sponsor should be identified 2. The Current Analysis - used to define and understand the current method of implementation, such as a system, a product, etc. - the strength and weaknesses of the current approach are identified (pros and cons) • Analysis Paralysis- spending more time unnecessarily in Current Analysis 3. Requirements - requirements are defined depends on the object of the project’s attention. 4. The Approach - represents the recommended solution or course of action to satisfy the requirements. Points to consider: •Does the recommended approach satisfy the requirements? •Is it also a practical or viable solution? 5. Evaluation - examines the cost effectiveness of the approach selected. This begins with the analysis of the estimated total cost of the project. 6. Review - that if all of the preceding elements are then assembled into a Feasibility Study and a formal review is conducted with all parties involved. • Purposes of Review to substantiate the thoroughness and accuracy of the Feasibility Study To make a project decision (either approved/reject it. II- TECHNICAL FEASIBILITY STUDY - assesses the details of how you will deliver a product or service. i.e., materials, labor, transportation, where your business will be located, the technology needed, etc. - in some regards, it serves as a flow chart of how your products and services evolve and move through your business to physically reach your market. The Technical Feasibility must support your Financial Study • An experienced investor and lending institution will read your entire report and come to their conclusions. Therefore, it is critical that the technical and financial study reconcile. • Expenses for technical requirements should be noted in the technical feasibility study. i.e., materials and labor • Basic things that most businesses need to include in their technical feasibility study 1. Materials 2. Labor 3. Transportation or Shipping 4. Physical Location 5. Technology • Calculating Material Requirements in this section, you list the materials you need to produce a product or service, and where you will get those materials * things to include in your list of materials: - parts needed to produce a product - supplies (glue, nails, etc.) - other materials that are involved in producing or manufacturing your product • Calculating Labor Requirements - labor will be one of your biggest small business expenses. In this section you will list the number and types of employees needed to run your business now, and that may be employed in the future as your business grows. * You can break labor into categories if necessary: - Office Support - Production or Distribution - Professional Staff • Transportation and Shipping Requirements
* If you offer a perishable items, you will need
special overnight handling * If you offer services, how will sales personnel get to customers and client? • Here, list things that will affect how you get your goods and services to other businesses or individuals, including: Methods of transportation and shipping services that will be needed to get your products/services to a customer Special handling/ other unique arrangements required to transport your product Special handling/ other unique arrangements required to transport your product Any special permits that will required, including postal rate discounts Cars and other vehicles needed to conduct your business • Physical location of your Business * you might consider the following: 1. Warehouse Facilities 2. Your own Factory 3. Your own trucking Facility 4. Retail Storefront 5. Any other purchased or rented facilities needed to conduct your business Here, you should also discuss the pros and cons of where these facilities will be located. Do you need to have special parking considerations for customers?
• Technology Requirement to run your Business
- Cell phones - Computer hardware and software - Camera Systems - Manufacturing Equipment III- FINANCIAL FEASIBILITY STUDY - an assessment of the financial aspects of something. - it considers many things including start-up capital, expenses, and revenues.
* you should include at least three key things
in your comprehensive financial feasibility study: 1. Start-up Capital Requirements 2. Start-up capital resources 3. Potential returns for Investors • Start-up Capital Requirements - is how much cash you need to start your business and keep it running until it is self- sustaining. You should include enough capital funds (cash, or access to cash) to run the business for one to two years. • Finding Start-Up Capital Funding Sources -there are many ways to raise capital for your business, but no matter what route you take, investors are more likely to invest, banks are more likely to approve loans, and large corporations are more likely to give you contracts if you have personally invested in the business yourself • Potential Returns for Investors Feasibility Study - any business or individual willing to give you cash can be a potential investor.
• How should I Pay Back Investors
-Project total revenue, deduct business expenses, and then from the remaining amount, decide what percentage will be distributed to investors. IV- ORGANIZATIONAL STRUCTURE FEASIBILITY STUDY - The purpose of this study is to define the legal and corporate structure of the business. It may include professional background information about the founders and principals of the business and what skills they can contribute to the business. • Your organizational feasibility study should include: 1.Description of your business structure 2.Description of your organizational structure 3.Internal and external principles and practices of the business 4.Professional skills and resumes Description of Business Structure -contains a narrative description of the legal requirements for establishing your business and why you feel this is the right structure for your business. Organizational Structure - present this information with a organizational chart. Organizational Chart- shows the hierarchy or chain of command in your business. Professional Skills and Resumes - in this section, you give a brief overview of all founders, employees and partners involved in the business that will be continuing their skills and input into how the business is operated. -include a brief overview of how their particular skills will serve the business. You can also include accomplishments that relate to the business. V- CONCLUSION • Your conclusion should state the facts and information necessary to ensure that the reader clearly understands your points. • Your conclusions must be based on research and verifiable information, not on the simple belief that your information, not on the simple belief that your idea can work. • A strong conclusion will: 1. Discuss how the business can succeed. Explain why, using research-based information that is contained in your study rather than opinions. 2. If your business idea takes a nontraditional approach, explain why this will help you succeed. 3. Point the reader back to the location of any examples you give by listing section, page title and page number 4. Summarize the most important points of your study. Don’t attempt to cover minor or unimportant details. Keep your focus on the major selling points 5. A good summary and conclusion should be concise, no longer than one to two pages. It should be written in plain, understandable terms. 6. Don’t attempt to persuade the reader with jargon or an advertising pitch. FS findings should be objective and based on the research and information you’ve include. 7. Avoid using phrases like” I believe”, “in my opinion”, “I hope” or “I anticipate”. Do use strong, impersonal and affirmative phrases such as, “Research supports that this study industry will continue to grow.” 8. A summarized conclusion helps to develop an overall impression, but it should not replaced the supporting documents. Submit the summary as part of the feasibility study, not as a substitute for study. Plan your Work, Work your Plan.