Feasibility Planning

Chapter # 3

Chapter outline
CH # 3

Fundamentals of Feasibility Planning

The Business Plan

What is Feasibility Planning?

A feasibility study is an analysis of the

viability of an idea through a disciplined

and documented process of thinking
through the idea from its logical beginning
to its logical end.

Helps answer the question of whether to

go forward with the business idea.

What is Feasibility Planning?

A feasibility study provides an

function that helps answer

Investigating

Is the project feasible?

Can it be done?
Does it make sense?
Should we proceed with the proposed project
idea?

A feasibility study should be conducted to

determine the viability of an idea BEFORE

proceeding with the development of a
business.

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

Levels of Feasibility Study

1- Market Feasibility
Industry description.
Industry competitiveness.
Market potential
Access to market outlets.
Sales projection

Levels of Feasibility Study

2- Technical Feasibility
Determine facility needs.
Suitability of production technology.
Availability and suitable of site.
Raw materials.
Other inputs.

3- Financial / Economic Feasibility

Estimate Expected Costs and Revenue

Estimate the Profit Margin and Expected Net Profit
Estimate the sales or usage needed to break-even
Estimate the returns under various production, price and
sales levels to create a sensitivity analysis
Benchmark against industry averages and/or
competitors
Identify limitations or constraints of the economic
analysis
Project expected cash flow during the start-up period
Project income statement, balance sheet when
reaching full operation

Why do a Feasibility Study?

Provide a thorough examination of all issues 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
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

What is a Feasible Business?

A feasible business venture is one where

the business will generate adequate cash flow

and profits,
the business will withstand the risks it will
encounter,
the business will remain viable in the longterm, and
the business will meet the goals of the
founders.

Feasibility Study vs.

Business Plan
Feasibility study answers the bottom line

questionIs 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

Feasibility Study vs.

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
sidegoals and objectives of the planned
business venture

What is a Business Plan?

A Business Plan summarizes the plan of action

after a business idea has been determined
feasible through the Feasibility Study.
A Business Plan provides a Planning function
A Business Plan outlines the actions needed to
take the proposal from idea to reality
A Business Plan tells How your business will be
created and Why it will be successful
A Business Plan provides a road map for
strategic planning

Why Write a Business Plan?

Put the Pieces TogetherDo the pieces fit

together in a logical manner?
Create a Blueprint for Action
Focus Founders and/or Management Team
Obtain Financing
Attract Equity Investment
Attract Key Managers and Employees
Obtain Contracts
Create Joint Ventures, Mergers, Acquisitions

What is included in a Business Plan?

A Business Plan should be brief, concise & straight to

the point
Main Requirements May Include

Industry Description
Product / service Description
Market Size
Customer Base
Competitive Advantage
Business Location
Three years of Financial Projections
Monthly Tracking of First Year Financials
Management Experience and Profile
Other Sources of Cash, if any

The Parts of a Business Plan

Cover Page

Market Analysis

Title Page

Competitive Analysis

Table of Contents

Marketing Plan

Executive Summary

Operations Plan

Management Plan

Organizational Plan

Company Description

Financial Plan

Product and Service Plan

Growth Plan

Mission and Vision Statements

Contingency Plan

Industry Overview

Supporting Documents

Executive Summary
To save time, investors
and lenders rely on the
executive summary to
help them decide
whether the business
plan is worth pursuing.

executive summary a
brief recounting of the key
points contained in a
business plan .

The executive
summary should
include the most
important information
from each section of
the business plan.

Management Team
Plan
The management team presents your
qualifications and those of any partners.
You must describe how your management
team has the capabilities to execute your
business plan.

Company Description
The company description section of the
business plan outlines the companys
background information and basic business
concept.

Product and Service Plan

In the product and service plan section
of the business plan, you present the
nature of your business and the
unique features of the product or
service.

Main Features of the product including:

Branding, Trade marks, Variants, Packaging,
Support services, Warranties, Prices & other
offers.

Company Vision & Mission

The vision statement
and mission statement
state the guiding
principles by which a
company functions.

vision statement a
declaration of the scope
and purpose of a
company
mission statement a
declaration of the specific
aspirations of a company,
the major goals for which
it will strive

Industry Overview
The industry overview section of the
business plan presents your research into
the industry, those companies providing
similar, complementary, or supplementary
products or services.

Competitive Analysis
The competitive analysis section of the
business plan should demonstrate that the
proposed business has a advantage over
its competitors.
Main Competitor
Competitive Position
Competitive Advantage

Marketing Plan
A marketing plan discusses how a
company plans to make its customers
aware of its products or services.
A marketing plan also describes the
market niche, pricing, company image,
marketing tactics, a media plan, and a
marketing budget.

Production Plan
Details relating to How
Product will be Manufactured?
Detail about all Processes,
Raw Materials, Inventory,
Technology, Formula, Quality
control and other production
related issues.

Operational Plan
The operational plan
describes all the
processes involving the
production and delivery of
the product or service.
The operational plan
describes the
distribution channel
of the product or service.

distribution channel
the means by which a
product or service is
delivered to the customer
direct channel the means of
delivering a service or product
directly to the customer, such
as via a Web site
indirect channel the means
of delivering a service or
product indirectly to the
customer, such as through a
wholesaler

Organizational Plan
The organizational plan section of a
business plan looks at the people aspects
and the legal form of the business.
It also describes the roles and
compensation of key management
personnel and important employment
policies.

Financial Plan
The financial plan presents forecasts for the
future of the business.
Financing Decisions: Ratio of Equity & Debt
Financing.
Financial statements. Financial projections,
Forecasts, Budgets and other important
documents related to company finances.
Plan for repayment of Loans / Exit strategy

Growth Plan
The growth plan describes how the
business will expand in the future.
Investors and lenders like to see that a
business has plans to grow in a planned
and controlled way.

Contingency Plan
The contingency plan section of the
business plan looks at the risks to
business, such as changing economic
conditions and lower-than-expected sales.
It then suggests ways to minimize the
risks.

Who is Target of Business Plan?

Stakeholder

Issues to Emphasize

Banker

Cash-Flow, Assets, Solid

Growth

Investor

Fast Growth Potential

Strategic Partner

Synergy, Proprietary

Large Customers

Stability, Service

Key Employees

Security, Opportunity

The Electronic Entrepreneur

The E-Business Business Plan
A good business plan is as important for an
e-business as it is to any other business.
An E-business plan should include the
following:
timeline
functionality
style

metrics
hardware

E-Business Plan
Functionality
the way a product or service works, such as a Web sites features

Launch
the first date on which a Web site is on the Internet

Metrics
methods used to measure activity and progress, such as those on a
Web site; metrics software can measure number of visitors, time of
day the site is most active, and which products receive the most hits

Web host
a business that provides server space and file maintenance services for Web
sites controlled by businesses that do not have their own Web servers

Web server
a computer that delivers Web pages

Common Mistakes in Preparing

Business Plans
projecting exaggerated growth levels

trying to be an expert in all areas

claiming performance above industry averages

underestimating the need for capital

Sources of Business Plan

Information
Government Support services
Small Business Promotion Authorities
Company Websites
Online Databases
Private Research Firms
Industry & Trade Associations
Chamber of Commerce