Feasibility Plan Intensive The goal of a feasibility plan is not to “sell” your idea. The goal...

Feasibility Plan Intensive

The goal of a feasibility plan is not to “sell” your idea. The goal of a feasibility plan is to help you decide WHETHER this is a venture you SHOULD pursue.

ESBM 3700Jan 15, 2003

1. Executive Summary• Highlights from each section.• Letter form…do not exceed 2 pages.

2. Product/Service• Section discusses and explains the exact

product/service to be offered and identifies the unique features and characteristics of the product or service.

3. The Market• Demonstrates the size of your market and what

portion is yours to own.

4. Price & Profitability• Section will tell you how much is will take to start the

business and if it can be profitable.

5. Plan for Further Action• Is it feasible and should you pursue the venture?

Sections of the Feasibility Plan

See chapter 8 of FastTrac Book

FastTrac: Business Mentor CD-ROM

The CD is designed to make your life easier…USE IT!

Product/Service Section

8 questions must be answered (see workbook p. 19)A critical question is: What new products/services (spinoffs)

could be developed to meet the ever changing market needs in this industry or others?

Focus groups are helpful here. The class as a focus group…

Differentiating your product/service from the competition

SEGMENTATION ANALYSIS

features

products

Your product

Competitor 1

Competitor 2

Competitor 3

Competitor 4

Feature 1 Feature 2 Feature 3 Feature 4 Feature 5

x

x x

x

xx

x x x

? ? ? ? ? ?…

This also helps determine competitive advantage for the Market Section.

The Market Section

Marketing consists of all the activities associated with: The identification of potential customers, Inviting those customers to buy the

product/service, and Reminding them to use the product or

service again.

8 questions to answer (see wkbk p. 24)

MARKETING BEGINS WITH AN INDUSTRY STUDY

Industry Study

Industry study is necessary for questions 1-3 in the market section.Where can you get data? FastTrac CD has sources (resourc2.pdf) Links on course page (

http://ucsu.colorado.edu/~mcmullej/links.htm) B-library (extensive entrepreneurship section

and databases for info) Stat USA Statistical Universe Colorado by numbers Lex-Nex

Assessing growth of the industry

Look at analyst reports.Think about economics… We’re in a recession…what will

happen to your product/service in a boom cycle.

Industry trends? Changes in technology. Changes in the economy.

Identifying the Target Market

“Everybody” is not a target.Upper and Middle class is not a target.“All people that eat”…not a good target for a restaurant.

Develop a customer profile: Potential customers (demographics and psychographic

info) Identify the user, the buyer, the decision maker, the

influencer. Understand buying behavior.

Where, when, what, how, and why do potential customers purchase products/services?

Market Penetration

Most entrepreneurs underestimate their marketing budget by 100%.Sales forces…what type is best for you?

Direct sales (in-house) Sales agents (out-sourced) Lead blockers (hired away from competitor)

Direct Sales Force

Advantages: Owner control. More dedicated and loyal. Easier for sales meetings and communication.

Disadvantages: Higher cost through employee benefits, taxes. Training can be expensive. Support is expensive (supplies, clerical

support, telephones, laptops, cell phones).

Sales Agents

Advantages: Paid when they sell and after collection from

customers. No employee benefits. No sales force overhead.

Disadvantages: No control over the sales force. Agents will probably be selling other

products as well. Little loyalty to your company.

Lead Blockers

Advantages: Has a relationship with customers. Knows pricing policy of competitors. Has excellent product knowledge. Does not need training.

Disadvantages: Salary will be higher. May want equity position in company. Selling techniques are set…entrepreneur

cannot mold this person.

Advertising and Promotion to Penetrate Your Market

Media (trade & other)FliersSignsDirect MailTelemarketingInfomercialsDistributorsLicensing

Trade showsYellow PagesCouponsFax marketingE-mail marketingPostcardsInternetSweepstakes/contest

BE CREATIVE WITH A SMALL BUDGET.

Price & Profitability

Pricing is the #1 weakness of entrepreneurs

Price & Profitability Sections

Price ListSales EstimateCost of product/serviceGross Margin3-year operating expenses3-year operating statementStartup costsStartup expenses (includes capital expenditures)

Pricing Myth: Pricing Myth: Cost has Cost has everything to do with price.everything to do with price.

“It cost me $1 to make the product, so I’ll sell it at $2.

--------------------------------------------------You may be underestimating the

VALUE of your product…and sacrificing profit.

Factors that can influence Factors that can influence pricing:pricing:

The customer’s ego or self image.The location of the business.The level of competition.Seasonality.The nature of the marketplace.Cost to manufacture or deliver the product or service.

A good way to develop your price…

Determine max price that would have sufficient #s of customers willing to pay.

Determine absolute lowest price that could be charged and still make a sufficient profit.

PRICE RANGE

Compare this price range with direct competitors.• same range?• below?• above? (Is your added value evident to the customer?)

SEE ANNUAL STATEMENT STUDIES (reference in blibrary)

Contains balance sheets, income statements, and 16 widely used ratios for over 300 industries.

$$$ $$$

Startup Costs

See questions on page 42 of FT wkbk.Include 3-6 months of operating costs in your projected startup costs.Startup costs can include:

Lease (before opening)

Equipment (computers, furniture, fax, etc.)

Opening inventory

Deposits (telephone, lease, utilities)

Signage/Marketing/Advertising

Web registration, space

Licenses

Supplies

Training

Legal

Operating Statement (3-year)

Sales- COGSGross Margin- Marketing Expenses- Administrative Expenses- General ExpensesGross Profit

Rule of thumb: Target Gross Margin at 80%

How to get your point across in 30-seconds or less

Although the goal of a feasibility plan is not to “sell” your idea to someone else, the goal of a feasibility plan is to satisfy your curiosity sufficiently regarding whether you could “sell” the idea to someone else.

Example

Ex: A pitch by Thornton Mellon of Mellon’s Tall & Fat

Ex: “Galpin purposely bought a lot of motor homes. But all the rain kept many of our customers away. We’ve got too many motor homes. Buy them during our three-day sale. Save up to eighteen thousand dollars off our regular list price. The savings can pay for your vacation for years. You can take up to twelve years to pay; many have an 11.9% finance plan. Prices start at $16,996. See Friday’s L.A. Times sports section. Don’t wait forever. It’s the things you don’t do that you regret.” (p. 16.)

Finding Your Objective

Ask yourself the following questions: Why am I going there? What do I want to achieve? Why do I want to have that conversation? Why do I want to write that letter? Why do I want to meet with this person? Why do I want that interview? Why do I want to address this meeting?

Know Who You’re Talking To They want some good reasons why they should give you the

job. They want to see how much you know about the job. They want to know why you’d be better than other applicants. They want to know why you think you can do the job. They want to know how confident you are. They want to know what the job will mean to you. They want to see how you act under the pressure of the

interview. They want to know what your ambitions are. They want to see what kind of person you are. They want you to prove to them that you can do the job.

Find the Right Approach

What am I talking about? What’s the basis of my game plan? What’s the heart of what I will say? What’s the single best statement that will lead

me to what I want? Can I comfortably build a case around this

statement? What other vital statements will fit within or

relate to this one? Will this relate to the needs and interests of my

listener?

Finding Your Hook

What’s the most unusual part of your subject? Can you reduce it to one sentence?What’s the most interesting and exciting part of your subject? Can you reduce it to one sentence?What’s the most dramatic part? Can you reduce it to one sentence?What’s the most humorous part? Can you reduce it to one sentence?