Feasibility PlanningChapter # 3

Chapter outlineCH # 3

Fundamentals of Feasibility PlanningThe 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 Investigating function that helps answerIs 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 businessExpansion of an existing businessAdding an enterprise to an existing businessPurchasing an existing business

Levels of Feasibility Study1- Market Feasibility

Industry description. Industry competitiveness.Market potentialAccess to market outlets.Sales projection

Levels of Feasibility Study2- 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 RevenueEstimate the Profit Margin and Expected Net ProfitEstimate the sales or usage needed to break-evenEstimate the returns under various production, price and sales levels to create a sensitivity analysisBenchmark against industry averages and/or competitorsIdentify limitations or constraints of the economic analysisProject expected cash flow during the start-up periodProject income statement, balance sheet when reaching full operation

Why do a Feasibility Study?Provide a thorough examination of all issues of business successGive focus to the project and outline alternativesNarrow business alternativesSurface new opportunities through the investigative processIdentify reasons NOT to proceedProvide quality information for decision makingHelp to increase investment in the companyProvide documentation that the business venture was thoroughly investigatedHelp 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 long-term, andthe 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 successFeasibility 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 feasibleBusiness plan deals with only one alternative or scenario that is determined to be the best alternativeBusiness 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 functionA 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 successfulA 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 ActionFocus Founders and/or Management TeamObtain FinancingAttract Equity InvestmentAttract Key Managers and EmployeesObtain ContractsCreate Joint Ventures, Mergers, Acquisitions

What is included in a Business Plan?A Business Plan should be brief, concise & straight to the pointMain Requirements May IncludeIndustry DescriptionProduct / service DescriptionMarket SizeCustomer BaseCompetitive AdvantageBusiness LocationThree years of Financial ProjectionsMonthly Tracking of First Year FinancialsManagement Experience and ProfileOther Sources of Cash, if any

The Parts of a Business PlanCover Page Title PageTable of Contents Executive Summary Management PlanCompany Description Product and Service Plan Mission and Vision StatementsIndustry OverviewMarket Analysis Competitive AnalysisMarketing Plan Operations PlanOrganizational PlanFinancial PlanGrowth PlanContingency PlanSupporting Documents

Executive Summary 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.

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

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 companymission 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 CompetitorCompetitive PositionCompetitive 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?

StakeholderIssues to EmphasizeBankerCash-Flow, Assets, Solid GrowthInvestorFast Growth PotentialStrategic PartnerSynergy, ProprietaryLarge CustomersStability, ServiceKey EmployeesSecurity, Opportunity

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:timelinefunctionalitystyleThe Electronic Entrepreneur The E-Business Business Planmetricshardware

E-Business PlanFunctionality the way a product or service works, such as a Web sites featuresLaunch the first date on which a Web site is on the InternetMetrics 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 hitsWeb host a business that provides server space and file maintenance services for Web sites controlled by businesses that do not have their own Web serversWeb server a computer that delivers Web pages

Common Mistakes in Preparing Business Plansunderestimating the need for capital projecting exaggerated growth levelstrying to be an expert in all areasclaiming performance above industry averages

Sources of Business Plan Information Government Support servicesSmall Business Promotion AuthoritiesCompany WebsitesOnline Databases Private Research FirmsIndustry & Trade AssociationsChamber of Commerce