FEASIBILITY PLANNING

Prepared By:

Nijaz N

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.

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

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

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.

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

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

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?”

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

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.

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

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.

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