Conducting a feasibility study and crafting a business

Conducting

a Feasibility Study

and

Crafting a Business PlanOmar El Hagar

Feasibility Analysis

The process of determining

whether an entrepreneur’s idea is

a viable foundation for creating a

successful business

Elements of a Feasibility Analysis

Financial Feasibility

Industry andMarket Feasibility

Product orService Feasibility

Industry and Market

Feasibility Analysis

To determine how attractive an industry is overall as a home

for a new business

To identify possible niches a small business can occupy

profitably

Five Forces Model

.

Rivalry among existing firmsSuppliers Buyers

Potential Entrants

Substitutes

Threat of new entrants

Bargaining Power ofsuppliers

Bargaining Power of buyers

Rivalry

Number of competitors is large or few (less than 5)

Competitors are not similar in size or capability

The industry is growing at a fast pace

The opportunity to sell a differentiated product or

service is present

Suppliers

Many suppliers sell a commodity product to the companies in it

Substitute products are available for the items suppliers provide

Companies in the industry find it eas to switch from one supplier to another

The items suppliers provide account for a relatively small portion of the cost of finished products

Buyers

Switching costs to competitors is high

Number of buyers is large

Customers demand differentiated products

Customers find it difficult to gather info on

suppliers costs etc

The items account for a relatively small portion of

the customers’ finished products

New Entrants

Advantages of economic scale are not present

Capital requirements to enter are low

Cost advantages are not related to company size

Buyers are brand-loyal

Governments do not restrict entry

Substitute Products

Quality substitute products are not readily

available

Prices of substitute products are not lower

Buyers’ cost of switching to substitute products is

high

Product or Service

Feasibility Analysis

Are customers wiling to purchase our goods and services?

Can we provide the product or service to our customers at a

profit?

Research Primary research

Customer surveys and

questionnaires

Focus groups

Secondary research

Trade associations and business directories

Direct mail lists

Demographic data

Census data

Forecasts

Market research

Articles

Local data

WWW

Trials

Prototypes: an original, functional model of a new

product that entrepreneurs can put into the

hands of potential customers so they can see it, test it and use it

In-home trials: a research technique that involves

sending researchers into customers’ homes to

observe them as they use the company’s product

or service

Financial Feasibility Analysis

Capital

Requirements

Estimated

Earnings

Return on

Investment

A Business Plan

A written summary of an entrepreneur’s proposed business venture, its operational and financial details, its marketing

opportunities and strategy, and its managers’ skills and abilities

3 Functions

Guides an entrepreneur

Attracts lenders and investors

Reality Test

Competitive Test

Value Test

Represents/reflects its creator

Elements of a Business

Plan Title Page and Contents

Executive Summary

Vision and Mission Statement

Company History

Business and Industry Profile

Business Strategy

Description of the Firm’s Product or Service

Marketing Strategy

Competitor Analysis

Description of Management Team

Plan of Operation

Pro Forma Financial Statements

The Loan or Investment Proposal

What Lenders and Investors

Look for in a Business Plan

Capital

Capacity

Collateral

Character

Conditions

Executive Summary

The company’s business model and basis for

competitive edge

The company’s target markets and the benefits its product or service will provide

The qualification of the founders and/or key

employees

The key financial highlights

Business and Industry

Profile

Overview of industry or market segment

Existing or anticipated profitability of the industry

Company’s general business goals

Company’s immediate objectives

Business Strategy

How to gain competitive edge

How to achieve the goals and objectives

Methods to satisfy KSFs of the industry

Description of Product or

Service

Overview of how customers will use it

Any patents, trademarks or copyright

Honest comparison with competition

Feature (descriptive fact about a product or service) vs

Benefit (what a customer gains from the product or service)

Description of production process, strategic raw materials,

sources, costs.

Marketing Strategy

Defining the target market

Who?

Where?

How many?

Why?

Proving that a profitable market exists

Showing customer interest

Documenting market claims

Marketing Strategy

Advertising

Market Size and trend

Location

Pricing

Distribution

Competitor Analysis

Each significant competitor

Advantage over each

Description of

Management Team

Qualifications of those with at least 20% ownership

Resumes

How to avoid primary reasons for business failures

Pro Forma Financial

Statements

Monthly for 3 years by quarter

3 sets: pessimistic, most likely, optimistic

Statement of assumptions

Loan or Investment

Proposal

Purpose of financing

Amount requested

Plans for repayment/exit strategy

Timetable for implementation

Evaluation of risks

Thank you all for your time