26829833 Feasibility Study PR

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FEASIBILITY STUDY


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What is feasibility study?

As the name implies, a feasibility

study is an analysis ofthe viability

ofan idea. The feasibility study

focuses on helping answer the

essential question of should we

proceed withthe proposed

project idea? All activities ofthestudyare directedtowardhelping

answer this question.


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What is a feasible business venture?

A feasible business venture is one where the

business will generate adequate cash-flow and

profits, withstandthe risks it will encounter,

remain viable in the long-termandmeetthegoals ofthe founders. The venture can be a

new start-up business, the purchase ofan

existing business, an expansion of currentbusiness operations or a new enterprise for an

existing business


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Steps in Making a Feasibility study

A feasibility study is an important stepin business development. The success

ofa feasibility study is based on the

careful identification andassessment of

all ofthe important issues for businesssuccess. Depending on the business

project, additional items mayalso be

important. Remember, the basicpremise ofa feasibility study is to

determine the potential for success ofa

proposed business venture.


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Description of the Project

Identification and exploration of businessscenarios.

Identifyalternative scenarios or business models of

whatthe projectmay entail andhow itmight be

organized. These may come fromthe ideaassessment or marketassessmentthatyoumayhave

already completed.

Eliminate scenarios and business models thatdont

make sense.

Flesh-outthe scenario(s) andmodel(s) thatappear

to have potential for further exploration.


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Definition of the project and alternativescenarios and models.

Listthe type and quality ofproduct(s) or

service(s) to be marketed.

Outline the general business model (ie.how

the business will make money).

Include the technical processes, size, location,

kind of inputs

Specifythe time horizon fromthe time the

project is initiateduntil it is upand running at

capacity.


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Relationship to the surrounding geographicalarea.

Identify economic and social impact on local

communities.

Identify environmental impact on the

surrounding area.


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Market Feasibility

Industry description. Describe the size and scope ofthe industry,

marketand/or market segment(s).

Estimate the future direction ofthe industry,

marketand/or market segment(s).

Describe the nature ofthe industry, market

and/or market segment(s) (stable or going

through rapid change and restructuring).

Identifythe life-cycle ofthe industry, market

and/or market segment(s) (emerging, mature)


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Market Feasibility

Industry competitiveness. Investigate industry concentration (few large

producers or many small producers).

Analyze major competitors.

Explore barriers/ease of entry of competitors

into the market or industry.

Determine concentration and competitiveness

of input suppliers andproduct/service buyers.

Identifyprice competitiveness of

product/service.


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Market Feasibility

M

arket potential. Will the product be sold into a commodity or

differentiatedproduct/service market?

Identifythe demandandusage trends ofthe market

or market segment in whichthe proposedproduct orservice will participate.

Examine the potential for emerging, niche or

segmentedmarket opportunities.

Explore the opportunityandpotential for a "branded

product".

Assess estimatedmarketusage andpotential share

ofthe market or market segment.


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Market Feasibility

Sales projection. Estimate sales or usage.

Identifyandassess the accuracy ofthe

underlying assumptions in the sales

projection.

Project sales under various assumptions (ie.

selling prices, services provided).


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Market Feasibility

Access to market outlets.

Identifythe potential buyers ofthe

product/service andthe associatedmarketing

costs.

Investigate the product/service distribution

systemandthe costs involved.


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Technical Feasibility

Determine facility needs.

Estimate the size andtype of

production facilities.

Investigate the need for related

buildings, equipment, rolling-

stock


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Suitability of production technology.

Investigate and compare technology

providers.

Determine reliabilityand

competitiveness oftechnology

(proven or unproven, state-of-the-art).

Identify limitations or constraints of

technology


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Availability and suitability of site.

Access to markets.

Access to raw materials.

Access to transportation.

Access to a qualified labor pool.

Access to production inputs

(electricity, natural gas, water, etc.).


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Availability and suitability of site.

Investigate emissions potential.

Analyze environmental impact.

Identify regulatory requirements.

Explore economic development

incentives.

Explore community receptiveness to

having the business locatedthere.


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Raw materials.

Estimate the amount of raw materials

needed.

Investigate the currentand future

availabilityandaccess to raw

materials.

Assess the qualityand cost of raw

materials andmarkets of easilysubstituted inputs.


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Other inputs.

Investigate the availability of labor

including wage rates, skill level, etc.

Assess the potential to access and

attract qualifiedmanagement

personnel.


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Estimate the total capital

requirements.

Assess the "seed capital" needs ofthe

business projectandhow these needs

will be met.

Estimate capital requirements for

facilities, equipmentand inventories.

Determine replacement capitalrequirements andtiming for facilities

and equipment.

Estimate other capital needs.

Financial Feasibility


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Estimate the total capital

requirements.

Estimate start-up capital needs until

revenues are realizedat full capacity.

Estimate contingency capital needs

(construction delays, technology

malfunction, marketaccess delays,

etc. Estimate other capital needs.



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Estimate equity and credit needs.

Identifyalternative equity sources and

capital availability-- producers, local

investors, angel investors, venture

capitalists, etc.

Identifyandassess alternative credit

sources -- banks, government (ie.

direct loans or loan guarantees),grants, local and state economic

development incentives.



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Estimate equity and credit needs.

Assess expected financing needs and

alternative sources -- interest rates,

terms, conditions, covenants, liens,

etc.

Establishdebt-to-equity levels.



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Budget expected costs and returns of

various alternatives.

Estimate expected costs and revenue.

Estimate the profitmargin and

expected netprofit.

Estimate the sales or usage neededto

break-even.



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Estimate the returns under various

production, price and sales

levels. This may involve identifying"best case", "typical", and "worst

case" scenarios or more sophisticated

analysis like a Monte Carlo simulation.



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Assess the reliability ofthe underlying

assumptions ofthe financial analysis

(prices, production, efficiencies,marketaccess, marketpenetration,

etc.)

Create a benchmark against industryaverages and/or competitors (cost,

margin, profits, ROI, etc.).



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Identify limitations or constraints of

the economic analysis.

Determine project expected cash flow

during the start-upperiod.

Identifyprojectan expected income

statement, balance sheet, etc. whenreaching full operation.



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Organizational/Managerial Feasibility Business structure.

Outline alternative business model(s)

(how the business will make money).

Identifythe proposed legal structure

ofthe business.

Identifyanypotential joint venture

partners, alliances or other important

stakeholders.


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Organizational/Managerial Feasibility Business structure.

Identifyavailability of skilledand

experienced business managers.

Identifyavailability of consultants and

service providers withthe skills

neededto realize the project,

including legal, accounting, industry

experts, etc. Outline the governance, lines of

authorityanddecision making

structure.


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Organizational/Managerial Feasibility Business founders.

Are the people involved of

outstanding character?

Do the founders have the "fire in the

belly" requiredto take the projectto

completion?

Do the founders have the skills and

abilityto complete the project?


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Organizational/Managerial Feasibility Business founders.

What key individuals will leadthe

project?

Is there a reward system for the

founders? Is it based on business

performance?

Have the founders organized other

successful businesses?


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Study Conclusions

The study conclusions contain the

information you will use for deciding

whether to proceed with creating the

business. The major categories this

section should include are: Identifyanddescribe alternative

business scenarios andmodels.


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Study Conclusions

Compare and contrastthe alternatives

based on their business viability.


based on the goals ofthe producer

group.

Outline criteria for decision making

among alternatives.


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Study Conclusions


based on their business viability.


based on the goals ofthe producer

group.

Outline criteria for decision making

among alternatives.

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26829833 Feasibility Study PR

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