ENTR 3111 - FeasibilityStudy

What Is Feasibility Analysis?

• Definition: The process of determining the viability of a business idea.

• Purpose: Conduct a preliminary evaluation to ascertain if the business idea is worth pursuing.

When To Conduct a Feasibility Analysis

• Timing: Conduct early in thinking, to screen ideas and avoid excessive resource expenditure.

• Components: A properly conducted feasibility analysis includes four components.

Feasibility Analysis Process

• Proceed with Business Plan: If the analysis is positive in all areas:

  • Product/Service Feasibility

  • Industry/Target Market Feasibility

  • Organizational Feasibility

  • Financial Feasibility

• Drop or Rethink: If negative in one or more areas.

Forms of Feasibility Analysis

• Types:

  • Product/Service Feasibility

  • Organizational Feasibility

  • Industry/Target Market Feasibility

  • Financial Feasibility

Outline for a Comprehensive Feasibility Analysis

• Part 1: Product/Service Feasibility

  • A. Product/Service Desirability

  • B. Product/Service Demand

• Part 2: Industry/Target Market Feasibility

  • A. Industry Attractiveness

  • B. Target Market Attractiveness

• Part 3: Organizational Feasibility

  • A. Management Prowess

  • B. Resource Sufficiency

• Part 4: Financial Feasibility

  • A. Total Start-Up Cash Needed

  • B. Financial Performance of Similar Businesses

  • C. Overall Financial Attractiveness of the Proposed Venture

• Overall Assessment

Product/Service Feasibility Analysis

• Purpose: Assess the overall appeal of the business idea.

• Significance: Ensure alignment with what potential customers desire.

• Components:

  • Product/Service Desirability

  • Product/Service Demand

Product/Service Desirability

• Questions to Consider:

  • Does it make sense?

  • Is it timely and addressing a market gap?

  • Are there fatal flaws?

• Administering a Concept Test

  • Definition: A concept statement to gather feedback on business viability which is about one page can can be distributed to people to gain feedback on the business idea.

  • Benefits: Helps entrepreneurs gauge product/service viability and obtain enhancement suggestions.

Product/Service Demand

• Steps to Assess Demand:

  • Face-to-Face Conversations with Potential Customers

    • Importance: Direct feedback on the product/service concept.

    • Outcome: Understand customer needs and improve ideas based on responses.

  • Utilizing Online Tools (e.g., Google AdWords, Landing Pages)

    • Tools: Online advertising, landing pages to explore customer interest.

    • Expected Outcome: Measure interaction and engagement with potential buyers.

• Additional Online Resources

  • Examples:

    • Feedback sites (Foundersuite, Quirky)

    • Market Research (CrowdPicker, Google Trends)

    • Surveys (Survey Monkey)

    • Q&A Platforms (Quora)

Industry/Target Market Feasibility Analysis

• Purpose: Assess appeal of the industry and target market.

• Definition of Industry: A group of firms providing similar products/services.

• Components:

  • Industry Attractiveness

  • Target Market Attractiveness

Industry Attractiveness

• Characteristics of Attractive Industries:

  • Young industries, early lifecycle stages, fragmented instead of concentrated, etc.

• Important Traits:

  • Growth vs. Shrinkage: Growing industries are more attractive.

  • Necessity of Product: Industries providing essential goods/services are preferable.

Target Market Attractiveness

• Challenge: Identify a market large enough to sustain business but small enough to limit competition.

• Assessment Complexity: Requires creativity in gathering information.

Organizational Feasibility Analysis

• Purpose: Determine sufficiency of management expertise and resources for business success.

• Focus: Non-financial resources.

• Components:

  • Management Prowess

  • Resource Sufficiency

Management Prowess

• Evaluation Factors: Passion and expertise of management team.

• Importance: Understanding of target markets is critical.

Resource Sufficiency

• Assessment Goal: Ensure availability of critical non-financial resources for business launch.

• Method: List 6 to 12 essential non-financial resources.

• Examples of Nonfinancial Resources:

  • Affordable office/lab space.

  • Key management and support personnel.

  • Ability to form partnerships and secure intellectual property protection.

Financial Feasibility Analysis

• Purpose: Final component of feasibility analysis.

• Focus: Conduct preliminary financial assessments.

• Components:

  • Total Start-Up Cash Needed

  • Financial Performance of Similar Businesses

  • Overall Financial Attractiveness

Total Start-Up Cash Needed

• Evaluation Focus: Total cash requirement for initial sales.

• Action: Create a budget detailing anticipated capital and operating expenses.

Financial Performance of Similar Businesses

• Estimation Method: Compare with established businesses for financial insight.

• Data Sources: Industry reports, observational research.

Overall Financial Attractiveness of the Proposed Venture

• Overview: Various financial factors help assess business opportunities.

• Importance: While estimates are key at this stage, they guide feasibility evaluation.

• Key Financial Factors:

  • Rapid sales growth potential.

  • High recurring revenue likelihood.

  • Capability to forecast income and expenses reliably.

  • Access to financing for business growth.

  • Opportunities for investor exit.

First Screen

• Template Access: A tool for initial feasibility assessment.

• Next Steps: If favorable results occur, entrepreneurs should formulate a business model.

Customer Persona

• Persona Name

• Background:

  • Role and company information

  • Relevant details such as education and hobbies

• Demographics:

  • Gender, Age Range, Household Income, Urbanicity

• Identifiers:

  • Buzz words and mannerisms

  • Method for data collection: administering surveys to target audience.