Full Feasibility Analysis Essay
Full Feasibility Analysis From “Preparing Effective Business Plans” by Bruce R - Full Feasibility Analysis Essay introduction. Barringer |Note: |All fields can be expanded to provide additional space to respond to the questions. A copy of this template, along | | |with each of the assessment tools, is also available in PDF format at the authors’ Web site at | | |www. prenhall. com/entrepreneurship. | Introduction |A. |Name of the proposed business | |B. Name of the founder (or founders) | |C. |One paragraph summary of the business | Part 1: Product/Service Feasibility Issues Addressed in This Part |A. |Product/service desirability | |B. |Product/service demand | Assessment Tools Concept Statement Test Write a concept statement for your product/service idea. Show the concept statement to 5 to 10 people. Select people who will give you informed and candid feedback. • Attached a blank sheet to the concept statement, and ask the people who read the statement to (1) tell you three things they like about your product/service idea, (2) provide three suggestions for making it better, (3) tell you whether they think the product or service idea is feasible (or will be successful), and (4) share any additional comments or suggestions. • Summarize the information you obtain from the concept statement into the following three categories: * |Strengths of the product or service idea—things people who evaluated your product or service concept said they | | |“liked” about the idea | |* |Suggestions for strengthening the idea—suggestions made by people for strengthening or improving the idea | |* |Overall feasibility of the product or service concept—report the number of people who thing the idea is feasible, the| | |number of people who think it isn’t feasible, and any additional comments that were made | |* |Other comments and suggestions | Buying Intentions Survey Distribute the concept statement to 15 to 30 prospective customers (do not include any of the people who completed the concept statement test) with the following buying intentions survey attached. Ask each participant to read the concept statement and complete the buying intentions survey. Record the number of people who participated in the survey and the results of the survey here. • Along with the raw data recorded here, report the percentage of the total number of people you surveyed that said they would probably buy or definitely would buy your product or service if offered. This percentage is the most important figure in gauging potential customer interest. One caveat is that people who say that they intend to purchase a product do not always follow through, so the numbers resulting from this activity are almost always optimistic. Still, the numbers provide you with a preliminary indication of how your most likely customers will respond to your potential product or service offering. How likely would you be to buy the product or service described above? ______ Definitely would buy ______
Probably would buy ______ Might or might not buy ______ Probably would not buy ______ Definitely would not buy Additional questions may be added to the buying intentions survey. Conclusion (expand fields and report findings, in discussion form, for each area) |A. Product/service desirability | |B. |Product/service demand | |C. |Product/service feasibility (circle the correct response) | | |Not Feasible Unsure Feasible | |D. |Suggestions for improving product/service feasibility. | Part 2: Industry/Market Feasibility Issues Addressed in This Part |A. |Industry attractiveness | |B. Target market attractiveness | |C. |Timeliness of entry into the target market | Assessment Tools Industry Attractiveness • To the extent possible, assess the industry at the five-digit NAICS code level your potential business will be entering. Use a broader industry category (less NCICS digits) if appropriate (http://www. census. gov/epcd/www/naicstab. htm). • Assess the attractiveness of the industry the potential business plans to enter on each of the following dimensions. Industry Attractiveness Assessment Tool used to assess the broad industry, rather than the specific target market, you plan to enter) | | |Low Potential |Moderate Potential |High Potential | |1. |Number of competitors |Many |Few |None | |2. |Age of industry |Old |Middle aged |Young | |3. |Growth rate of industry |Little or no growth |Moderate growth |Strong growth | |4. |Average net income for firms in the |Low |Medium |High | | |industry | | | | |5. Degree of industry concentration |Concentrated |Neither concentrated nor |Fragmented | | | | |fragmented | | |6. |Stage of industry life cycle |Maturity phase or |Growth phase |Emergence phase | | | |decline phase | | | |7. |Importance of industry’s products |“Ambivalent” |“Would like to have” |“Must have” | | |and/or services to customers | | | | |8. Extent to which business and |Low |Medium |High | | |environmental trends are moving in | | | | | |favor of the industry | | | | |9. |Number of exciting new product and |Low |Medium |High | | |services emerging from the industry | | | | |10. |Long-term prospects |Weak |Neutral |Strong | Target Market Attractiveness • Identify the portion or specific market within your broader industry that you plan to target. • Assess the attractiveness of the target market on each of the following dimensions.
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Target Market Attractiveness Assessment Tool used to assess the specific target market, rather than the broader industry, you plan to enter) | | |Low Potential |Moderate Potential |High Potential | |1. |Number of competitors in target market|Many |Few |None | |2. |Growth rate of firms in the target |Little to no growth |Slow growth |Rapid growth | | |market | | | | |3. |Average net income for firms in the |Low |Medium |High | | |target market | | | | | |Low Potential |Moderate Potential |High Potential | |4. |Methods for generating revenue in the |Unclear |Somewhat clear |Clear | | |industry | | | | |5. |Ability to create “barriers to entry” for|Unable to create |May or may not be able to |Can create | | |potential competitors | |create | | |6. Degree to which customers feel satisfied |Satisfied |Neither satisfied or |Unsatisfied | | |by the current offerings in the target | |dissatisfied | | | |market | | | | |7. |Potential to employ low cost guerrilla |Low |Moderate |High | | |and/or buzz marketing techniques to | | | | | |promote the firm’s product or services | | | | |8. |Excitement surrounding new |Low Medium |High | | |product/service offerings in the target | | | | | |market | | | | Market Timeliness • Determine the extent to which the “window of opportunity” for the proposed business is open or closed based on the following criteria. • Determine the timeliness of entering a specific target market based on other criteria. Market Timeliness Assessment Tool | | |Low Potential |Moderate Potential |High Potential | |1. Buying mood of customers |Customers are not in a |Customers are in a moderate |Customers are in an | | | |buying mood |buying mood |aggressive buying mood | |2. |Momentum of the market |Stable to losing momentum |Slowly gaining momentum |Rapidly gaining momentum | |3. |Need for a new firm in the market with |Low |Moderate |High | | |your offerings or geographic location | | | | |4. Extent to which business and |Low |Medium |High | | |environmental trends are moving in favor | | | | | |of the target market | | | | |5. |Recent or planned entrance of large firms|Large firms entering the |Rumors that large firms may be |No larger firms entered | |
|into the market |market |entering the market |the market or are rumored | | | | | |to be entering the market | Conclusion (expand fields and report findings, in discussion form, for each area) |A. Industry attractiveness | |B. |Target market attractiveness | |C. |Market timeliness | |D. |Industry/market feasibility (circle the correct response) | | |Not Feasible Unsure Feasible | |E. |Suggestions for improving industry/market feasibility. | Part 3: Organizational Feasibility Issues Addressed in This Part |A. Management prowess | |B. |Resource sufficiency | Assessment Tools Management Prowess • Use the following table to candidly and objectively rate the “prowess” of the founder or group of founders who will be starting the proposed venture. Management Prowess Assessment Tool | | |Low Potential |Moderate Potential |High Potential | |1. |Passion for the business idea |Low |Moderate |High | |2. Relevant industry experience |None |Moderate |Extensive | |3. |Prior entrepreneurial experience |None |Moderate |Extensive | |4. |Depth of professional and social |Weak |Moderate |Strong | | |networks | | | | |5. |Creativity among management team |Low |Moderate |High | | |members | | | | |6. Experience and expertise in cash flow |None |Moderate |High | | |management | | | | |7. |College graduate |No college education |Some college education but not |Graduated or are | | | | |currently in college |currently in college | Resource Sufficiency • The focus in this section is on nonfinancial resources. Use the following table to rate your “resource sufficiency” in each category. • The list of resources is not meant to be exhaustive. A list of the 6 to 12 most critical nonfinancial resources for your proposed business is sufficient.
An explanation of the rating system used in the first portion of the table is as follows: |1 |Available | |2 |Likely to be available: will probably be available and will be within my budget | |3 |Unlikely to be available: will probably be hard to find or gain access to, and may exceed my budget | |4 |Unavailable | |5 |NA: not applicable for my business | Resource Sufficiency Assessment Tool |Ratings |Resource Sufficiency | | 1 2 3 4 5 |Office space | | 1 2 3 4 5 |Lab space, manufacturing space, or space to launch a service business | 1 2 3 4 5 |Contract manufacturers or outsource providers | | 1 2 3 4 5 |Key management employees (now and in the future) | | 1 2 3 4 5 |Key support personnel (now and in the future) | | 1 2 3 4 5 |Key equipment needed to operate the business (computers, machinery, delivery vehicles)| | 1 2 3 4 5 |Ability to obtain intellectual property protection on key aspects of the business | | 1 2 3 4 5 |Support of local and state government if applicable for business launch | | 1 2 3 4 5 |Ability to form favorable business partnerships | |Ratings: Strong, Neutral, or Weak | | | |Proximity to similar firms (for the purpose of knowledge sharing) | | |Proximity to suppliers | | |Proximity to customers | | |Proximity to a major research university (if applicable) | Conclusion (expand fields and report findings, in discussion form, for each area) |A. |Management prowess | |B. |Resource sufficiency | |C. |Organizational feasibility (circle the correct response) | | |Not Feasible Unsure Feasible | |D. Suggestions for improving organizational feasibility | Part 4: Financial Feasibility Issues Addressed in This Part |A. |Total startup cash needed | |B. |Financial performance of similar businesses | |C. |Overall financial attractiveness of the proposed venture | Assessment Tools Total Start-Up Cash Needed • The startup costs (which include capital investments and operating expenses) should include all the costs necessary for the business to make its first sale.
New firms typically need money for a host of purposes, including the hiring of personnel, office or manufacturing space, equipment, training, research and development, marketing, and the initial product rollout. • At the feasibility analysis stage, it is not necessary for the number to be exact. However, the number should be fairly accurate to give an entrepreneur an idea of the dollar amount that will be needed to launch the firm. After the approximate dollar amount is known, the entrepreneur should determine specifically where the money will come from to cover the startup costs. • The total startup cash needed can be estimate using the following table. Total Startup Cash Needed (to Make First Sale) Capital Investments |Amount | | | | |Property | | |Furniture and fixtures | | |Computer equipment | | |Other equipment | | |Vehicles | | |Operating Expenses |Amount | |Legal, accounting, and professional services | |Advertising and promotions | | |Deposits for utilities | | |Licenses and permits | | |Prepaid insurance | | |Lease payments | | |Salary and wages | | |Payroll taxes | | |Travel | | |Signs | | |Tools and supplies | | |Starting inventory | | |Cash (working capital) | | |Other expense 1 | | |Other expense 2 | | | | | |Total Startup Cash Needed = | | Comparison of the Financial Performance of Proposed Venture to Similar Firms • Use the following tables to compare the proposed new venture to similar firms in regard to annual sales (Year 1 and Year 2) and profitability (Year 1 and Year 2). Comparison of the Financial Performance of Proposed Venture to Similar Firms Assessment Tool Annual Sales Estimate of Proposed Venture’s |Explanation of How the Estimate | |Annual Sales—Year 1 |Was Computed | |Estimate of Year 1 Sales __________ | | |Summary: How proposed annual sales, on average, compares to similar firms| | |(circle one) | | |Below Average Average Above Average | | |Estimate of Year 2 Sales __________ | | |Summary: How proposed annual sales, on average, compares to similar firms| | |(circle one) | | |Below Average Average Above Average | | Net Income Estimate of Proposed Venture’s |
Explanation of How the Estimate | |Net Income—Year 1 |was Computed | |Estimate of Year 1 Net Income __________ | | |Summary: How proposed net income, on average, compares to similar firms | | |(circle one) | | |Below Average Average Above Average | | |Estimate of Year 2 Net Income __________ | | |Summary: How proposed net income, on average, compares to similar firms | | |(circle one) | | |Below Average Average Above Average | | Overall Financial Attractiveness of the Proposed Venture • The following factors are important in regard to the overall financial attractiveness of the proposed business. Assess the strength of each factor in the following table. Overall Financial Attractiveness of Proposed Venture Assessment Tool | | |Low Potential |Moderate Potential |High Potential | |1. |Steady and rapid growth in sales during the|Unlikely |Moderately likely |Highly likely | | |first one to three years in a clearly | | | | | |defined target market | | | | |2. High percentage of recurring income—meaning|Low |Moderate |Strong | | |that once you win a client, the client will| | | | | |provide recurring sources of revenue | | | | |3. |Ability to forecast income and expenses |Weak |Moderate |Strong | | |with a reasonable degree of certainty | | | | |4. Likelihood that internally generated funds |Unlikely |Moderately likely |Highly likely | | |will be available within two years to | | | | | |finance growth | | | | |5. |Availability of exit opportunity for |Unlikely to be |May be available |Likely to be available | | |investor if applicable |unavailable | | | Conclusion (report finding for each area) |A. |Total startup cash needed | |B. |Financial performance of similar businesses | |C. Financial feasibility (circle the correct response) | | |Not Feasible Unsure Feasible | |D. |Suggestions for improving financial feasibility | Overall Feasibility: Summary and Conclusion | |Overall Feasibility of the Business Idea |Suggestions for Improving the Feasibility | | |Based on Each Part | | |Product/Market Feasibility |Not feasible | | | |? | | | | | | |Unsure | | | |? | | | | | | | |Feasible | | | |? | | | | | |Industry/Market Feasibility |Not feasible | | | |? | | | | | | | |Unsure | | | |? | | | | | | |Feasible | | | |? | | | | | | |Organizational Feasibility |Not feasible | | | |? | | | | | | |Unsure | | | |? | | | | | | | |Feasible | | | |? | | | | | |Financial Feasibility |Not feasible | | | |? | | | | | | | |Unsure | | | |? | | | | | | |Feasible | | | |? | | | | | | |Overall Assessment |Not feasible | | | |? | | | | | | |Unsure | | | |? | | | | | | | |Feasible | | | |? | | | | | | Conclusion—briefly summarize your justification for your overall assessment.a