Feasibility Study Review PDF

FEASIBILITY STUDY FEASIBILITY STUDY Why do a Feasibility Study? What is a Feasibility Provide a thorough examination of Study? all issues and as...

FEASIBILITY STUDY FEASIBILITY STUDY Why do a Feasibility Study? What is a Feasibility Provide a thorough examination of Study? all issues and assessment of probability of business success. A feasibility study is an analysis of Give focus to the project and the viability of an idea through a outline alternatives. disciplined and documented Narrow business alternatives. process of thinking through the Surface new opportunities through idea from its logical beginning to the investigative process. it's logical end. Identify reasons NOT to proceed The discipline of planning Enhance the probability of success organizing, and managing by addressing and mitigating resources to bring about the factors early on that could affect successful completion of specific the project. project goals and objectives. Provide quality information for A feasibility study provides an decision making. Investigating function that helps Help to increase investment in the answer the questions "Is the company. project feasible? Can it be done? Provide documentation that the Does it make sense? Should we business venture was thoroughly proceed with the proposed project investigated. idea? Help in securing funding from A feasibility study should be lending institutions and other conducted to determine the monetary sources viability of an idea BEFORE proceeding with the development Goals of the Feasibility of business. Study The Three Main Areas of Add value to the decision-making the Business Feasibility process. Study Introduce the concept of the time value of money by incorporating. MARKET POTENTIAL ASSESSMENT - Net Present Value TECHNICAL AND OPERATIONAL - Internal Rate of Return ASSESSMENT - Break-even Analysis FINANCIAL ASSESSMENT - Cost/Benefit Analysis Provide formats for clear and Levels of Feasibility concise cost and benefit rationale Assessment to assist in the investment evaluation process. A feasibility study of an idea is conducted at three levels Data Sources for a Operational Feasibility - "Will it work?" Feasibility Assessment Technical Feasibility - "Can it be ►Data required for a feasibility study built?" can come from primary or secondary Economic Feasibility - "Will it sources make economic sense if it works ►Primary data can include formal and is built? Will it generate interviews and surveys PROFITS?" ►Collection of primary data can be expensive and time consuming 1  FEASIBILITY STUDY ►Secondary data can include industry and trade publications, statistics of What Defines Feasibility? industry associations, and government A feasible business venture is one agency reports where: Data Sources for a The business will generate adequate cash flow and profits; Feasibility Assessment The business will withstand the risks ►Identify and Estimate all Capital it will encounter; Expenditures The business will remain viable in ► Identify and Estimate all Variable the long- term, and Costs related to the Proposed Business The business will meet the goals of Venture the founders. ►Identify People and Skills required to operate What's Next? ►Determine Wages, Salaries, and ➤ After the feasibility study has been Benefits completed and presented to the leaders ►Identify and Estimate Project Related of the project Costs 1. They should carefully study and ►Infrastructure development or analyze the conclusions and improvements underlying assumptions. ► Advertising and Promotion 2. They will decide which course of ► Legal Fees action to pursue ►Municipal & State Development 3. Potential Courses of action include taxes 4. Choosing the most viable business ►Identify and Estimate all Fixed Costs model, developing a business plan Cost-Benefit Analysis and proceeding with creating and operating a business 1. Utilize data collected to determine 5. Identifying additional scenarios for economic feasibility: further study 2. Estimate Expected Costs and Revenue 3. Estimate the Profit Margin and FEASIBILITY STUDIES Expected Net Profit 4. Estimate the sales or usage needed to break-even What is a Feasibility 5. Estimate the returns under various Study? production, price and sales levels It is a detailed analysis that to create a “sensitivity analysis” considers all the critical aspects of 6. Assess the reliability of the a proposed project in order to underlying assumptions of the determine the likelihood it financial analysis succeeding. Cost-Benefit Analysis Business feasibility criteria may be... Benchmark against industry return on investment averages and/or competitors community reaction Identity imitations or constraints of environmental impact the economic analysis Non-profits Project expected cash flow during specific social good the start-up period is the benefit to the community Project income statement, and worth the cost balance sheet when reaching full operation 2  FEASIBILITY STUDY Key Benefits of a Technical Feasibility - Will Feasibility Study it work Improves project teams focus Is the project feasible within the Identifies new opportunities limits of current technology? Provides valuable information for a Does the technology exist at all? "go/no-go" decision Is it available within given resource Narrows the business alternatives constraints? Identifies a valid reason to Is it a practical proposition? undertake the project Do you currently possess the Enhances the success rate by necessary technology? evaluating multiple parometers Do we have the People - Aids decision-making on the knowledge project Will it be compatible with our other Identifies reasons not to proceed systems? Can the technology be easily MARKET FEASIBILITY applied to current problems? Who or what is the Target Market and Marketing Mix - product, Financial Feasibility - Does place, promotion and price it make money What is Market Segmentation - ➤ Is the project justified (i.e. will target different categories of benefits outweigh costs)? consumers ➤ What is the NPV or IRR What could be the Market Share - ➤ What is the minimal cost to attain a estimating the total demand of the certain system? product and the market share of ➤ How soon will the benefits accrue the organization. ➤ Which alternative offers the best Techniques for demand return on investment? forecasting. ➤Selection among alternative 1. Primary Data financing arrangements Market Surveys (rent/lease/purchase) Expert Opinion (Delphi Method) ➤ Difficulties - benefits and costs can Trend Analysis both be intangible, hidden and/or hard Correlation Analysis to estimate Fads (products that have a rapid ➤ ranking multi-criteria alternatives rise Operational Feasibility - 2. Secondary Data Will it work? Internet search engines Does the current operational mode Trade associations provide enough response and Research companies throughput time? Media outlets Is there timely and accurate Industry experts information to managers and end- Government and non-government users? agencies Will there be an increased benefit Digital intelligence platforms or a cost reduction? Educational institutions Will the system be used once it is Company reports developed? Academic journals What are the manpower problems Public libraries the system will face? Competitor websites 3  FEASIBILITY STUDY Will there be labor objections? What are the likely organizational 2. PROJECTED INCOME policies and conflicts? STATEMENT What are the operational risks 1. Project your spending and sales - What are the governmental salaries, rent, gas, insurance, regulations that might affect the marketing, raw materials, system local and national? maintenance and the like What are the legal risks Does the 2. Create financial projections - put current system provide an effective your expenses and revenues into a process to safeguard against fraud cash flow projection and breach of data? 3. Determine your financial needs- SEVEN (7) Steps of projected shortfalls or financing needs Feasibility Study 4. Use the projections for planning - 1. preliminary analysis, scenario planning 2. projected income statement, 5. Plan for contingencies - what if, 3. market research or survey, cash reserves 4. financial assessment including 1. They should carefully study and staffing, analyze the conclusions and 5. sensitivity analysis, underlying assumptions. 6. review and analysis, 2. They will decide which course of 7. project decision (go or no-go) action to pursue 1. PRELIMINARY ANALYSIS 3. Potential Courses of action include 4. Choosing the most viable business First, outline your plan. model, developing a business plan Second, examine the potential and proceeding with creating and market and the commercial viability operating a business of your plan. 5. Identifying additional scenarios for Third, assess the strengths and further study weaknesses of your plan Fourth get feedback about the new 3. MARKET RESEARCH ORR concept from the appropriate SURVEY stakeholders Fifth analyze and ask questions Is there a demand for this about the data obtained in the venture/product in the market it early phase of the study seeks to serve? What is the current competitive This determines whether the feasibility landscape? study itself is justified What is the geographic influence conducting a feasibility study is an on the market? intensive, What is the market's overall value? time-consuming process, What are the demographics of the the preliminary analysis will look to target market? uncover any roadblocks that would Four types of search render the feasibility study useless. 1. Primary research Interviews Ethnographic or observational research Trials or experiments Surveys Focus groups 4  FEASIBILITY STUDY 2. Primary research - Third party third-party services information human resources Internet search engines and the potential impact that Trade associations project failure will have on the Research companies bottom line for an existing business Media outlets Industry experts 5. SENSITIVITY Government and non-government ANALYSIS/SCENARIO agencies ANALYSIS Digital intelligence platforms Sensitivity - change one variable at a Educational institutions time Company reports Academic journals 1. Provides an in-depth assessment Public libraries 2. Helps in fact-checking Competitor websites Scenario Analysis - usually determines 3. Qualitative Research - How people base case, worst case and best case feel 1. Improves systems thinking Focus groups 2. Leads to an optimal allocation of Interviews resources Participant observation Ethnography 6. REVIEW AND ANALYSIS Case Studies Do a SWOT analysis - strengths, Grounded theory (using research to weaknesses, opportunities, threats generate a theory) Consider NPV or IRR Narrative Do a pest analysis - political, Thematic analysis (looks to identify economic, social, technological or interpret patterns and their Review the study from top to connected meanings) bottom by a fellow PM, a Open-ended surveys manager, or someone else in your Diary or Journal logging organization. Phenomenological study (where you take a customer or individual, 7. PROJECT DECISION (GO and examine things from their perspective) OR NO-GO) 4. Quantitative Research - numerical or Who is making the decision? measurable data Is the project approved to move forward or not? Experimental Research Descriptive Research Survey Research Quasi Experimental Research Correlational Research 4. FINANCIAL ASSESSMENT INCLUDING STAFFING Risks involved with the project including costs such as, equipment, material, software, hardware, facilities, 5  FEASIBILITY STUDY CONTENTS OF A There are 4 Ps for a FEASIBILITY STUDY successful business 1. Executive Summary Purpose 2. Description of the Product/Service Passion 3. Technology Considerations Planning 4. Product/Service Marketplace Perseverance 5. Identification of the Specific Market 6. Marketing Strategy 7. Organizational Structure HOW TO DEVELOP A 8. Schedule FEASIBILITY STUDY 9. Financial Projections AREAS OF FOCUS PROJECT SUMMARY MARKETING ➤It presents the highlights, descriptive definition, long-range objectives, Develop strategies to keep ahead feasibility criteria, history, and basic of the competition conclusions of the project under study. Capitalize on low- hanging fruit ➤It gives the analyst and the financier FINANCE a "capsule view" of the whole project. Obtain Funding WHAT PROJECT SUMMARY CONTAINS? Commence operations DEC 2024 A. NAME OF THE ENTERPRISE B. LOCATION C. DESCRIPTION DEFINITION OF THE PROJECT D.LONG-RANGE OBJECTIVES E. FEASIBILITY CRITERIA NOV 2024 Assemble F. HIGHLIGHTS OF THE PROJECT teams G. MAJOR ASSUMPTIONS USED AND SUMMARY OF FINDINGS AND CONCLUSIONS Name of the Enterprise equipment, etc licenses, etc. TIMELINE Apply for OCT 2024 permits, ➤Briefly explain the reason for the Order choice of name. Location ➤Pinpoint the location of the head of office and the plant site and give the SEP 2024 Write the Study main reasons for choosing the project sites. ➤The factors which affect the choice of location are the sources of raw materials, labor and utilities; proximity AUG 2024 to the market; nature of available Gathering transportation; and the cost of land Data and buildings. ➤The project must choose a location where maximum efficiency can be attained at the lowest possible cost 6  FEASIBILITY STUDY Descriptive Definition of 4. MODE OF FINANCING the Project ➤Briefly discuss the sources of funds, the financing terms, and the 1. RELATED NATIONAL PROGRAM reasons for choosing such sources ➤Is the project in line with any and terms. government-initiated or priority 5. INVESTMENT COSTS program? ➤How much funding is needed to 2. AFFINITY TO THE REGIONAL AND make the project fully operational? SECTORAL STUDIES ➤How are these funds to be ➤Is the project a result of allocated? encouraging findings in certain regions or sectors of the country? 1. MARKET FEASIBILITY 3. PROJECT POTENTIAL AND ➤Discuss the nature of the PROPONENT unsatisfied demand that the project ➤Give a conceptual description of seeks to meet, its growth, and the the project's potential worth and manner in which it is to be met. importance and the person or group ➤Here, the supply-demand situation of people who will manage it. is examined, the target market analyzed, and the marketing program Long-Range Objectives formulated. ➤What does the project expect to 2. TECHNICAL FEASIBILITY achieve in ten years, in terms of size, ➤Discuss the nature of the product capacity, volume, worth, role in its line, the technology necessary for industry, and impact on the economy? production, its availability, the Feasibility Criteria proper mix of production resources, and the optimum production volume. ➤What were the most important guidelines used to judge the feasibility 3. FINANCIAL FEASIBILITY of the project? ➤Present the overall financial ➤Was it profitability? picture in terms of operating cash ➤Did it seriously consider the project's requirements, profitability, and cash impact on the socio-economic flow. environment Highlights Of The Project 4. SOCIO-ECONOMIC FEASIBILITY 1. HISTORY ➤What are the effects of the project ➤How did the project come about? on society and the regional and 2. PROJECT TIMETABLE AND STATUS national economy as a whole? ➤Is it generally beneficial to the ➤How long will it take for the people? project to be operational? What ➤Is it in line with any national or stage is the project presently in? regional economic development 3. NATURE OF THE INDUSTRY program? ➤Briefly describe the industry, its product lines, the demand-supply 5. MANAGEMENT FEASIBILITY situation, history, growth patterns, ➤What is the management problems and potentials, and role in structure? the economy. ➤Is it appropriate for the managerial needs of the project? ➤What is the salary scale? Is it compatible with industry standards 7  FEASIBILITY STUDY Project Development and What is Project Management / Feasibility Management Study ► It is the application of skills, knowledge, tools and techniques to What is a Project? meet the needs and expectations of stakeholders for a project. A project is a temporary endeavor ► The purpose is PREDICTION and undertaken to produce a unique PREVENTION, NOT recognition and product or service reaction. Temporary Characteristics Unique TRIPLE CONSTRAINTS of Project Time Temporary Definitive beginning and end Quality Unique Cost Scope New undertaking, unfamiliar Increased Scope = increased time ground + increased cost Tight Time = increased costs + reduced scope Tight Budget = increased time + reduced scope. Key Areas of Project Management Scope Management Issue Management Project Success Cost Management Quality Management Communications Management Customer Completed within Risk Management Requirements allocated time Change Control Management satisfied/exceeded frame Scope Management Primarily it is the definition and Completed within Accepted by the control of what IS and IS NOT allocated budget customer included in the project. Project Failure Scope Creep Poor Requirements Gathering Issue Management Issues are restraints to accomplishing the deliverables of Unrealistic planning Lack of resources the project. and scheduling Typically identified throughout the project and logged and tracked 8 through resolution.  FEASIBILITY STUDY Risk... POTENTIAL negative impact to Issue... already impacting the project cost, time or quality Cost Management This process is required to ensure the project is completed within the approved budget and includes: Change Control Management Define how changes to the project scope will be executed Quality Management All changes require collaboration and buy in via Quality Management is the process the project sponsor's signature prior to implementation of the changes that insure the project will meet the needs Closing Phase "conformance to requirements" - Crosby "fitness for use" - Juran Implementation Deployment Phase "the totality of characteristics of an entity that bear on its ability to satisfy stated and implied need' - ISO 8402:1994 Communications Phase Management This process is necessary to ensure timely and appropriate generation, PROJECT LIFE CYCLE collection, dissemination, and Planning storage of project information Phase Definition Phase Risk Management Risk identification and mitigation Initiation Phase strategy Risk update and tracking 9  FEASIBILITY STUDY Initiation Phase Implementation Phase Define the need Execute project plan and Return on Investment Analysis accomplish project goals Make or Buy Decision Training Plan Budget Development System Build Quality Assurance Definition Phase Determine goals, scope and project Deployment Phase constraints User Training Identify members and their roles Production Review Define communication channels, Start Using methods, frequency and content Risk management planning Closing Phase Planning Phase Contractual Closeout Post Production Transition Resource Planning Lessons Learned Work Breakdown Structure Project Schedule Development Project Management Tools Quality Assurance Plan 1. PERT CHART Work Breakdown designed to analyze and represent Structure the task involved in completing a given project. ► For defining and organizing the total scope of a project ► First two levels define a set of planned outcomes that collectively and exclusively represent 100% of the project scope. ► Subsequent levels - represent 100% of the scope of their parent node 2. GANTT CHART a popular type of bar chart that illustrates a project schedule 10  FEASIBILITY STUDY Role of a Project Manager Project issues Disseminating project Implementing standard information processes Mitigating project risk Establishing leadership Quality skills Managing scope Setting expectations Metrics Team building Managing the overall Communicator skills work plan Process People Responsibilities Responsibilities Business Development b. Non-quantifiable Projects Framework quantifiable assessment of benefits is not possible. Project Defined: Ex. Health, education ➤A great variety of endeavor 2. Sectoral ►An idea or plan that is intended to Ex. Agriculture, mining, social be carried out services ► A scheme, design, a proposal of 3. a. Profit oriented something intended or devised to achieved Ex. New Projects/business ►Has a distinct mission that is Development Project (Expansion) designed to achieve and a clear Modernization or Technology termination point, the achievement b. Service Oriented of a mission. ► Any activity that involves the use Ex. Welfare Projects, Educational of one or more scarce resources during a specific time period for the IMPORTANCE OF A purpose of producing socio- PROJECT REPORT economic return in the form of 1. Serves as a master plan - indicate goods or services goals Three basic common attributes of a 2. Describes direction project 3. Foresees requirements a course of action 4. Shows feasibility Specific objectives 5. Indicates profitability Definite time perspective 6. Helps in decision making 7. Paves way to financial assistance Types of Projects 8. Ensures survival 1. a. Quantifiable Projects Precautions in Preparing a benefits can be assessed in Project Report quantifiable term. 1. Always estimate costs higher and Ex. Power generation income lower than expected. 11  FEASIBILITY STUDY 2. Do not include any cost/price 1. Identification and Prioritization unless checked and verified in the identifying opportunities for a new market. business venture 3. Make necessary provision for cost -idea generation education if time gap between the Internal sources: preparation and implementation of the Knowledge/experience project is wide. Combining the available resources REASONS FOR THE FAILURE Knowledge of potential customer OF A PROJECT REPORT needs External sources: 1. Failure to estimate the utilization capacity properly Success stories 2. Not providing up-to-date Project profiles of various information and supporting industries documents. Market surveys/trends Professional journals/reports 1. Not making adequate provisions Trade fairs/exhibits for contingency. 2. Wrong selection of ownership form 2. Feasibility Study/Business Plan and or not selecting an appropriate Appraisal - Involves selection processes location. which are more detailed in nature as these include a concept paper or a Business Development feasibility study. If the project is found Framework to be feasible, an appraisal of the project proposal for financing approval follows. Thoroughly assess current customers. competitors and 3. Detailed designing - once the project markets has been approved for implementation, Fully Implement successful new Identify unmet a more detailed products, services, channels needs and growth opportunity implementation/operational planning follows. The Fund Group Business PHASE II Development Framework Project Implementation Create adjacent 1. Activation/organization - involve Refine based on outcomes and products, services, the recruitment/selection of the project customer feedback distribution channels manager and project staff Conduct pilot testing and analyze 2. Operational planning - all work plans results should cover activities, responsibilities, schedules, budget, and plantilla are finalized 3. Implementation - direct implementation of the project through PROJECT IDENTIFICATION action steps, communications coordination, monitoring and AND PROJECT control. PREPARATION PHASE III PHASE I Termination/Completion Project Identification and Development 1. Completion - attainment of all objectives and delivery of all expected outputs 12  FEASIBILITY STUDY 2. Termination - Phasing out or close- Title Page out of the project at the end of Approval Sheet schedule Acknowledgement (if any) 3. Handover - Reporting/presentation Table of contents cation of all outputs to the mother List of Tables organization List of Figures List of Annexes PHASE IV B. The Main Body of the Report Evaluation and Recycling Title Page 1. Project Evaluation - Evaluation of Approval Sheet results against the original project goals Acknowledgement (if any) and objectives and the impact it has I. The Executive Summary created to the environment Highlights 2. Diffusion of Outputs - Diffusion of Conclusions to Feasibility lessons or outputs or services II. Project Background and History generated, as documented in a case report, or executive summary, or Project Proponents applied- study format or through Proposed Name of the Business extension of pilot or experiment Type of Business Organization VMGO 3. Replanning/recycling - replanning of project if it is to be duplicated or III. Marketing Plan institutionalized into the parent Market Description organization Demand & Supply Analysis STAGES OF PROJECT LIFE Marketing Practices Marketing Program 1. Pre-Investment Phase Projected Sales IV. ORGANIZATION AND a. Project identification MANAGEMENT PLAN b. Project preparation c. Project appraisal and financing Organizational Structure Personnel (Positions, Job 2. Investment Phase Descriptions, Job Qualifications, Benefits) a. Detailed engineering Projected Compensation and b.Construction/installation Benefits of Employees implementation V. Production/Operations/Technical 3. Post-investment Phase Plan a. Project completion, hand-over to Product Description operating unit/agency Production Process b. Project appraisal Location/Project Layout Equipment AREAS OF INVESTIGATION Utilities Raw Materials IN PROJECT/FEASIBILITY Waste Disposal STUDY PREPARATION Production Costs VI. Financial Plan GENERAL FORMAT Lists of Assumption A. Preliminaries Total Project Costs Projected Financial Statements Title Page Financial Analysis Approval Sheet Acknowledgement (if any) 13  FEASIBILITY STUDY VII. Socio-Economic Contributions Proposed Marketing Your employees The government Program Other beneficiaries present national and local VIII. Project Timetable government marketing policies and assistance packages and programs IX. References that will benefit your project X. Curriculum Vitae present also your marketing sales force and budget allocation Marketing Plan present your proposed product mix and marketing mix ➤Market Description Projected Sales - present a table state here, the general description showing your sales forecasts of your market: its size and composition, population, age PRODUCTION/OPERATIONS group, income level, etc. / TECHNICAL PLAN ➤Demand Products demand situation of your product detailed description of your make a projection for the next five proposed product/s, dimensions, months. compositions, quality specifications, etc. ➤Supply show drawing or picture of your present the supply situation of proposed product/s your intended products make a projection for the next five Production process months diagram or work flow present your quality control Supply Measurements: measures Local Production Capacities present your inventory control measures your future competitors' rated capacity could be summed up Location together to estimate the total describe your proposed location supply of your products in the Project Layout market. Importations layout's detailed drawings drawn to scale importations by other companies Equipment/Tools could provide your other source of supply for your intended present a detailed list of equipment product/s. and tools you will need for the Product Substitutes project Utilities those seemingly cheaper and usually inferior product substitutes present a detailed breakdown of could not be taken for granted. the utilities that will be needed for Many consumers resolve to these your project items because of certain economic Raw Materials Requirements factors. present a detailed breakdown of your project's raw materials requirements 14  FEASIBILITY STUDY Waste and Waste Disposal Methods Job classification describe all wastes produced by a grouping of jobs on some your project and their effects. specified basis such as the kind of state your means of disposal work or pay, etc. system state all costs your project will require FINANCIAL PLAN ► Start with your major financial Total Production Costs assumptions present a breakdown of all your ✓ sales and collections projected production costs ✓depreciation ORGANIZATION & ✓tax rates, if any ✓inventories, beginning & end MANAGEMENT PLAN ✓ division of profits Personnel ► Sources of financing ✓ state your proposed number of ► Projected Financial Statements personnel ✓Present your Total Project Costs ✓ present your proposed Organizational ✓ Property & Equipment Chart in detail ✓ Working Capital (for months) ✓ state your proposed personnel's job ✓ Contingency requirements, specifications, ► Projected Cash Flow Statement responsibilities and functions ✓ state your proposed personnel's ✓ Cash Balance, Beg salary rates and benefits ✓Cash Receipts: ✓Cash contributions Management Proposals ✓Loans, if any ✓Cash sales ➤ state and define your Management ✓ Collections of Accounts Rec'ble Style to run your workforce ✓Total Cash Inflow ➤ state your project's general policies ✓Less: Cash disbursements: ➤ state trainings, seminars and staff ✓Property & Equipment development program you may wish to ✓Operating Expenses conduct to your personnel ✓Total disbursements Terminologies ✓Cash Balance, end Job analysis FINANCIAL PLAN the process of studying and ► Projected Income Statement collecting information related to ► Projected Balance Sheet the operations and responsibilities of a specific job. The immediate ► Financial Analysis products of these are job descriptions and job specifications SOCIO-ECONOMIC PLAN Job Descriptions ► This chapter presents how entities other than the project proponents will these are organized, factual benefit as a result of your project statements of the duties and responsibilities of a specific job. ✓your project's employees They tell us what is to be done, ✓the Government how it is done and why it is done. ✓other beneficiaries Job Specifications these are statements of the minimum acceptable human qualities necessary to perform a job 15 properly.  FEASIBILITY STUDY PROJECT IMPLEMENTATION & TIMETABLE ►your project's total pre-operating time frame ►scheduling of your pre-operating activities ►your target start-up and completion dates ►test marketing 16