Feasibility Analysis PDF

 Feasibility analysis Product/service feasibility Industry/target market feasibility Organizational feasibility Financial feasibility New Business Creation Process 1. Recognizing a business idea 2. Testing the feasibility of the idea 3. Writing a business plan 4. Launching the bu...

 Feasibility analysis Product/service feasibility Industry/target market feasibility Organizational feasibility Financial feasibility New Business Creation Process 1. Recognizing a business idea 2. Testing the feasibility of the idea 3. Writing a business plan 4. Launching the business (Barringer & Ireland, 2012, p.105) Feasibility Analysis Feasibility analysis is the process of determining if business idea is viable. Feasibility Analysis Components Feasibility Analysis Product/service feasibility Industry/target market feasibility Organizational feasibility Financial feasibility (Barringer & Ireland, 2012, p.105-122) Is my product idea appealing to potential customers? What do we test? Product/service desirability Product/service demand 1. Product/service desirability Does it make sense and excites the customers? Does it take advantage of an environmental trend, solves a problem or fills a gap in the market? Is this a good time to introduce such product? Are there any fatal flaws in the product design/concept? How do we test desirability? Create a concept statement – short concept description including: ✓ Product/service description ✓ Intended target market ✓ Benefits of product/service ✓ Positioning against competition (what’s special?) ✓ Company’s management team Show the concept statement to 10+ people familiar with the industry of the concept for informed feedback. What do they like about the idea? What could be improved? Is it realistic? Other feedback? 2. Product/service demand Will the customers be willing to buy such product/service? How much they will be willing to pay? Is there any proof of existing demand for similar products? How do we test demand? Buying Intention Survey. Show the updated concept statement to 20-30 potential customers (not participants of desirability survey). How likely are they to buy the product described (use likert scale)? How much they would be willing to pay? Where would they like to buy the product? Literature/internet/observation research for purchase statistics of the industry. What do we test? Industry attractiveness Target market attractiveness 1. Industry Attractiveness An industry – a group of firms producing similar products/services. Is it young? Is it early in its life cycle? Is it growing? Is it not crowded yet? Does it have high operating margins? How do we test industry attractiveness? (Edit.org, n.d.) 2. Target Market Attractiveness A target market segment – a narrower group of customers with similar needs. Which industries does this market belong to? Can the information be found on the market size and buying power? Is the market large enough but not too large? Is there potential for market growth? How do we test target market attractiveness? What do we test? Management Prowess Resources Sufficiency 1. Management Prowess Management prowess is about superior abilities of the management team. Is the team passionate about the product? Does the team have industry expertise and market knowledge? Does the team have extensive networks? Does the team have partners / founders / key players / advisors? 2. Resource Sufficiency Is there enough resources to open and move forward? Focus on nonfinancial resources, e.g.: ✓ Affordable office space ✓ Laboratory/manufacturing space ✓ Contract manufacturers/service providers ✓ Key management employees & supporting personnel (now & later) ✓ Key equipment ✓ IP protection ability ✓ Local & state government support What do we test? Total start-up cash needed Financial performance of similar businesses Overall financial attractiveness Financial Feasibility 1. Total start-up cash – how much money needed, where to take from and how to return (see the template in Moodle). 2. Similar businesses performance – industry reports, research companies reports, observations, direct enquiries. 3. Overall financial attractiveness – comparing projected ROI to factors like total investments, risks, existing alternatives for money investment and entrepreneur’s efforts. References Barringer, B.R., & Ireland, R.D. (2012). Entrepreneurship: Successfully launching new ventures. Pearson. Edit.org. (n.d.). Porter’s Five Forces template [Image]. https://edit.org/edit/all/1t1inwla2