Business Feasibility Study PDF

BUSINESS FEASIBILITY STUDY https:// www.extension.iastate.edu/agdm/wholefarm/html/c5-65.html https://fitsmallbusiness.com/feasibility-study-for-small-business/ What is a Feasibility Study?  A feasibility study is the initial design stage to any project or plan.  As the name implies, a feasibility...

BUSINESS FEASIBILITY STUDY https:// www.extension.iastate.edu/agdm/wholefarm/html/c5-65.html https://fitsmallbusiness.com/feasibility-study-for-small-business/ What is a Feasibility Study?  A feasibility study is the initial design stage to any project or plan.  As the name implies, a feasibility study is an analysis into the viability of an idea.  Feasibility studies help answer the essential question, “should we proceed with the proposed idea?”  The objective study may be completed in conjunction with a SWOT planning process, which looks at the strengths, weaknesses, opportunities, and threats that may be present externally (the environment) or internally (resources).  Feasibility studies help determine: a) does the company possess the required resources or technologies; and b) does the proposal offer a reasonable return vs. risk from the investment. Contents of a Feasibility Study  An Executive Summary  Description of Product or Service  Technology Considerations Contents of a Feasibility Study  Product or Service Marketplace  Identification of Specific Market  Marketing Strategy  Organization Structure  Schedule  Financial Projections Types of Feasibility Studies  Technical – hardware and software; existing or new; staffing skills  Financial – initial and future stakeholder investors; ROI benchmarks  Market- industry type; marketing characteristics; market growth; competition environment; sales projections  Organization- structure; legal; management team’s competency Typical Steps to a Feasibility Study 1. Preliminary Analysis To efficiently evaluate alternatives, a pre-feasibility study is often conducted after discussing a series of business ideas or scenarios. This pre-feasibility study helps to “frame” and “flesh-out” specific business scenarios, with only some studied more in-depth. It is not unusual that during this preliminary analysis, the number of business alternatives under consideration is reduced from the initial starting point. During this first step to the feasibility process you may investigate a variety of ways to organize the business and/or to position the product in the marketplace. It is like an exploratory journey and you may take several paths before you reach your destination. Just because the initial analysis is negative does not mean that the proposal does not have merit. Sometimes limitations or flaws in the proposal can be corrected. If the findings lead you to proceed with the feasibility study, your work may have resolved some basic issues. A consultant may help you with the pre-feasibility study, but you should be involved. This is an opportunity for you to understand the issues of business development  2. Market Assessment May be conducted that will help determine the viability of a proposed product or service in the marketplace. The market assessment will also help to identify demand in the market, and at what price. If no opportunities are found, there may be no reason to proceed further with the feasibility study. If opportunities are found, the market assessment can give focus and direction in the construction of business scenarios to investigate in the feasibility study. A market assessment will provide much of the information for the marketing feasibility section of the feasibility study  3. Organizational Structures This step in the feasibility analysis pertains to organization. Staffing requirements, including management and labor alignment are studied. How many workers are needed for how long? What other resources will be needed?  4. Financial Controls It is important to formalize an opening day balance sheet. In this step, first efforts at projected revenues and expenses are attempted.  5. Points of Vulnerability Factors that are internal to the project and represent vulnerability to the project’s short-term or long-term steps should be reviewed and analyzed. These points then can be controlled or otherwise eliminated.  6. Results and Conclusions The conclusions of the feasibility study should outline in-depth the various scenarios examined. The project leaders need to carefully examine the feasibility study and challenge its underlying assumptions. This is the time to be skeptical.  It is not the purpose of the feasibility study or the role of the consultant to decide whether or not to proceed with a business plan. It is the role of the project leaders to make this decision, using information from the feasibility study and input from consultants.  7. Go/No-Go Decision The go/no-go decision is one of the most critical in business development. It is the point of no return. Once you have definitely decided to pursue a business scenario, there is usually no turning back. The feasibility study will be a major information source in making this decision. This indicates the importance of a properly developed feasibility study. What Is a Feasibility Study for Small Business?  A feasibility study for small business is an in-depth research and financial analysis that recommends if one should pursue a business idea or product. The study contains estimates of items such as income, costs, obstacles, and technical challenges. How the Feasibility Study Works  Usually, businesses conduct feasibility studies to determine if their idea or product is worth pursuing. It’s one of the more complicated and costly ways to test a business idea.  Depending on the idea’s complexity and scope, a study can take weeks or months to prepare. With the help of templates or programs, business owners can conduct feasibility studies on their own. However, because of the in-depth research and complicated financial projections, they often hire an expert to create the study.  Feasibility studies do not determine the final decision but present all the evidence and make a strong recommendation on whether or not it’s best to move forward. The entrepreneur, stakeholders, and/or other authorities decide whether to go ahead with the business idea or product, using the study as a guide. Who Should Get a Feasibility Study? Small business entrepreneurs use a feasibility study to prevent the costly mistake of launching an unsuccessful business, product, or project. You can use a study to help make strategic decisions, such as determining whether you should:  Start a new business  Open a new store or factory  Change product lineup or approach  Expand to a new area or market  Acquire another company  Make a significant investment in new technology  Enter an already crowded or competitive market segment  Invest personal capital into a project Feasibility Study vs Business Plan  A feasibility study often comes before the business plan, because the information and data uncovered in the study are included in the business plan. Plus, if the feasibility gives a recommendation not to move forward, you may want to rethink your business idea or product altogether before creating a plan. What Should Be in a Feasibility Study?  Executive Summary: This summarizes the project and business. The ultimate conclusions are outlined here. It should be about a page long.  Demand: A marketing analysis determines the need for your product or business in the industry you want to sell. Even if you have a brick-and-mortar business, you should consider online aspects as well.  Technical issues: What tool, hardware, or software do you need to create your business or product? Will you create the tech, buy it, or rent it? This section also includes the facilities, including layout, shelving, offices, and manufacturing space.  Logistics issues: This piece outlines vendors, pricing schedules, exclusive agreements, and franchised product contracts. It may include getting supplies and delivering finished products or working online elements like an ecommerce site. Location issues can be placed here.  Legal concerns: Do you need permits? Are there regulations or prohibitions to consider? What about environmental, historical, or legacy issues to negotiate?  Marketing strategy: This section will define the target market as specific as possible: How you will meet their needs, and how you will target them?  Required staffing: How many employees will you need? What are their qualifications? What is the typical salary in your area? You can include a sample organizational chart along with a corresponding discussion of who among your current employees may change jobs to fill new positions.  Scheduling: This section includes milestones for financials as well as physical projects and a timeline for completion.  Financials: In addition to anticipated expenses and potential profits, this section will include an opening day balance sheet that lists total assets and liabilities on your business’s first day. This financial data gives you an indication of your return on investment (ROI).  ROI: If you don’t see a return on investment, it makes no sense to start or expand your business. A feasibility study estimates when you’ll earn profits and what or how much they may be.  Analysis: You will see discussions answering questions like: Does it seem realistic? Are the sources strong? Are there outlying data points to consider? Also, analyze potential risks: What are the worst-case scenarios, and how likely are they?  Recommendations: This gives a go or no-go recommendation and breaks down specific suggestions based on the main elements. If the project is not feasible, it may offer alternatives. https://www.wallstreetmojo.com/feasibility-study/#types-of-feasibility-study  A feasibility study of a business is an assessment tool that analyses the cost-benefit factor of an idea. In detail, they: 1. Provide a preliminary analysis to eliminate business scenarios that are not in tune with the organization’s motives. Specifically, it looks for ways to position the product in a marketplace. A negative preliminary analysis does not mean the plan is a failure; companies can correct the shortcomings to perfect it. 2. Help assess the demands in a market and the price at which a company can reap profit. In addition, such market assessments can provide information on marketing feasibility. 3. Provide insights to address gaps in the organizational structure of the company. Labor and management alignment, human resource requirements, and talent acquisition processes are assessed. 4. Project an idea of revenue and expenses that the plan might require in the future. 5. Point out factors that make the business idea vulnerable and the short-term and long- term steps to correct it. 6. By analyzing the above factors, one can categorize business ideas into feasible and non-feasible. #1 – Technical Feasibility Technical feasibility study checks for accessibility of technical resources in the organization. In case technological resources exist, the study team will conduct assessments to check whether the technical team can customize or update the existing technology to suit the new method of workings for the project by properly checking the health of the hardware and software. Many factors need to be taken into consideration here, like staffing requirements, transportation, and technological competency. #2 – Financial Feasibility Financial feasibility allows an organization to determine cost-benefit analysis. It gives details about the investment that has to go in to get the desired level of benefit (profit). Factors such as total cost and expenses are considered to arrive simultaneously. With this data, the companies know their present state of financial affairs and anticipate future monetary requirements and the sources from which the company can acquire them. Investors can largely benefit from the economic analysis done. Assessing the return on investment of a particular asset or acquisition can be a financial feasibility study example. #3 – Market Feasibility It assesses the industry type, the existing marketing characteristics and improvements to make it better, the growth evident and needed, competitive environment of the company’s products and services. Preparations of sales projections can thus be a good market feasibility study example. #4 – Organization Feasibility Organization feasibility focuses on the organization’s structure, including the legal system, management team’s competency, etc. It checks whether the existing conditions will suffice to implement the business idea. Purpose of a Feasibility Study A feasibility study of a business can help choose the best available alternative by assessing the opportunity cost. The reasons for rejecting one option can reveal weaknesses of the company; investigating options can lead to undiscovered opportunities. From these, a company can assess why certain factors pull them down and find measures to mitigate them. When these steps are executed, and necessary corrective actions are taken, it reflects on its performance. Thus profits can follow easily and attract investors. This analysis can also help in securing funds from financial institutions.