M.Tech Unit 4 - Prefeasibility Study PDF

Module -4 Prefeasibility Study Prefeasibility Study: A Foundation for Entrepreneurial Success A prefeasibility study is a critical first step in the entrepreneurial journey. It provides a roadmap for evaluating the viability of a new business venture, helping entrepreneurs make informed decisions...

Module -4 Prefeasibility Study Prefeasibility Study: A Foundation for Entrepreneurial Success A prefeasibility study is a critical first step in the entrepreneurial journey. It provides a roadmap for evaluating the viability of a new business venture, helping entrepreneurs make informed decisions about resource allocation and future development. VL Importance of Prefeasibility Study in Entrepreneurship Development 1 Reduced Risk 2 Enhanced Decision Making A prefeasibility study identifies potential challenges and risks, allowing By providing comprehensive data and insights, a prefeasibility study empowers allowing entrepreneurs to address them proactively, thereby mitigating the risk empowers entrepreneurs to make well-informed decisions about market entry, mitigating the risk of financial loss or project failure. market entry, resource allocation, and future development strategies. 3 Improved Funding Prospects 4 Successful Implementation A strong prefeasibility study demonstrates the viability and potential of a The insights gained from a prefeasibility study serve as a foundation for of a business venture, attracting investors and increasing the likelihood of for successful implementation, ensuring that the business venture is aligned likelihood of securing necessary funding. aligned with market needs and resources. Continued The characteristics of the pre-feasibility study include: 5% - 15% of the initial tasks are complete Cost estimate accuracy is in the order of ±30% Bottom line contingency is in the order of ±20% Considerable amount of time needs to be given to the draft report. Report reviews and final approval can add significant time to the overall project schedule. Normal cost range (includes supporting studies and test work — consumer survey, socio-economic aspects, expert opinion, market trends, political and environmental aspect, etc., but not in-depth research) will be in the order of 0.5% - 2.0% of the total project value (lNR 1.0 — lNR 4.0 lakhs for a lNR 2 crore project) What is a pre feasibility study? Pre feasibility studies are an early stage analysis of a potential business idea. They are conducted by a small team and are designed to give company stakeholders the basic information they need to green light a business idea or choose between potential investments. These studies typically give an overview of any project’s logistics, capital requirements, key challenges and other information deemed important to the decision-making process. When and why do companies undertake them? Pre feasibility studies act as one of the first explorations of a potential investment, following a preliminary resource report and the creation of a rough model. Based on the data procured by various assessments, a pre feasibility study may occur. Companies use these studies to collect information before investing millions of dollars into tasks like acquiring licenses or proprietary software. Continued What information do they include? ln addition to information relating to business models and product design, pre- feasibility studies also take into account factors that may impact or interfere with the final project. That can involve community issues, operational obstacles, socio- economic challenges and more. A comprehensive pre-feasibility study should include detailed designs and descriptions for operation, as well as cost estimates, project risks, safety issues and other important information. There should also be multiple options included in the study for tackling different issues, as that will provide organizations with more ways to overcome potential challenges. Continued What happens if results are positive? Negative? If a pre-feasibility study results in a positive base-case scenario, the company will likely move on to the next stage: a feasibility study. lf the study is negative; an organization may head back to the drawing board or abandon the potential project altogether. Why should investors care? Both pre-feasibility and feasibility studies can provide investors with useful updates on the progress of your project. These studies help create a more concrete picture about your key milestones and the challenges that you may face as you move forward. Continued The Purpose of Pre-feasibility Study (Market Research) 1.To verify that the investment opportunity is promising enough to make a firm decision. 2.To confirm that the project is viable from the Marketing, Manufacturing and other points of views. 3.To identify any aspects of the project that is critical or crucial enough to call for in depth 4.To acquire comprehensive technical, economic and commercial data for the final investment decision Key Components of a Prefeasibility Study 1 Market Analysis Examining target market size, growth potential, competition, customer needs, and industry trends. 2 Technical and Operational Feasibility Evaluating the availability of necessary technology, resources, infrastructure, and operational processes. 3 Financial and Economic Viability Assessing the financial feasibility, projected revenue, expenses, profitability, and economic impact of the venture. 4 Risk Assessment Identifying potential risks, assessing their likelihood and impact, and developing mitigation strategies. 5 Conclusion and Recommendations Summarizing the key findings, providing insights, and recommending future actions for the entrepreneur. Market Analysis and Opportunity Identification Target Market Analysis Industry Analysis Opportunity Assessment Defining the ideal customer profile, Evaluating market size, growth potential, Identifying unmet needs, emerging trends, including demographics, psychographics, potential, trends, regulations, and and potential gaps in the market that the psychographics, and buying behavior. competitive landscape. business can address. Market size Age Growth rate Unmet needs Income Key players Emerging trends Location Barriers to entry Competitive advantage Lifestyle Technical and Operational Feasibility Technology Assessment Determining the technology required for production, operations, and customer service. Resource Availability Evaluating the availability of raw materials, labor, infrastructure, and other essential resources. Operational Processes Designing efficient production processes, supply chain management, and customer service delivery systems. Regulatory Compliance Assessing and ensuring compliance with all relevant industry regulations, permits, and permits, and licensing requirements. Financial and Economic Viability Revenue Projections Forecasting sales revenue based on market market analysis and pricing strategies. Cost Analysis Identifying and quantifying all production, production, marketing, administrative, and and operational costs. Profitability Analysis Calculating gross profit, operating profit, and and net profit margins, assessing the overall overall financial viability of the venture. Break-Even Analysis Determining the point at which the business business generates enough revenue to cover cover all costs and start generating profit. profit. Investment Requirements Estimating the total capital investment needed for startup, operations, and growth. Risk Assessment and Mitigation Strategies Market Risk Operational Risk Potential changes in market Risks associated with production, demand, competition, or industry supply chain, technology, or other trends that could impact the operational aspects of the business. business. Financial Risk Regulatory Risk Risks related to financing, cash Risks arising from changes in flow, profitability, and the overall regulations, permits, or licensing financial stability of the venture. licensing requirements that could could impact the business. Conclusion and Recommendations Key Findings Summarizing the main insights and conclusions from the prefeasibility study. Recommendations Providing specific recommendations for the entrepreneur, such as further market research, refining the refining the business model, or securing additional funding. Next Steps Outlining the next steps for the entrepreneur, such as developing a detailed business plan, securing securing financing, or launching the venture. Example It is about a medical shoes with a technological Massage built in for heel pain as physical therapy that the person who suffer from this kind of pain can have a quick massage anywhere at any time for his heels without the need for traditional electricity connection to work because it will has a "load cell" that generate electricity by load and movement, also it is going to be easy to use as you will get a remote control to turn it on and select the speed that you want your massage to be, and let it do the massage session for you. ► Ultimate customer-: People who suffer from heel pain Especially people over the age of forty (70%) ► Expected demand 60% (assumed) Continued Expected competitors: There are no competitors or providers for the same product up till now. But, there are providers for similar products as the ordinary medical shoe, that have has few features similar to the "Relax shoe" as relatively relieving the pain of heels but don't has a massage in it. Also there as a device that provides a massage for heel pain but its size is very big and it has to be used at home not outside as it has to be connected to electricity, but Relax shoe has a competitive advantage as it doesn't need the traditional electricity connection to work because it will has a "load cell" that generate electricity by load and movement. Continued Opportunity recognition The idea is recognized from a problem facing my parents and other old people, as their work requires from them to stand for a long time that cause them a heel pain, and this pain affect their efficiency at work and this kind of pain can't be totally treated but it can be reduced by massage, as a result the idea heat my brain to solve this problem, as there is a possibility that anyone can have a massage for their heels that relives this pain and make them more comfortable anywhere at any time without electricity connections and it is just in your feet. Also I have made a survey with people who suffer from this issue if I offered them a product like "Relax shoe" would they purchase it and majority of them accepted the idea and they are willing to buy it. Continued Opportunity assessment The competitors provide two types of products: The first one is the ordinary medical shoe that is relatively comfortable but don't have a massage option in it. The second one is the massage device that provide a massage but the customer can't use it outside their home because it needs electricity and its size is very big. Continued Competitive advantages: ▪ No need for electricity to have your massage as the shoe has a "load cell" in it that generate electricity for it to work. ▪ Can be used outside your home and at any place in anytime. ▪ It will reduce the heel pain. ▪ No need for going to the ordinary physical therapy sessions. ▪ Easy to use by remote control (The salesperson will explain how to use the product in detail). ▪ After sale service for maintenance. Continued Market: The market is medical industry market which is a very big market and have a lot of customers with large demand and many suppliers. Skills and experience: As an entrepreneur I have many skills that would help me in this business as: Marketing knowledge, planning skills, creative thinking, analytical thinking, problem solving skills, interpersonal skills. Also, for the part of experience, it will be supported by an expertise in the business operations and the market some of them will be supporters in the management team and the others will be consultants. Continued The management team will include: Marketing manager, electrical engineer (which I have personal relationships with), financial analyst, R&D and market research, business analyst, accounting manager, sales manager. They will work directly with CEO and at building the product stage we will hire 5 employees as it is the minimum number to hire at this stage, and then we will increase their number. Also we can hire volunteer employees who are looking for experience. The time line: It's expected to prepare the business within one year in order to:- Continued Resources needed: ▪ Financial resources. ▪ Human resources. ▪ Technical and scientific experts: to determine the technology used, the possibility to apply the idea perfectly, the material to be used, and the design. ▪ Technical resources related to machines needed and material. Comparison of Prefeasibility and Feasibility Studies Feature Prefeasibility Study Feasibility Study Scope Narrow, initial Comprehensive, assessment detailed analysis Depth Limited, preliminary In-depth, thorough investigation research Cost Lower cost, quicker Higher cost, longer turnaround timeline Purpose To determine project To justify investment viability and plan project  KEY NOTES ▪ What is pre-feasibility study ▪ Importance and Characteristics of Pre-Feasibility study ▪ What is pre-feasibility study-when and why do company undertake them- Purpose ▪ Key components – which includes Market analysis-Technical and operational feasibility- Financial and economical viability-Risk assessment- Conclusion & recommendation(Note: write the answer in the order specified) ▪ Difference between Pre-feasibility study vs feasibility study