Chapter 5Conducting a Feasibility Analysis and

Crafting a Winning Business Plan

planning is bringing the future into the present so that you can do something

about it now-Alan Lakein

if u wait until all the lights are “green” before you leave home, you’ll never get

started on your trip to the top.Zig Ziglar

Conducting a Feasibility Analysis

Definition of feasibility studyThe process of determining whether or not entrepreneur’s idea is a viable foundation for creating a successful business.Elements of a Feasibility Analysis1) Industry and market feasibility2) Product or service feasibility3) Financial feasibility

Conducting a Feasibility Analysis

1) Industry and market feasibilityGood starting point

- A basic analysis of the industry and targeted market segments

- The focus-- 1) To determine how attractive an

industry is overall as a “home” for a new business

- 2) To identify possible niches a small business can occupy profitably.

Conducting a Feasibility Analysis

The Five Forces Modela model that recognizes the power of five forces-rivalry among competing firms, bargaining power of suppliers, bargaining power of buyers, threats of new entrants, and threat of substitute products or services-on an industry. Michael E. Porter.

Conducting a Feasibility Analysis2) Product or Service Feasibility Analysis

an analysis that determines the degree to which a product or service idea appeals ot potential customers and identifies the resources necessary to produce the product or provide the service.Two methods that can be used:

a) Primary researchInformation that an entrepreneur collect firsthand and analyze

b) Secondary researchInformation that has already been compiled and is available for use, often at a very reasonable cost or sometimes even free.

EG: customer surveys and questionnaires, focus group, market research, articles, local data and www

Conducting a Feasibility AnalysisPrototypesan original, functional model of a new product that entrepreneurs can put into the hands of potential customers so they can see it, test it and use it.In home trialsa research technique that involves sending researchers into customers’ home to observe them as they use the company’s product or service.

Conducting a Feasibility Analysis3) Financial Feasibility Analysis-the major elements to be included in a financial feasibility analysis include the initial capital management, estimated earnings and resulting return on investment.

a) Capital requirements-estimated start up capital.b) Estimated earnings-an entrepreneur should forecast the earning potential of the proposed business.c) Return on investment-the final aspect of the financial feasibility analysis combines the estimated earnings and the capital requirements to determine the rate of return the venture is expected to produce.

Crafting a Winning Business PlanWhy Develop a Business Plan?

Business planA written summary of an entrepreneur’s

proposed business venture, its operational and financial details, its marketing opportunities and strategy, and its

managers’ skills and abilities.

Crafting a Winning Business PlanThe elements of a Business Plan

1) Title page and table of contents2) Executive summary

3) Vision and mission statement4) Company history

5) Business and industry profile6) Business strategy

7) Description of the company’s product or service8) Marketing strategy

9) Documenting market claims10) Competitor analysis

11) Description of the management team12) Pro forma (projected) financial statements

13) The loan or investment proposal

Crafting a Winning Business PlanWhat Lenders and Investors Look For in a

Business PlanFive C’s of credit

Criteria lenders and investors use to evaluate the creditworthiness of

entrepreneurs seeking financing capital, capacity, collateral, character and

conditions.