conducting a feasibility study and crafting a business
TRANSCRIPT
Conducting
a Feasibility Study
and
Crafting a Business PlanOmar El Hagar
Feasibility Analysis
The process of determining
whether an entrepreneur’s idea is
a viable foundation for creating a
successful business
Elements of a Feasibility Analysis
Financial Feasibility
Industry andMarket Feasibility
Product orService Feasibility
Industry and Market
Feasibility Analysis
To determine how attractive an industry is overall as a home
for a new business
To identify possible niches a small business can occupy
profitably
Five Forces Model
.
Rivalry among existing firmsSuppliers Buyers
Potential Entrants
Substitutes
Threat of new entrants
Bargaining Power ofsuppliers
Bargaining Power of buyers
Rivalry
Number of competitors is large or few (less than 5)
Competitors are not similar in size or capability
The industry is growing at a fast pace
The opportunity to sell a differentiated product or
service is present
Suppliers
Many suppliers sell a commodity product to the companies in it
Substitute products are available for the items suppliers provide
Companies in the industry find it eas to switch from one supplier to another
The items suppliers provide account for a relatively small portion of the cost of finished products
Buyers
Switching costs to competitors is high
Number of buyers is large
Customers demand differentiated products
Customers find it difficult to gather info on
suppliers costs etc
The items account for a relatively small portion of
the customers’ finished products
New Entrants
Advantages of economic scale are not present
Capital requirements to enter are low
Cost advantages are not related to company size
Buyers are brand-loyal
Governments do not restrict entry
Substitute Products
Quality substitute products are not readily
available
Prices of substitute products are not lower
Buyers’ cost of switching to substitute products is
high
Product or Service
Feasibility Analysis
Are customers wiling to purchase our goods and services?
Can we provide the product or service to our customers at a
profit?
Research Primary research
Customer surveys and
questionnaires
Focus groups
Secondary research
Trade associations and business directories
Direct mail lists
Demographic data
Census data
Forecasts
Market research
Articles
Local data
WWW
Trials
Prototypes: an 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 trials: a research technique that involves
sending researchers into customers’ homes to
observe them as they use the company’s product
or service
Financial Feasibility Analysis
Capital
Requirements
Estimated
Earnings
Return on
Investment
A Business Plan
A 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
3 Functions
Guides an entrepreneur
Attracts lenders and investors
Reality Test
Competitive Test
Value Test
Represents/reflects its creator
Elements of a Business
Plan Title Page and Contents
Executive Summary
Vision and Mission Statement
Company History
Business and Industry Profile
Business Strategy
Description of the Firm’s Product or Service
Marketing Strategy
Competitor Analysis
Description of Management Team
Plan of Operation
Pro Forma Financial Statements
The Loan or Investment Proposal
What Lenders and Investors
Look for in a Business Plan
Capital
Capacity
Collateral
Character
Conditions
Executive Summary
The company’s business model and basis for
competitive edge
The company’s target markets and the benefits its product or service will provide
The qualification of the founders and/or key
employees
The key financial highlights
Business and Industry
Profile
Overview of industry or market segment
Existing or anticipated profitability of the industry
Company’s general business goals
Company’s immediate objectives
Business Strategy
How to gain competitive edge
How to achieve the goals and objectives
Methods to satisfy KSFs of the industry
Description of Product or
Service
Overview of how customers will use it
Any patents, trademarks or copyright
Honest comparison with competition
Feature (descriptive fact about a product or service) vs
Benefit (what a customer gains from the product or service)
Description of production process, strategic raw materials,
sources, costs.
Marketing Strategy
Defining the target market
Who?
Where?
How many?
Why?
Proving that a profitable market exists
Showing customer interest
Documenting market claims
Marketing Strategy
Advertising
Market Size and trend
Location
Pricing
Distribution
Competitor Analysis
Each significant competitor
Advantage over each
Description of
Management Team
Qualifications of those with at least 20% ownership
Resumes
How to avoid primary reasons for business failures
Pro Forma Financial
Statements
Monthly for 3 years by quarter
3 sets: pessimistic, most likely, optimistic
Statement of assumptions
Loan or Investment
Proposal
Purpose of financing
Amount requested
Plans for repayment/exit strategy
Timetable for implementation
Evaluation of risks
Thank you all for your time