Business Feasibility Study Outline

Business Feasibility Study is written to determine if the business is viable. It is also used to support decision making process based on the costs and benefits associated with different options for solving a problem. It is usually conducted during the deliberation phase of the business development cycle prior to commencement of a formal business plan. If the business is feasible based on the result of the study, a full business plan will be created.

The following are suggested outline for the successful business feasibility study.

Cover Sheet
Product / Services
Technology
Market Environment
Competition
Industry
Business Model
Marketing and Sales Strategy
Production/Operating Requirements
Management and Personnel Requirements
Intellectual Property
Regulation/Environmental Issues
Critical Risk Factors

Financial Projections
Balance Sheet Projections
Income Statement Projections
Cash Flow Projections
Break-even Analysis
Capital Requirements and Strategy
Recommendations and Findings
Conclusions

The above business feasibility study outline is based on Entrepreneurship and Business Innovation by Allan Thompson 2005.

Structure of a Business Feasibility Study

If a business is interested in a new business enterprise or a new venture for instance marketing a new product so it is important to conduct a feasibility study of the idea to assess its viability. The purpose of a business feasibility study is to determine if the business idea can generate profitability and remain possible in the marketplace for a long time.

  • Executive Summary. It contains the overview of the study. It should be able to understand the study by your investor, clients and company’s management without having to read the entire text.
  • Product Description. Describe the product such as the detail information as well as the benefits and advantages of the product. Include pictures of the product and other technical description. Tell also the difference of the product being offered compared to other products. Name the manufacturer and supplier as well as other information such as patents and related information.
  • Market Analysis. It should provide information about the product’s potential market size such as number of customers and income. Discuss the target market for the new product. Also, it should contain the factors which will affect the demand for the product such as the demographic characteristic of the target client or customer as well as the existing competition.
  • Financial Analysis. Discuss the financial information such as the price and related calculations that back up the pricing. Also, includes start up and working capital requirements, sales forecasts and profitability.

Feasibility study is not the same as a business plan. A feasibility study is a tool for determining whether a business idea is viable. A business plan is for planning the actions needed to bring the business idea to reality. The feasibility study does, however, provide information for the business plan.

How to Write a Business Feasibility Study

One of the important parts of a business plan is a feasibility study because it determines if a business will be successful or not considering the environment, the market, operational requirements and financial analysis.

Create a page about your business to know if a feasibility study is even necessary. This information will serve as an outline for your feasibility study. Then, review the market background for your business as well as your probable customer according to age, proposalgender, classification. Also, take note your major competitors direct and indirect and think how and why your customer will choose your business over your competitors. List the strengths and weaknesses of your competitors. You can write two good points and two bad points to determine why they are competition.

Next step is to create a list of materials and equipment to be used in your business to become operational. Determine the management requirements such as employee’s qualification and employment infrastructure for your business. Know the costs for equipments and other start up costs as well as the location preparation.

Be sure to present your feasibility study with charts, graphs and table to visualize and clarify information before submitting it to another party or authority. It should contain useful facts and figures to be used in decision making.

Marketing Feasibility Study

Marketing Feasibility study is written in order to know and identify the potential market and market competition. It is use as marketing tool to identify possible problems and obstacles for the implementation of new project or laughing new products or services. It should identify how things done including the sales projection and cost of the project.

Market feasibility study is used as assessment if the proposed business is going to be successful in terms of marketability. Such marketability includes the geographic location since market feasibility study also explains the importance of the business in the selected area. Proposed business proposal will be implemented based on the market feasibility study since it will evaluate the viability of a business proposal whether it will be success or failure.

Some elements of market feasibility study are current market including the market competition as well the expected future market potential. Also, it included the prospective client and sources of income.

Market feasibility study is done through research such as having a questionnaire and surveys to know the status of the prospective client to know the exact need of the people in the area as well the demand of a certain product or services. It is a collection of information about the possible market that can be used in deciding how a product or services will be priced, delivered and marketed. In addition, don’t forget to collect information about the strengths and weaknesses of the competitors.

Approval Sheet for Feasibility Study

 

This is to certify that I have supervised the operation of and read the feasibility study prepared by Ronron de Silva entitled “Pico Hydro for Rural Electrification” and that the said project has been submitted for final examination by the Oral Assessment Committee.

Engr. Rolando Marquex
Project Study Adviser

As members of the Oral Assessment Committee, we certify that we have examined this feasibility study presented before the committee on April 03, 2000, and hereby recommend that it be accepted as fulfillment of the feasibility study for the degree in Bachelor of Science in Electrical Engineering
Engr. Niel Enriquez
Panel Member

Engr. Romeo Tedore
Committee Chairman

Technical Feasibility Study

One of the major components of a project feasibility study is technical study.  In case of product proposal, a technical study identifies whether the product could be produced at the highest possible quality level with minimum cost.

Factors to be considered in technical study

  • The appearance of the product such as physical, mechanical and chemical properties should be illustrated.
  • Data flow or detail flow charts should indicate the material and energy requirement during the manufacturing process.
  • Production schedule and plant size such as the production capacity and number of days that the project will operate per year and possible yearly production.
  • Machine requirement such as machine specification and capacities as well as machine price and auxiliary equipment will also consider. Also include the availability of spare parts and repair services.
  • Raw materials including the current and potential sources and cost of raw materials should also be determined.
  • Location of the plant as well as the plant layout and structure.
  • Waste disposal and utilities such as electricity, fuel, water and supplies.

Technical study in feasibility study can be an excellent means for trouble shooting and long term planning. It a method use of how the products and services will progress through your business to reach the target market. Other basic things need in technical study includes labor, materials, technology, and transportation.

Guidelines for the Preparation of Project Feasibility Studies

These guidelines are required b the Board of Investment and also required by banks. (Guidelines for the Preparation of Project Feasibility Studies, Philippine Journal of Business and Finance, II, July 1968, 473-8)

1. Summary of Project

1.1 Name of Firm

1.2 Location
1.2.1 Head Office
1.2.2 Plant Site

1.3 Brief Description of the Project
1.4 Highlights of major assumptions such as market projections, share and prices, investment costs, method of financing, etc.
1.5 Summary of findings and conclusions regarding the following:
1.5.1 Market feasibility
1.5.2 Technical feasibility
1.5.3 Financial feasibility

2. General Information

2.1 Management of the project
2.1.1 Management during the pre-operating period (firms or persons involved or to be involved in marketing, engineering and other studies)
2.1.2 Management during the operating period (type of business organization; organization chart and functions of each unit; management personnel specifying the duties and time to be devoted to the project, qualifications and compensation)
2.1.3 Labor (skills required; recruitment and training program, compensation, fringe benefits and facilities)
2.1.4 Professional firms or consultants to be hired, if any

2.2. Status and Timetable of the Project

2.3 Other information (pending, litigations, information regarding intangibles)

3. Economic Aspects

3.1 Market Study

3.1.1 Demand
3.1.1.1 Consumption for the past ten years and statement of the major consumers of the project
3.1.1.2 Projected consumption for the next ten years and method used and factors stated in preparing the projections

3.1.2 Supply
3.1.2.1 Supply for the last ten years, broken down as to source whether imported or locally produced; specification as to the form in which the goods are imported, the country of origin and the brands indicated; Local companies with their production capabilities and brands used be specified

3.1.2.2 Projected supply for the next ten years

3.1.2.3 Factors affecting trends in past and future supply

3.1.2.4 Competitive position considering imported and/or substitute products

3.1.2.4.1 Selling Price
Prices to be adopted including tariff protection assumed or expected for the project; Products to be sold locally to include comparison of prevailing prices (both local and imported) and prices of substitute products, whether wholesale or retail, whichever is applicable in the light of the applicant firm’s marketing program; Products to be exported to specify comparative landed cost of goods from other countries and that of those goods at the prospective importing country with prevailing prices there, either wholesale or retail, whichever is applicable.

3.1.2.4.2 Competitiveness of the quality of the product

3.2 Marketing Program

3.2.1 Description of the present marketing practices of competitors

3.2.2 Proposed marketing program of the project describing selling organization, terms of sale channels of distribution, location of sales outlets, their corresponding costs

3.3.3 Promotion and advertising plan, including costs

3.3.4 Packaging

3.3 Projected Sales

3.3.1 Expected annual volume of sales for the next ten years considering the demand, supply, competitive position, and marketing program
3.3.2 Sales contracts, if any

3.4 Contributions to the Philippine Economy

3.4.1 Net annual amount of dollars earned or saved, after subtracting amortization of imported capital equipment; and any important of raw materials
3.4.2 Labor employed and taxes paid
4. Technical Feasibility

4.1 Product(s)

4.1.1 Description of the product(s) including specifications relating to their physical, mechanical, and chemical properties.
4.1.2 Uses of the product/s

4.2 Manufacturing Process

4.2.1 Description of the process showing detailed flow charts indicating material and energy requirement at each step and the normal duration of the process
4.2.2 Licensing agreement, if any, including terms
4.2.3 Alternative processes and factors used in determining the process to be employed
4.2.4 Processes used in existing plants and in similar projects in the Philippines or abroad

4.3 Plant Size and Production Schedule

4.3.1 Rated annual and daily plant capacity at the given number of shits per day and number of operating days per year and factors used in determining plant size
4.3.2 Expected attainable annual production volume for the next ten years, considering start-up and technical factors

4.4 Machinery

4.4.1 Machinery layout showing the number, specifications, rated capacities and balancing of capacities of each major and auxiliary equipment and standby units
4.4.2 Availability of spare parts and repair service
4.4.3 Quotations from suppliers, machinery guarantees, delivery, terms of payments and other arrangements

4.5 Plant Location

4.5.1 Site plant

4.5.2 Desirability of location in terms of distance to sources of raw materials and markets, and other factors

4.6 Plant Layout

4.6.1 Description of the plant layout, layout chart
4.6.2 Effect of layout on materials flow, handling of materials, and storage
4.6.3 Provisions for expansion

4.7 Structures

4.7.1 Buildings and construction costs
4.7.2 Other structures and their respective costs
4.7.3 Land improvements such as roads, drainage facilities, etc. and their respective costs

4.8 Raw Materials

4.8.1 Description and specification relating to their physical, mechanical, and chemical properties
4.8.2 Alternative raw materials and factors used in selecting the raw materials
4.8.3 Material balance
4.8.4 Availability, continuity of supply and current and prospective sources
4.8.5 Current and prospective costs of raw materials

4.9 Utilities
Electricity, fuel steam and supplies, specifying the uses, quantity required, balance of utilities, availability, sources and alternative sources and costs
4.10 Waste Disposal

4.10.1 Description and quantity of the waste to be disposed of
4.10.2 Description of the waste disposal methods
4.10.3 Methods used in other plants
4.10.4 Cost of waste disposal
4.10.5 Clearance from proper authorities or compliance with legal requirements

5. Financial Feasibility

5.1 Total Project Cost
5.2 Initial Capital Requirements
5.3 Sources of Financing
5.3.1 Sources selected or proposed for both long-term and short-term financing
5.3.2 Alternative sources considered
5.3.3 Amount and terms of financing for each source selected indicating the currency, security, repayment period, interests and other features
5.3.4 Status of financing from each source relating to actual releases already made, pending applications and applications still to be made
5.3.5 Financing of contingencies and seasonal peaks of working capital

5.4 Financial Statements
5.4.1 Projected income statement for ten years
5.4.2 Projected cash flow statement for ten years
5.4.3 Projected balance sheets for ten years

5.5 Financial Analysis

5.5.1 Unit cost estimates and detailed breakdowns of all cost factors from first year until normal operation is attained
5.5.2 Break-even point analysis
5.5.3 Capital recovery, and earning showing the cash pay-off period rate of return and discounted cash flow rate of return

Business Feasibility Study Checklist

As we all know it is essential to produce a business feasibility study checklist or outline in order to organize our business feasibility study because creating an outline can be an effective tool to have complete list of what we’re going to write in our feasibility study.

Checklist for business feasibility study includes cover letter, cover sheets, table of contents, executive summary, project or product description, market feasibility study, organizational feasibility study, technical feasibility study, financial feasibility study, recommendation, conclusion, attachments and appendices.

In market feasibility study includes the description of the industry, market analysis, future market pfeasibility study checklistotential, potential buyer, sales projects and sources of income.  While in organizational feasibility study contains the organizational business structure with corresponding professional skills and resume, management and business personnel.

Technical feasibility study identifies the materials, labor, technology, transportation and physical location. While in financial feasibility study includes cost estimation and pricing recommendation, balance sheet projection for three years, cost benefit analysis, income projection and break-even analysis.

Of course, you have also to consider the description of the industry, market potential, market analysis, potential buyers and sources of revenues, business competition as well as sales projections.

Before submitting your business feasibility study, be sure to proofread by someone to check for errors such as typographical error, grammar and spelling.

Project Feasibility Study – Public Market Development Project

I. Introduction

With its rapidly expanding economy, the municipality of Kidapawan, North Cotabato, needs to drastically improve its entire market complex which is located along the national highway traversing the town’s commercial center. As reflected in the accompanying statistical figures, the estimated total cost to replace all existing, dilapidated, and fire hazards, would be Php20.2 million. The town’s legal borrowing capacity is only 2.26 million as of June 30, 1978 as certified by the Commission on Audit.

II. Immediate Project

Phase I of the project is the Kidapawan Bagong Lipunan Center which involves the construction of a new, modern, two storey Agora-type building with a Muslim-motiffed façade in accordance with guidelines, rules and regulations of the Ministry of Human Settlements. The term Agora is a Greek term for a place where community residents converge for their civic, cultural, social, and political activities, usually in marketplaces. Such edifices as that being designed for Kidapawan will house not only market stalls but also offices and spaces for community gatherings.

Phase 1 will bring about the establishment of the first main building which will have a total of 216 stalls, each averaging 24 square meters plus 100 meters for restaurant purposes. It will be provided with all the necessary facilities for a modern public building such as adequate light, water, drainage, toilet, garbage disposal, ventilation and parking system.

The specifications of the floor areas are as follows;

FLOOR AREAS

1. Main Building

Ground floor – 4,692 sq. m.
Second floor – 4,580 sq. m
Total – 9,272 sq. m

2. Driveway and Parking Space – 1,350 sq. m.

Total Area – 10,622 sq.m.

III. Outline of Financial Funding Aspects

3.1 Estimated Cost – Phase 1

3.1.1 Building Construction
Ground floor, 4,692 sq.m. at Php800.00
Second floor, 4,580 sq. m. at 825.00
Total Building Cost

3.1.2 Driveway and Parking areas 1,350 sq.m. at Php 35.00 –

3.1.3 Plans and supervision, 7.75% of Construction cost of Php 7,579,350.00
Total Cost

3.2 Projected Funding Sources

3.2.1 Loan, DBP, per legal borrowing capacity

3.2.2 Loan, Central Bank, PD 752, Sec.3

3.2.3 Two-year advance rentals from stall-holders

3.2.4 BIR allotments and specific Tax shares

3.2.5 5% Presidential Discretionary Funds

Total Fund Sources

3.3 Estimated Revenues from Stall Rentals

3.3.1 Ground floor
102 stalls at Php40 per day for 365 days
8 stalls at Php50 per day for 365 days

3.3.2 Second floor
98 stalls at Php35 per day for 365 days
8 stalls at Php45 per day for 365 days

Total revenues from stall rentals

3.4 Estimated Operating Expenses

3.4.1 Personal services

3.4.2 Other operating expenses

3.4.3 Depreciation expenses

3.4.4 Interest expense

Total operating expenses

3.5 Estimated Net Revenues
Estimated revenue from tall rentals
Less: Estimated operating expenses
Estimated Net Revenue

IV. Other Facilities and Cost
After Phase 1 is completed, 13 more building with a total of 13,297 square meters, and 8,223.5 square meters, of driveways and parking spaces will have to be constructed to complete the entire development project. At existing prices of construction materials, estimated additional project costs will amount to Php12,256,350.00 to include building and driveway construction and plans and supervision costs. This is assuming that prices will remain constant in the years to come, or during the ten-year development project which is impossible when one considers the trend in the rise of prices nowadays. Further details of this project feasibility study will be taken up under preparation for submittal to the agencies concerned.

Financial Feasibility Study

According to Wikipedia, financial feasibility can be judged by the total estimated cost of the project, financing of the project in terms of its capital structure, debt equity ratio and promoter’s share of total cost, existing investment by the promoter in any other business and projected cash flow and profitability.

Financial feasibility study determines how much start-up capital is needed as well as sources of capital and returns on investment. It is an analysis of the total costs of a proposed project and the potential income that the project can get. It the potential income of the proposed project can cover all the costs, then the project is financially feasible.

Your financial feasibility study should analyze the start-up capital requirements, capital sources and returns for investors. Start-up capital is a cash you need to start your business and should keep it running until it is profitable. Sources of capital for your business include investors, bank business loan, large corporations and your personal money from your savings and checking account.

financial feasibility studyReturn on Investment also known as ROI is significant measure in investing. The return on investment is calculated by an investor to measure the performance of an investment and compare the efficiency of a number of different investments. The formula for Return on Investment (ROI) is:

ROI = net profits before tax / share holders equity
In all the components of feasibility study, financial feasibility should be completed because it is use to evaluate and make sure that the project or business will live it up to its performance expectations.