Archive for the ‘Feasibility Study’ Category.

Feasibility Study of a Commercial Warehouse in Angeles City

General Aspects

1.1    Description of the Project
The warehouse project is described and the findings on the market, technical and financial aspects of the study are summarized.

1.2    Project Timetable
A brief statement on when the warehouse will become operational together with a timetable of pre-operating activities is indicated

1.3    Management of the Warehouse
The organization and staffing of the warehouse company are defined and quantified.  Procedures for inventory account-ability, receiving and shipping of goods are established.

Product and Market Aspects

2.1    Product
The products to be warehoused and marketed are identified together with corresponding producers.  Brands of producers with warehousing facilities in the area are excluded.

2.2    Trade Area
The producers are interviewed to attain data on the volume of production and distribution of each product to the region.

2.3    Competition
Competitors, data on products warehoused and marketed sales volume, and pricing are identified.

2.4    Projected Sales
The total demand and market share for each product over a ten-year period are projected on the basis of the following:

2.4.1    Population growth
2.4.2    Consumption per capita as affected by income growth
2.4.3    Competition

2.5    Marketing and Selling Prices
The marketing arrangement and selling price for each product are defined over a ten-year period.

2.5.1    Immediate purchase of goods upon delivery from producers
2.5.2    Immediate sale of goods on commission basis
2.5.3    Storage and sale of goods upon orders from producers, fixed charges for storage and commission on sales.
2.5.4    Combination of the preceding marketing methods

Technical Aspects

3.1 Location Factors
After the geographic location of the warehouse has been selected, the specific site must be determined.  Some of the factors that may influence the choice are as follows:

3.1.1 Topography
The site must be free from floods.

3.1.2 Accessibility
The site must be as near as possible to transportation lines.

3.1.3 Cost of Land

3.1.4 Land Use
The site should be compatible with warehousing regulations.  Proximity to residential areas should be avoided.

3.1.5 Security
The site should not be in areas known for the incidence of theft and vandalism

3.1.6 Building Code
The requirements of the building code must be considered, particularly with regard to the restriction on the height of the building.

3.1.7 Advertising
The exposure of the building to heavily traveled high ways adds on advertising value to the state or site.

3.2 Size and Layout of the Building
The specific considerations on the size and layout of the warehouse are as follows:

3.2.1 The size of the building is related to the projected sales over a ten-year period in general and to the occupancy rate in particular.

3.2.2 The width-length on figuration of the building affects the construction cost per square meter of floor area as well as the handling and storage operations  In principle, for optimum combination of construction cost and operating efficiency, a warehouse should be nearly a square

3.2.3 Height will be limited by local building restrictions and the need for safe and practical handling equipment.  Height is also a convenient and relatively economical means of providing storage capacity.

3.2.4 Location of rail and dock should consider factors such as protection from the weather, security aspects, proximity to storage areas and loss of storage space.  Docks may be located outside, inside or partially inside/outside the warehouse.

3.3 Equipment
The types and number of equipment for handling storing and shipping operations are determined.

Financial Aspects

4.1 Project Cost
4.1.1  property, plant and equipment
4.1.2 organizational and operating expenses
4.1.3 working capital

4.2 Sources of Financing
4.2.1 capital stock
4.2.2 long term borrowing
4.2.3 short term borrowing

4.3 Financial Projections and Notes and Assumptions
4.3.1 cost of sales
4.3.2 operating expenses
4.3.3 income
4.3.4 cash flow
4.3.5 balance sheets
4.3.6 capital expenditures (organizational and pre-operating expenses, building, machinery and equipment, office furniture)

4.4 Financial Analysis
4.4.1 discounted  cash flow rate of return on total investment
4.4.2 financial ratios (return on sales gross profit rate, return on assets, etc.)
4.2.3 break-even analysis

Technical Aspect Feasibility Study for Snack Stand

The technical aspect helps to determine the capacity of the project.  The technical study will provide information in service activity and the raw materials to be used in providing activity this product as well as their resources.  It is also determine the utilities and equipment to be acquired in showing the location and layout of the project.

Objectives

1.    To know the business should be located.
2.    To find how to improve more in the business and also in the product.
3.    To know how to use properly the equipment and machinery.

Plant Lay out

The plant lay out show the size of a firm.  Lay out shows the different angel of the firm and the lay out is the guide for the worker who made a difficult firm.

Plant Location

The business will be situated at Common Terminal at Barangay Ibayo, Balanga City, Bataan beside the Isaac and Catalina medical center.  The common terminal is a very busy place where a great number of people come to go  The GF Snack Stand is situated on the second floor of the terminal.

The business was agreed to be situated at the said location because of its suitability for the targeted market.  Researchers suggested that the kind of business is very much profitable in the said place.  The partnership believes that the business can serve more customers in the area compared to other places.  The said location is very much accessible to students, employees, office workers, businessmen and common terminal passengers and also for those who are roaming around the three (3) malls.

Excerpt from Management Project by Arde R. Reyes

System Feasibility Study

In the field of computer and technology, there always an option to automate things likes payroll system, inventory system, lighting system, and sales system.  But of course, before the automation of any system, a feasibility study should be conducted in order to see the benefits of automation over manual system as well as other alternatives.

At first, you should study the organizational systems such as the users, policies, functions and objectives. Consider also the problems existing over the present systems like redundancies, inconsistencies and slow services. Also, know the constraints such as the nonfunctional requirement.

After analyzing the present or current system, possible alternatives should be presented.  Sticking to the current or present system is always an alternative. Different types of automation or computerization and business processes are considered to solve the existing problems. Advantages and disadvantages of each alternative should be discussed.

In addition, the computation of payback analysis, net present value analysis, and return on investment analysis should be included in your feasibility study.

If there is a feasibility study, the best alternative is to be preferred by the management because there a chance of comparing alternative. Feasibility study will determine the best solution to the problems.  After all, feasibility study is written to assess each alternative and come out of the best alternative that will benefit the intended users.

What to Include in your Feasibility Study

In starting a new business venture, it is important to conduct a feasibility study to ensure that your business will be successful.  Some things to be included are plan, cost, and sources of funding, manpower and personnel requirements, market and profitability.

In the plan section of your feasibility study, State clearly the objectives and description of the project. Duration to complete the project is also included. It is usually answers the questions what, why and how about the project.

Indicate the cost of equipment and facilities needed for the project.  The proponents should undertake reliable canvassing using at least two or three supplier and be particulars to models and capacities of equipment as well as the availability of materials.

Also, it is important if there is budget for the project.  If there is no sufficient budget for the project, a bank loan may be considered.  In this case, the loan amount and its interest must be factored into the financial documents of the study.  Realistic income targets from the venture should be projected.

As per personnel or manpower, it is important to determine the size and particulars of manpower as well as personnel’s job description, job titles and credential standards.  Also, salary rates and allowance should be noted.

In addition, the stability of the market determines the viability of the project.  A survey should be conducted to know if there are sufficient clients or customers and to whom the commercial venture will cater.

Of course, project should know if it is profitable. A ten or twenty percent return of investment (ROI) is usually regarded as profitable enough.

Vital Parts of Feasibility Study

A.    Summary of Project

  1. Name of Firm
  2. Location – head office and plant site
  3. Brief description of the product
  4. Highlights of major assumptions such as market projections, share and prices, investment costs, method of funding
  5. Summary of findings and conclusions on the following

a.    Market feasibility
b.    Technical feasibility
c.    Financial feasibility

B.    General Information – Describe the pre-operating period, during the operating period, labor, and professional firms or consultants to be hired, if any. Also, includes status of timetable of the project and other information such as pending litigations, information regarding intangibles, etc.

C.    Competitive position considering imported and/or substitute products.

D.    Marketing Program – description of the present marketing practices of competitors in the exports and domestic market. Projected export and proposed marketing program of the project.  It includes the contribution to the economy, plant layout, structure, raw materials, utilities, and waste disposal.

E.    Financial Feasibility – Total project cost, initial capital requirements, sources of financing, financial statements,  and financial analysis.

F.    Social Desirability – specific project contributions to the economy and society and social rate return.

Some Feasibility Study Mistakes

It is imperative to show your idea is feasible to attract investor and fund the project.  No matter what is your offering whether a product or service, you need to convince other people to finance your ideas.

I provide some feasibility mistakes which serve as guidelines to your feasibility study.

  • Doing feasibility study without doing research. It is a wasting of time and money without preliminary research on validity of the idea.   It is necessary to conduct initial research or pre-feasibility study before the start on of a full feasibility study.
  • Incorrect data interpretation.  Sometimes, the writer overestimates the market size as well as the opportunity for the new venture. For example, you will observe that the product has a large market place, but not realized the strengths of competitors and their customer’s loyalty.
  • Incorrect cost estimation. Make sure to detailed the cost to avoid over-estimation or under estimation.  Also, cost estimates should be studied carefully.
  • Overlook indirect competitors.  Make sure to investigate all products and services that deal to customers’ need.
  • Surveys dependence. Don’t over rely to survey because people tend to answer “yes” for new product but when it comes to purchasing, they say “no”.
  • Without expert Assistance.  It is important to get expert views regarding the product, idea or services.

What to include in your Technical Feasibility

Product

  • Description of product
  • Economic uses of the product

Manufacturing Process

  • Detailed Flow Chart of the Manufacturing Process including the material and energy requirement at each step and normal duration of the process
  • Other processes and factors considered to determine the process to be adopted
  • Processes used in existing plants and in similar projects

Plant Size and Production Schedule

  • Daily and annual production capacity of the plant
  • Days per year the project operate
  • Factors used in determining plant size
  • Expected attainable annual production volume for the next five years considering start-up and technical factors.

Machinery

  • Machinery layout such as the number of specifications, rated capacities of major machineries, prices of equipment, and balancing of capacities of each major and auxiliary equipment and standby units
  • Spare parts and repair service available
  • Quotations from suppliers, machinery guarantees, delivery, terms of payments and other arrangements

Plant Location and Layout

  • Location map of the plant
  • Plant Layout

Suggested Outline for Feasibility Study

One of the important steps in business development is a feasibility study.  Feasibility study is used to determine the potential for success of a proposed business venture.

The sample outline below can be used to help you make your study. However, not all feasibility studies are alike because it depends to the type of business venture analyzed and the market. The success of a feasibility study is based on the careful identification and evaluation of all of the important aspects for business success.

Description of the Project. Identify the list of product(s) or services(s) to be marketed and the general business model such as how the business will make money. Include the technical processes, size, location and kind of inputs. Also know the economic and social impact on local communities as well as environmental impact on the surrounding area.

Market Feasibility. Determine the industry description, industry competitiveness, market potential, sale projection and the access to market outlets.

Technical Feasibility. Find out the facility needs, suitability of production technology, availability and suitability of site, raw materials and others such as labor availability and qualified management personnel.

Financial Feasibility. Include the estimation of total capital requirements, equity and credit needs, budget expected costs and returns of various alternatives

Management Feasibility. Identify the business structure and business founders.

Conclusion. Include information that will be used for decision making whether to proceed the proposed business ventures.

Rules in Preparing a Good Project Feasibility Study

A project study or feasibility study contains several chapters.  The proposed project must be financially, economically, technically and socially feasible.

A consultant or researcher must possess not only the technical expertise on the project involved, but also the right analytical, interpretative and writing skills to be able to produce the desired studies.  He must know all banking, institutional, and governmental rules and regulations on the particular projects he is to work on.

Rules in Preparing a Good Project Feasibility Study

  1. Know the nature of the proposed project well. If you are not familiar with the topic or project, you must obtain the technical expertise from qualified experts to help you in researching the basic required technology and other sensitive aspects of the project.
  2. Research well. Explore all resource related to your study.  Your project study must be included with statistics, data documents, and all information needed from all available resources.
  3. Must be a good analyst. You must know how to analyze, evaluate, interpret, use and discard unnecessary data.
  4. Data must be accurate. Your estimates and projections must be close to realities.  Avoid making guesses and statistical improbabilities.
  5. Organize study. You must know how to put in order your study.
  6. Write it well. You must know how to write it properly.

Sample of Management Study

Excerpt from the proposed telephone industry business.

Management study includes the planning, organizing, staffing and directing of the project.  Also it includes the external activities in starting the business.  The means and procedure are undertaken before the operation of the business.  The form of management is indicated identifying each of management and each personnel.  The role and duties of each personnel is clearly defined, as well as practice and develop skills learned from this project

Management Analysis

Our business covers a system of services that can be determined in large scales.  A corporation owns the ETHECOM.  This kind of business has a very large management.  The management and operation of the business are determined and constructed by the joint-forces and capabilities of the corporate members and staffs.

Organization Chart

ETHELCOM provides its organizational line chart, compose of personnel deployed within the business.


Registration of business

The registration of business is an act that is provided by the constitution.  It is very important and must be implemented in order for the business to be legal and to perform well and freely.

The following are the steps for registering a business in the Philippines.

  1. Prepare the article of partnership/corporation.
  2. Registration of the business name with the Bureau of Domestic Trade and Industry.
  3. Apply the registration of the partnership with the Securities and Exchange Commission.
  4. Get the necessary permit from the office of the mayor and license to operate from the treasure of the city of municipality where the business will be located.
  5. Secure a tax identification from the Bureau of Internal Revenue and a file VAT or Not-VAT permit.

Hiring Personnel

The following are the qualification for the interested job seekers.

Electronics and Communication Engineer
-    Preferably Male, 22-30 yrs. old
-    Licensed
-    At least 5 years of experience

Technician
-    Preferably Male, 22-30 yrs. Old
-    BSECE or Electronics/ Electrical graduate
-    At least 3 years of experience in the related field

Sales
-    Male or Female, 21-30 yrs. old
-    High School Graduate
-    With pleasing personality

Job Description and Responsibilities

President
-    Responsible in making final decision for every undertaking the business may encounter.
-    Administer over all activities and for sees projects, forecast, and solve problems.

Manager (Stockholders)
-    To assist the President and his duties and responsibilities.
-    Must be responsible in assigning different task of each personnel.
-    Responsible for preparing financial statement of the business.

Purchasing Personnel
-    Responsible for good quality of purchased products
-    Responsible for purchasing low cost of product
-    Responsible for scheduling of purchased product

Technicians
-    Responsible for repairing, servicing and installation

Sales Personnel
-    Responsible for the sales of product, operational reliability of services and provides customer care.