Archive for the ‘Feasibility Study’ Category.

Preparing Feasibility Study

Everyday we think to own our business but the problem is how to make sure that our business will become successful. By looking around your area and you will see what people needs. To prevent the waste of money and time, make sure to have a feasibility study to assess the viability of your business idea. Before spending money, feasibility study should be conducted in order to foresee if the business has a good chance of succeeding.

Business magazines and daily newspaper is a good source of business information. Also, yellow pages will give you an idea of a business already operating in your area. Also, seek business advice from others who are in the same industry. Getting information you need will find out
Some factors to consider when preparing feasibility study are the following:

  • demand and market
  • skills and talent needs by customer
  • capital needs and requirements
  • potential client or customer
  • management and operations
  • resources including facilities, equipment, staff, etc.
  • competition
  • market size
  • economic benefits

When you pass the feasibility test, you are now ready to the next step which is to business planning. Business planning will see the picture of the future. According to Wikipedia, business plan is a formal statement of a set of business goals, the reasons why they are believed attainable, and the plan for reaching those goals. It may also contain background information about the organization or team attempting to reach those goals.

Difference between Business Plan and Feasibility Study

Feasibility Study is written to determine if the business is feasible because it serves as analytical tool that includes scenarios for the decision-makers.  If they decided not to proceed with the business then there is no need to write a business plan. Business feasibility study determines if the business is profitable or not.

The business feasibility study is conducted during the deliberation phase of the project development cycle while business plan is the design for project implementation phase which presents the guideline for the project plan.

The feasibility study provides calculations, analysis and estimated financial projections as well as the description of the business and statements concerning competition and cash flow projection while the business plan contains plans and strategies to be implemented to grow the business. Just like feasibility study, business plan also provides detailed budgets, monthly and seasonal forecast, management details such as resumes of staff, background and competition. Also, business plan shows revenues expected, overheads and expenses as well as staffing levels with salaries along with employment cost, sales levels, setup costs, building and office costs, utility, telephone, legal, insurance, accounting, supplies cost and legal requirement cost. It also features sales and sales methodology and objectives.

To summary, business feasibility study determines if the business or project is viable because writing a feasibility study is an inexpensive way to safeguard against wastage of investment while business plan will help to maximize potential and minimize overheads.

Importance of Business Feasibility Study

One out of fifty businesses is commercially viable so it is essential to conduct a feasibility study to avoid wastage of investment and resources.  Business decision making is based on the feasibility study. The primary aim of feasibility study is if the project will continue or not.  In business, feasibility study will determine if the business proposal works on the long time basis or endure financial risk that may come. Also, it helps to identify potential cash flow. Some business fails to success because they do not begin with a feasibility study.

Finally, business feasibility study will assess by the potential investors and stakeholders. They have to analyze every aspect of business feasibility including marketing aspect, production aspect, management aspect, and financial aspect.  If the result of the study is favorable, it is reasonable to continue with it.  On the other hand, if the result is not reasonable, no investor or businessman will take a risk on it.

The last but not the least, your feasibility study should provide supporting evidence for its recommendation. Decision-making process is also based on cost benefit analysis of the actual business or project viability. If the business feasibility study is viable, the full business plan is created.

Characteristic of a Good Feasibility Study

It is important to identify the parts or areas of a feasibility study in order to compose a good feasibility study.

The following are some areas of a feasibility study to be writing in:

  1. Introduction – It includes background information about the proposed business including proposed name and purpose of the business. Also, determines the skills and experience of the business investors.
  2. Business Description – It provides information about the business including the product or services to be offered and nature of industry.
  3. Market Analysis – It includes knowing the current and potential demand of the product as well as the characteristics of buyers and sales forecast over the first three years.
  4. Management Analysis – Prospective entrepreneurs need to know the skills and talent of the management team in launching the proposed business. It provides details specification of management personnel including primary duties and organization structure.
  5. Technical Description – It explain the detailed requirements of facilities, inventory and production control as well as raw materials and other utilities.
  6. Risks and Problems – It should identify the major and minor risks and problems of the proposed business opportunity including the timing and financial start-up.
  7. Economic Plans – It should contains the cost and benefit to compare
  8. Financial Plans – It includes the total estimated cost of the proposed business or project as well as projected cash flow and profitability.

Sample Abstract

The world that we are living now is experiencing different environmental problems. Some affect the water, others affect the air, and still others affect the land and the animals. Some of the largest problems are now affecting the world. As globalization continues and the earth’s natural processes transform local problems into international issues, few societies are being left untouched by major environmental problems like global warming.

Philippines have experienced temperature spikes brought about by climate change. It has been observed that warming is experienced most in the northern and southern regions of the country, while Metro Manila has warmed less than most parts. This kind of environmental problems can be reduced or eliminated through corrective actions or proactive measures. Every environmental problem has causes, numerous effects, and most importantly, has a solution.

The increase in the use of natural and renewable energy sources is one of the major solutions to take the burden off our current dependency. By making switch to natural and renewable energy sources, you will be doing your part in helping to improve the quality of the environment and the air we breathe. To resolve such predicament, people should strive to manage or conserve electrical energy to find other ways to generate electric power out of some high anticipated natural like water.

The pico-hydro electric generator system is a proven technology and is feasible solution to existing problem, not only lessening the demand of electric energy, but also as a source of energy for some rural areas here in Bataan. The system is an efficient way in keeping the environment clean because it only uses water rather than harmful toxins to produce electricity. Other ways producing energy that we used today create harmful effects to the environment. Therefore, hydro electric power is much more environment friendly way of producing energy.

The proponents developed a pico-hydro project designed to test the electrical energy potential of a river available in Maluya Central, Balanga City, Bataan and to supply energy to the target house near the site.

Title: Feasibility Study: Pico Hydro for Rural Electrification

By:

Jerome dela Cruz
Kenneth Aquino
Wilgem Regino Crespo
John Andrew Molino
Rosauro J. Fernando Jr.

Steps in Conducting a Feasibility Study

Some entrepreneurs overlook the first step of the project cycle which is conducting a feasibility study. Knowing the importance of feasibility study can save companies time, investment, effort and embarrassment. The purpose of conducting a feasibility study is to determine the long term viability of the business.

feasibility study stepsThe first step is to examine the market. Examining the market involves a thorough analysis of the competitive landscape for the product or services to be offered. Some entrepreneurs often assume that their product or services to be offered are no competition but in reality they have to viewed customer that allocates time, money, resources as a competition.

Knowing and understanding the needs of the marketplace is not guarantee that you meet customer’s expectation and not mean that you will have a successful business venture. You should analyze the need of technology requirements including the resources to be used.

Another thing to be considered is the business strategy to reach the market as well as the business model. Business model analyze the value proposition, competitive strategy and revenue generation. You should have a scenario planning to guarantee the long term success. You should know whether business model will offers enough profit potential.

At last you should determine the financial projections, operating requirements, recommendation and findings.

Market Feasibility Study

Feasibility study needs to focus on potential market opportunities and market assessment. If there is no adequate demand for the product, there is no need to continue the business venture. Market feasibility study is one of the important aspects in your business feasibility study because it entails the analysis of existing market. Market analysis involves the study of market size, market trends, and market profitability. Market size includes the size of the market based on present sales and potential sales of the product being market. Market size is obtains through government data and customer surveys. Market trends include the changes in prices and customer demands.

Market feasibility study describes the size and scope of the industry as well as industry competitiveness. It also uses to forecast sales projection, and potential suppliers and buyers. In addition, marketing strategies and marketing plan is presented.

During market study, you should estimate the market size and the targeted geographical area. Also, you should describe your target market and your competition and how your customer or client benefits to your products or services. Identifying your key competitors and outline their market share, business strengths, assets, strategies, and goals will determine to overcome the market. You should also analyze the industry such as the industry’s current need or demands and current supply. And then you will need to define your marketing and sales strategy including the distribution and pricing of your product and marketing campaign.

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.