- What is the name of the firm?
- Where is the location of head office and plant site?
- Give a brief description of the project.
- What are the assumptions being made including market projections, share and prices, investment costs, and method of financing?
- Mention the summary of findings and conclusions regarding the market feasibility, technical feasibility and financial feasibility.
- How shall the project be managed during the pre-operating period such as the firms or persons involved or to be involved in studying the different aspects of the project?
- How shall the project be managed during the operating period including the type of business organization, organizational chart and function of each unit management personnel, duties and time to be devoted to the project, qualification and compensation?
- What skills and corresponding numbers of labor are required such as qualifications, recruitment and training program, compensation, fringe benefits and facilities?
- Include the time table of the project.
- Indicate the annual volume of the domestic demand for the past 10 year?
- Who are the major consumers of the product?
- What is the projected annual volume of the domestic demand for the next 5 years? Also indicate the method used and factors considered in preparing the projection.
- Who are the current and potential buyers of the product and where are they located?
- What is the annual volume of the domestic supply for the past 10 years?
- Who are the major producers of the product?
- What are the prevailing prices of the product?
- What are the present marketing strategies and practices of competitors?
- What shall be adopted in the project as to the selling organization, terms of sales, channels of distribution, location of the sales outlets, transportation and storing facilities?
Archive for the ‘Feasibility Study’ Category.
It is important if the proposed project is financially feasible, meaning the project cost is afford by the board or the company. Also, it involves the thorough coverage of all the monetary information. It covers the detailed information on the total project cost, initial capital requirements, sources of financing, financial statements and financial analysis.
The profitability level of the project is also defined such as the net income after taxes to the total investment. The identification of sources of financing is an essential element of feasibility study including the currency, security, repayment period, interest, and other features.
In addition, the financial health of the business is also assessed in the financial statements as well as the analysis showing the income, cash flow and balance sheets. Other information such as break-even outputs, sales and prices, amount of sales required to earn a certain amount of profit and the cash payback period are also provided.
Management study involves the appropriate business organization such as the people who will be in-charge both before and after the operating periods of the enterprise as well as the function.
Factors to be determined in management study:
- pointing out the firms or personnel who will be involved in the operation of the project or enterprise
- type of business organization
- organizational chart
- functions of each unit management personnel
- skills and numbers of labor required as well the duties and time to be devoted in the project
- qualifications, compensations, and fringe benefits of the personnel involved
- facilities to be used
- recruitment and training programs of the personnel
- status and timetable of the project
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
- Composition of the product such as physical, mechanical and chemical properties should be described.
- Manufacturing process include detail flow charts which indicate the material and energy requirement at each step and normal duration of the process.
- Plant size and production schedule includes the production capacity of the plant and number of days the project shall operate per year and expected attainable yearly production.
- Machinery. The number specification, rated capacities, prices of equipment and auxiliary equipment should be considered. Also, the availability of spare parts and repair services such as quotation from supplier, machinery guarantees, delivery, and terms of payment are other factors to be studied.
- Plant location, layout and structure. The location must be desirable in terms of distance to source of raw materials and markets.
- Raw materials. The availability, combination, current and prospective sources and costs of raw materials should be determined.
- Utilities and waste disposal. Here, it includes the specific utilities such as electricity, fuel, water, supplies and their respective uses, and quantity required.
In preparing a proposal or feasibility study, it is important to conduct a market study to determine if the proposed project or idea is feasible in terms of market.
Market study recognizes whether there is adequate demand for the product and that the project shall enjoy competitive marketing position.
An investor is interested to invest in a business project with a minimal risk and a higher rate of return on investment. However, the major consideration is where there is an ample demand for the product being produced or proposed to produce.
Steps in Market Study
- Identify if there is an ample demand for the product being produced or proposed to produce. It means if there is a substantial excess demand, the new firm could enter into the industry.
- If there is a sufficient demand for the product, investigate the competitive position of the firm in the industry. The information on the prevailing prices of the product are gathered and scrutinized.
- The prices to be adopted for the project and the quality of the product relative to the product of the current and potential producers are also carefully studied.
- The present marketing practices of the competitors, selling organization, terms of sales, channels of distribution, location of sales outlets, transportation and storing facilities and other information relative thereto are also taken into account.
Various approaches have been used in preparing a feasibility study according to individual preferences. Some give more emphasis on ocular observation without quantitative and qualitative verifications of the market and other factors considered in starting or expanding a business enterprise. But some are very careful in their investment by verifying all aspects of the project study in a scientific survey.
Suggested steps to prepare a feasibility study
- Identify and recognize the people or firms that will be involved in preparing the various aspects of the study.
- Examine the market feasibility both in terms of ocular observations and the actual scientific survey. Determine if there is ample excess demand and a competitive market position of the project. If not feasible, abandon the idea immediately and think of another business project.
- Find out if the project or idea is technically feasible. Determine if the resources to be used are available on a long term basis and at a reasonable cost. If not feasible, abandon the project or idea.
- Proceed with the management study. Management study involves in determining if the organizational set up carry out its function effectively and that qualified persons under the circumstances are available.
- If management is feasible, determine if it is financially feasible. Financial feasibility means that the budget or financing shall be available at a reasonable cost and there is a financial support and is deemed profitable.
- If government project, assess the social desirability of the project and it will have an economic benefits to the people living in the community and its vicinities.
- Lastly, prepare the summary of the feasibility study including the brief description of the project and the major assumptions made such as market projections, share and prices, investment costs, method of financing. Also, prepare the summary of findings and conclusions regarding market feasibility, technical feasibility and financial feasibility.
Feasibility study is a document written to show the justification of a proposed policy, product, service or other charges in an organization.
A project study has several chapters or division embracing several aspects related to proposed project. A study presented must be financially, economically, technically and socially feasible or viable.
Rules in Preparing Study
- The writer must know the nature of the proposed project very well. Get technical expertise if necessary from qualified expert.
- The study must be loaded with statistics, data, documents and all information to support the study.
- Organize the project study properly.
- The estimation and projections shows must be close to realities.
Characteristics of Feasibility Study
- It helps the managers and other decision makers vote for or against an idea or select many other alternatives.
- It is often preceded by a proposal.
- It helps the reader to make a decision.
- It saves time, capital and effort
Feasibility Study of Establishing Cindy’s Fast Food Branch Along Plaza of Balanga, Bataan
1. General Objectives
1.1. Description of the Business Project
The proposed business will need a two-storey building in a 2,000 square-meter lot with a parking space at the rear. The customer will drive in the left entrance greeted by the water-sprinkled Indian trees partly shielding the establishment from the fumes coming from the busy street. Embraced by the multi-colored lights, the trees will set the cosmopolitan setting to a rustic atmosphere. The building will be constructed to hide the stockroom complementing the architectural masterpiece. The smoothly cemented exit passing through the well-manicured lawn will draw sights of satisfaction from the customers.
The state-of-the-art tables, chairs and utensils will enhance the customers feeling that they are in a five-star hotel. Very affordable, the food will enthrall every customer to come and savor the food over the widely spaced tables on the immaculately marbled floor. The electronically flushing system of the restrooms will motivate the customers to force their friends and relatives to frequent this new Cindy’s Branch at the heart of the Balanga.
1.2. Project Time Table
All minor details considered, the project will start serving the five thousand targeted daily customers within five months. The contractors will complete the fence and the framework of the building in the first month. They will finish the walls and the floors in the second month. They will install the electrical and the air conditioning units in the third month. After the first and second layer coating, they will complete the final painting in the fourth month and finally they will landscape and plant balled-trees in the fifth month. As the project will be in progress, the company will busy the facilities to be used.
1.3. Management of the Business
With three managers alternately scheduled on the eight hour duty to man the 95crew in the 24 hour service, the business will surely satisfy the customers, propelling profit to soar.
The personnel will make a customer feel that he is the only one served amidst the queuing multitude. The high wage given by the company and, likewise, the humane treatment of the superiors will inspire the crew to render machine-precise service.
2. Product and Market Aspects
2.1 Market Outcome
A variety of expensive fireworks commence the business to attract the children, students, parents, and professionals. This opening blast will have been advertised a month before. The initial big crowd from the different districts of the province will keep growing to actualize the management’s vision that this Cindy Branch will be the most profitable among the food chains in the City.
2.2 Market and Selling Price
The customers can order from a variety of choices in the counter staffed with beautiful and handsome ever-smiling crew. The waiters will serve the orders in the well-crafted, smoke free dining areas with both oriental and western motifs to fit their number and their tastes. These areas will enhance customer privacy as the customers enjoy eating while talking about the gossips of the town, or as they engage in a highly intellectual calisthenics about a hot political issue. The area will also conduce lovers to cement their relationship with their soul-penetrating interlocked gazes that only lovers could fathom, as they savor their food.
3. Technical Aspect
3.1 Location Factor
At the center of Balanga Plaza, this food center will surely draw customers from the cross-section of society. The following factors will back-up the company’s foresight:
The 2,000 square-meter lot does not need labeling because the area is already flat and it is located in high location. No matter how strong the typhoon will be, the rains will not flood the area. The customers will not be drawn away from enjoying the services of Cindys.
3.1.2 Cost of Land
The fertile business venture will cheapen the current P20,000 per square meter piece of land. The forty five million peso worth of property will double after only three years of operation.
The place will be safe. Secretly installed cameras will monitor every move to ensure the security of the customers. Four security guards simultaneously assigned to the area will guarantee the safety of the clients. This will be backed up by policemen assigned at the outpost nearby.
3.2 Size and Layout of the Building
To maximize the 40 x 50 meter land area, the engineers will erect the 20 x 30 meter proposed two storey building, leaving five meters at both sides and 18 meters fronting the street. Only two meters will be left at the back of the building. This will ventilate the establishment.
The Bataan Builders will construct the building. This construction company will use modern building equipment like a cement mixer, caterpillar, automatic digging drill, and other state of the art construction materials.
4. Project Cost
4.1 The Land and the Building
This project will cost about P 45,000,000.00 which is roughly broken into the following:
Cost of 2,000 meter lot – P 40,000,000.00
Cost of 2 storey building – P 4,000,000.00
Accessories and Equipments – P 1,000,000.00
Total Cost – P 45,000,000.00
The 45 million pesos worth of land is the biggest of the capital investment but it is worth it because unlike the other expenses, the land value will appreciate through the years. The contract with the Bataan Builders for the proposed two-storey building is P 4,000,000. This includes materials and labor. With the five-month paying scheme, Cindy will pay P 800,000 every month until the last month. The food center will need P 1,000,000 for the imported accessories like tables, chairs and other needs.
The food center will pay the current P 1,000,000 Cindy franchise.
4.3 Sources of Financing
The proprietor will put in P 5,000,000. The remaining P 40,000,000 will be borrowed from the bank.
5. Business Operation
With 50 thousand monthly net income target from about five thousand daily customers, the proposed branch projects the following net income by month and years:
First month – P 1,500,000.00
First year – P 18,000,000.00
Second year – P 36,000,000.00
Third year – P 54,000,000.00
Fourth year – P 72,000,000.00
After four years of operation, this venture will have gained P 11,000,000 as shown in the following computations:
Net income in four years – P 72,000,000.00
Minus the sum of investments – P 61,000,000.00
Difference – P 11,000,000.00
Loaned money from the bank – P 42,500,000.00
Interest of loaned money – P 17,000,000.00
Franchise – P 1,000,000.00
Maintenance – P 500,000.00
Total – P 61,000,000.00
5.2 Accessories and Equipments
Being of high quality, the accessories will still be usable after four years. However, P 500,000 pesos is allotted for maintenance and replacements of damaged property.
The figures above prove how financially rewarding this business venture. Because food is a necessity, a venture like this guarantees 99% success. This is especially so if the location is the Plaza like Cindys Plaza.
* The feasibility study is a result of the proposed Establishment Cindy’s Fast Food.
A feasibility study is a document written to show the justification of a proposed policy, product, service, or other charges in an organization. Prompted by ideas suggested in a proposal, it examines details such as costs, alternative and likely effects.
A feasibility study can be in-house (for decision makers in an organization) or external (requested by clients from outside the organization)
Characteristics of a Feasibility Study
1. A feasibility study is always solicited.
2. It always assumes one of these two patterns of organization:
a. An analysis of the advantages and disadvantages of one course of action, product or idea.
b. A comparison of two or more courses of action, product or idea.
3. It is always intended to help managers and other decision makers vote for or against an idea or select many other alternatives.
4. It usually helps the reader to make a decision.
5. It is often preceded by a proposal.
6. It saves capital, time and effort.