Steps in Conducting a Feasibility Study

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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.

Elements of a Business Plan

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The following are elements of a good business plan:

  1. Executive Summary. It should be short and clear. Try to keep it in one page or half page. It should contain the synopsis of your entire business plan such as the business concept or idea, financial status, business position and business achievements.
  2. Company Description. It states the name of the company as webusiness planll as the legal status and organization structure. It also describes the company’s mission statement.
  3. Business Description. It should provide information about the industry whether a product or service. Describe the product or services you want to market and give an idea to make a profit using the product or services.
  4. Market Strategies. It includes market analysis such as defining the target market as well as the pricing, distributing and promotional strategies. It describes here the marketing plan.
  5. Operation Plans. Details the location, facilities and equipment as well as the tracking of inventory.
  6. Management Plans. Includes the quantity and quality of people within the organization to determine the success of the business. It indicates the qualification and responsibilities of each member of the organization.
  7. Financial Plans. It includes the income statement, cash flow projections, and balance sheet. In making financial projections, explain assumptions to know the figures used.

Business Plan Components

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Business plan is compose of executive summary, company analysis, industry analysis, customer analysis, and customer analysis, competition analysis, marketing plan, management plan, financial plan, operation and development plan.

Executive summary – it contains precise synopsis of the business plan. It should be easy to read and no longer than 2 to 4 pages. Executive Summary should sell idea to prospective investor such as the size and scope of the market opportunity, profitability model and skills of the management team to execute the plan.

Company Analysis – it includes the planned overview of the company and explains how the company is organized such as the products and services to offers.

Industry Analysis – it asses the competitors and analyze the market research issue including the size of the target market and trends of the industry.

Customer Analysis – it involves in knowing what the customer wants. It is essential to know exactly and identify the target customer such as average income of the customer and geographically location of the customer. Also, know how its products and services satisfy their need and able to pay.

Competition Analysis – it defines the direct and indirect competitors and evaluates their strengths and weaknesses.

Marketing Plan Analysis – it contains the strategy knowing the target markets including the company’s pricing strategies, promotional strategies, branding strategies, product, and services description.

business planManagement Plan – it shows that the company has required human resources. It should have key management personnel including their background in order to make a successful business as well the boards of directors or board of advisors

Financial Plan – it involves the growth of the company’s revenue and profitability model. It also evaluates the amount of capital needed, the proposed use of these funds and the anticipated future earnings such as the projected income statements, balance sheets, and the cash flow statement.

Operation and Development Plan – it explains the functions required to run the business, milestones to be reached as well as the quality should be controlled.

7-Eleven Franchising

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7-eleven is one of the largest convenience store worldwide.  It is started out as an ice house in Dallas, Texas in 1927 and it has grown into the word’s largest operator, franchisor and licensor of convenience store in the world. It continues to grow, with an average of 7 stores opening somewhere in the world everyday.

A candidate for franchising 7-eleven should possess qualification such as self-driven entrepreneur, service oriented, hardworking, strong entrepreneurial skills, financially capable to fund the investment and knows how to motivate his staff.

The investment for franchising 7-Eleven ranges from Php 1 M to 5 M.   It includes the operational rights of the store, equipment and facilities, furniture and fixtures, air-con system, signage and initial inventory.  The ideal floor area for 7-eleven store is 120 square meters.

seven 11Franchising 7-eleven is very costly but they assure you that you will make income from your investment.  Benefits includes:  They will give full training, offer   s 24 hours support, take care of the payroll, help the bookkeeping, deal with supplier to best products, manage the fuel, and provide advertisement and promotional support. The store manpower salaries and benefits will be provided by the franchisee. Also, the franchisee is required to complete a 4 week full time training program which is combined classroom and in-store training.

The steps for franchising 7-eleven are the following:

  1. Complete the online inquiry form
  2. Complete information request
  3. First interview
  4. Complete self-assessment questionnaire
  5. Store selection
  6. Second interview
  7. Make a business plan
  8. In store assessment
  9. Approval meeting
  10. Commence your training
  11. Store agreement

Market Feasibility Study

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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

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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

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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

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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

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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

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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