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.

Pico Hydro for Rural Electrification Feasibility Study

Introduction

Pico hydro is a term used to describe the smallest systems, covering hydro electric power generation under 5kw.  Depending on its size, a Pico hydro power system may provide a small, remote community with adequate electricity to power light bulbs, radios, and televisions, among other appliances.  It was given the name “Pico” by Nigel Smith because it needs some different ways of thinking to micro, mini and larger hydro power  There are thousands of site where people have a source of falling water but do not have electricity.  For there rural communities in Bataan, Pico hydro is the lowest technology for generating electricity.  Lighting from these sources is cheaper than using kerosene lamps, and safer too.

1.1    Load Profile

1.1.1    Location/accessibility

The Pico hydro is located in Maluya Central Balanga City, Bataan.  The barangay is accessible by one main dirt road approximately 30 minutes from the main road.  This proposed site for pico hydro project is easily access through any transportation vehicle.  The climate is generally hot and wet with an average yearly temperature of 29 degree Celcius.  The summer dry season occurs from January to April.

1.1.2    Water Resource

There is one canal in Maluya Central which providing irrigation for rice cultivation.  This canal generally runs dry during the summer due to irrigation and lower rainfall.  Although rainfall is plentiful during wet season and the canal is primarily use for rice paddies.

1.1.3    Electricity Supply

The bapico hydrorangay currently has access tp grid electricity provided by Peninsula Electric Cooperative (PENELCO) where the local electricity rate is 9 pesos/kWh plus 12% tax and 5 peso/month charge.

The availability of power can be intermittent brown outs, ranging from a few minutes to several hours, being common.  In addition, tropical storms and typhoons cause power outages lasting up to several days or week in extreme cases.  Thereafter, intermittency in local electricity in the local electrical supply would prove to be detrimental to the consumer of Maluya.

Fifty percent of households in Maluya are electrified ad from 10 to 20 households in the said place are un-electrified (50%)  Small number of household are available in this place because of the fact that the place is new to the public and the road is not yet constructed.  The life of the residence here s considered to be below the poverty threshold.  As is well known, most villages that are un-electrified are also whom to people who are poverty stricken and multi dimensionally deprived.  Un-electrified households primarily used candles and kerosene lanterns for light, with some using rechargeable car batteries for lighting, televisions, or radios.  The local rate for charging batteries is 50 pesos a fairly significant amount for many families whose income are just enough and limited for their basic needs.  Therefore, pico hydro project are proposing to offer battery charging, which could help for local community to reduce their daily expenses.  In addition, it will provide a small revenue stream to help pay for routine maintenance of the Pico hydro system.

1.2     Social Economic Profile

1.2.1    Local Economy

Jobs are very difficult to come by Maluya, resulting in an unemployment rate of even lower.  Families are considered to below poverty threshold where their limited economy exists based around agriculture including rice, root crops, and fruits.  Fishing is also common among the local population.  An agricultural laborer can expect to make around 100 pesos a day budget enough to support the needs of their family.  One household are manufacturing small amount of craft work, making income but not enough for their needs.

1.3    Rationale

Hydropower, hydrokinetic power or water power that is derived from the force or energy of falling water, which may be harnessed for useful purposes.  Since ancient times, hydropower has been used for irrigation and the operation of various mechanical devices, such as watermills, sawmills, textile mills, dock cranes, and domestic lifts.  Since the early 20th century, the term is used almost exclusively in conjunction with the modern development of hydro-electric power, the energy of which could be transmitted considerable distance between where it was created to where it was consumed.

Another previous method used to transmit energy has employed a trompe, which produces compressed air from falling water, that could then be piped to power other machinery at a distance from the energy source.

Water’s power is manifested in hydrology, by the forces of water on the riverbed ad banks of a river.  When a river is in flood, it is at its most powerful, and moves the greatest amount of sediment.  This higher force results in the removal of sediment and other material from the riverbed and banks of the river, locally causing erosion, transport and, with lower flow, sedimentation downstream.

In hydrology, hydropower is manifested in the force of the water on the riverbed banks of a river.  It is particularly powerful when the river is in flood.  The force of the water results in the removal of sediment and other materials from the riverbed and the banks of the river, causing erosion and other alterations.  This section  explains how to select and install Pico hydro system for run of river location in Maluya.  Many aspect of the implementation methods described however, are common also to other design including those suited to low head sites and to those which benefits individual consumers rather than small communities.

In starting up in the Pico hydro business or starting a programmed of community pico hydro is important to carefully select the first scheme as this will act as a focus for future interest.  The chosen location should be accessible to you and to the customer/funder to make it easy for future business.  The optimum site for the pico turbine system in a social application context should have the condition:

Site Location

Pico hydro power generate a limited power, because of that, is oriented to reduced applications as small grid or individual used.  According to this, to avoid high grid expenses and power losses, the site should not be too far end users  As a standard, for 1kW of power, the distance should not be more than 2 km.

Flow

The flow should be enough throughout a year, extreme flows can affect to the system performance, and the excess flow must be controlled.  For measurement of the flow, it should, at least, be done twice a year, during the lowest season (January – April) and also in the highest season (end of September – beginning of October).

Contribution from community

Apart from the suitable technical conditions, is recommendable that community can’t contribute to the project with labors, local material available in the area such as power poles, aggregate sand and gravel) etc.  and also people interested in the formed as technicians to assure the continuity of the project.

The impact of the pilots on end user beneficiaries has been carefully considered in the project.  The benefits include an increase in the quality of life, with better lighting system enabling community activities during the evenings.  The beneficiaries has out that fuel saving were made and there was as increase in the productive output as well as increased opportunities for educational and social activities.

1.4     Statement of the Problem

Due to the unavailability of the power source to number of small communities in Maluya Central, Balanga City, Bataan, most of its residents suffer and experience continues used of kerosene lamps and candles emitting CO2 that may resulting to a fire and also to a low level performance, unprogressive community, uncomfortable lifestyle and inability of doing things as convenient, easy and effective.  This Pico hydro generation power project enable to supply electricity to the consumer of Maluya Central.  It provides technical data and procedural guidance for the systematic of the viability of potential small hydro power addition and focuses upon the concepts, technology, economic and financial issues to these additions.

1.5    General Objectives

To develop a pico hydro electric generator system designed for run of river as economic source of electrical energy in Maluya, Central, Balanga City, Bataan

Specific Objectives

  • To adopt pico hydro technology as a source of transmitting electrical energy in Maluya Central, Balanga City, Bataan
  • To install transmission system from pico hydro to a near households
  • To provide effective and convenient energy in low cost
  • To maximize the usage of water

1.6    Significance of the study

The impact of this study to the consumer of Maluya includes an increase in the quality of life, with the better lighting system enabling community activities during the evening and opportunities for educational and social activities  There will be fuel savings and unused of kerosene lamps and candles emitting CO2 which is the primary cause of fire.

To the beneficiaries, the Pico hydro system will be a very big help since it is a renewable kind and is very convenient and cheap.  Also to the environment, it does not produced carbon emissions and will definitely reduced global warming in a little way.  With the generated electric power, the project aims to contribute a sustainable development in this rural village through improved lighting for household/community work and school assignments, information/entertainment by radio and television, communication access and small livelihood opportunities.

1.7    Scope and Delimitations

This study focuses on the use of renewable energy through the flow of water in a river of Maluya Central, Balanga City, Bataan.  One of the factors to be considered is the flow of water since it is the driving force to make the turbine move.  As the study comes along, we concluded that the flow of water in Maluya has an electric potential to produced electrical energy.  It measures 200 watts and can now supply one household.  We also consider the generator and the turbine. The turbine is required to drive with a certain speed while the generator should be at a certain height on top of the turbine for safety reasons and efficiency.  On rainy seasons, the water may rise and the flow could be treacherous to the system.  However, with the used of penstock this could prevent damage to the system.

Detailed hydrological data for the area is hard to come by.  The flow rate of the stream was determined by measuring the cross sectional area of the stream along with the surface velocity of the water using the float method.  This method is prone to some error, however the actual design flow is a fraction of the total stream flow measured during dry season and thus should be available year round.  Sufficient care was taken to ensure the measurement were as accurate as possible and suitable for this feasibility study.
By:

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

Restaurant Feasibility Study

Before putting up a restaurant business, it is important to write a feasibility studies to analyze the current situation if it is possible to have a successful restaurant business.  Feasibility study is an effective tool to evaluate a business if it is feasible.
Some factors to consider are location, competition, price value strategies and population. Also, feasibility study evaluates terms of lease, rental rents, tax projections, cost, sales, and special assessments.

Restaurant feasibility study includes the financial analysis of the restaurant’s projected income and operating expenses.  It should provide a market analysis with ROI to be used as a basisrestaurant feasibility study for business plan.  It also included the capital budget expense, sales projections, labor costs, detailed profit and loss statements as well as the break even analysis.  Other items to be included are the working capital requirements, equipment and fixture costs, payback forecasts and analysis, pre-opening budget and all general costs estimates cost.

Restaurant feasibility study is written to evaluate the potential of having a restaurant in a certain place based on extensive research and investigations.  It is usually used for the reason of having potential investors of the restaurant to make an investment decision.

To sum up, restaurant feasibility study will definitely study the following elements such as the potential location, marketing figures, existing competition, industry, cost and expenses, and organizational structure.

Mister Donut Franchising

Mister Donut was started at Boston, USA in 1955. Today, Mister Donut grew to be one of thelargest donut chains in the country and now it already has over 2,000 branches across the Philippines.  They open for franchising to individuals who is business minded and looking for income.

The first step of Mister Donut franchising is to submit a duly signed intent letter addressed to the Franchise Management Department which contains the following information such as Applicant’s interest to be a franchisee of Mister Donut, Applicant’s address, contact numbers and e-mail, proposed location address and vicinity map as well as site pictures.

The franchise fee is Php 50.000.00 on any shop type and it shall entitle for a 2-year contract with Mister Donut. This franchise fee is non-refundable and non-transferable. The total investment for Mister Donut is depending on the type of shop.

The following are Franchising Packages”

A.    Food Camister donut franchisert Shop

  1.  Showcase 01 – Food cart size is 1.35 frontage at 2.16 height and 100mm size portal and icon elements attached to the food cart. It is cost Php89,962.47
  2. Showcase 02 – Food cart size is 1.60 frontage at 2.16 height and 300mm size portal and icon elements attached to the food cart. It is cost Php91,286.00.
  3. Showcase 03 – Full package of new cart design food cart showcase with portal, signage and icon elements .  Full back enclosure with mural and poster board. It cost Php159,671.00
  4. Budget-Friendly Cart. Food cart size is 2.0M x 2.0M height.  It cost Php130,737.36
  5. New Cart with Side Counter.  Food cart size 2.0M x 2.0M.  It cost Php169,771.00

B.    Take Out Shop

This Mister Donut take out shop is used for in-line or outdoor areas.  The floor requirement is 6-9 square meters. Also, it includes showcase, signage, POST, portal with icon, poster stand, poster board, premium item holder, drinks holder, LCD menu board, lifestyle mural, blackbar, storage cabinet, crates cabinet and other design elements and equipment.

C.    Dine-In Shop

The design for Mister Donut Dine-in shop is depends upon the space allotment for the shop. The floor area require is 25-90 square meters. This includes showcases, signage, portal with icon, glass decals, lifestyle mural, LCD menu boards, poster stands, poster boards, premium items holder, chiller or refrigerator, oven or microwave, sandwich counter, crack pot, backbar, POS, tables and chairs, and other design elements and kitchen equipment.

Kinds of Feasibility Study

Feasibility study is written as an evaluation to determine if the proposed project is feasible. It will assist and find out the probable market for the products as well as probable income.

  1. Real Estate Feasibility Study – It includes the testing of geographic location for real estate development project.
  2. Technology Feasibility Study – It is necessary to know if the techl be supkinds of feasibility studyported by the new system or new project.Legal Feasibility Study – Inology needed for the project is available or exists.
  3. Market Feasibility Study – It isthe study of market studies in certain location such as the demands of the customer or client.
  4. Resource Feasibility Study – It study how much time is available to complete the project or build a new system as well as the type and amount of resources needed.
  5. Operational Feasibility Study – It is include the work practices and procedure if the current organization wilt is to know if a proposed project has a conflict to legal requirements.
  6. Cultural Feasibility Study – The proposed project should be evaluated for the impact on legal and general culture.
  7. Economic Feasibility Study – It is to determine if the proposed project is profitabke.

 

Real Estate Feasibility Study

It is important to conduct a real estate feasibility study to examine the possible outcome either positive or negative for a real estate project before investing money, effreal estate feasibility studyort and time into it.  This study also deal in consideration for legal, technological and economic issues as well as other factors which are important for the completion of a real estate development.

There are five (4) steps in conduction a real estate feasibility study such as market analysis, location analysis, competition analysis and risk analysis.  During market analysis, the space supply and the development of space demand as well as the space vacancies should be examined.  Also, the assessment of supply and demand, vacancies, space and rent should take into consideration. The second step is the location analysis.  Location analysis includes the geographic dimensions as well as geographic structure and population structure.  It also assesses the employment and economic development.

In competition analysis, relevant competitive real estate should be identified.  You can prepare a checklist of criteria so that you will estimate the degree of completion of your goals and results respectively. While risk analysis is the identification of the risk such as the development risk and liquidation risk.  Examples of these risks are completion risk, cost overrun, financial risk, market and location risk.  Through identifying of risk, you can make a decision immediately to avoid problems to occur.

Legal Feasibility Study

Legal feasibility study is to know if the proposed project conform the legal and ethical requirement.  It is important that the project or business is following the requirements needed to start a business or a project including business licenses, certificates, copyrights, business insurance, tax number, health and safety measures, and many more.

There are some things to consider in legal feasibility study including ethical issues and some social issues. These issues are the privacy, nepotism, and accountability.

legal feasibility studyA proposed system should determine if it has a conflicts with a legal requirements like for example if the data processing system is complying with the local Data Protection Act.

An example of requirements needed to proposed a construction projects are architect contract, bid bond, bid form, equipment lease, guaranty agreement, flooring contract, electrical service agreement, construction contract, construction agreement, warranty bond, certificate of final completion, change order, contract extension agreement, and many more. These documents should be able to provide once the project will be started.

Other legal documents needs for business are corporate resolution, day care policy statement, activity release of liability, business fact sheet, letter of intent, location of release, insertion order, IT service contract, Attorney Engagement Letter and many more.

10 Types of Feasibility Studies

Feasibility study is written to know if the project or business is possible to implement given a certain circumstances. It will show strengths and weaknesses before the project is planned and budgeted for. Through feasibility study, company can save time and money as well as other resources in the long run by preventing projects that are not feasible.

The following are types of feasibility study:

  • Marketing Feasibility Study – demonstrate the target demographic.  If there is enough consumer in the market place.
  • Operational Feasibility Study – evaluates if the system will operates will.
  • Resource Feasibility Study – measures if there is enough resources are available such as the facilities to be used.
  • Real Estate Feasibility Study – distinguishes if there is available land or property required to undertake the project
  • Cultural Feasibility Study – knows the impact on local and general cultures.
  • Schedule Feasibility Study – recognizes if the company has available time to complete the project
  • Technical Feasibility Study – identifies if the company have technology that deals with the project including the processes and procedures needed for the success of the project
  • Legal or Ethical Feasibility Study – reminds the legal implication and ethical consideration of the project
  • Economic Feasibility Study – knows if the company has enough financial resources for the project.
  • Comprehensive Feasibility Study – it looks all aspects of feasibility study including marketing, cultural, economic, real estate and many more.

 

A Feasibility Study of Establishing a McDonald Branch along Nicanor Reyes Street, Sampaloc, Manila

Establishing McDonald Restaurant Feasibility Study

1.    General Objectives

1.1    Description of the Business Project

The proposed business will need a three-storey building in a 2,000 square-meter lot with a parking space at the rear.  The customers 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 M insignia appearing to be cradled by the trees from a distance will outshine the multi-colored lights below stressing the romantic surrounding.  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 sighs 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 McDonald Branch at the heart of the university belt.

1.2    Project Time Table

All minor detail considered, the project will start serving the ten 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 buy the facilities to be used.

1.3    Management of the Business

With three managers alternately scheduled on an eight-hour duty to man the 130 crew 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 city will keep growing to actualize the management’s vision that this McDonald Branch will be the most profitable among the food chains that mushroom in the metropolis.

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.

mcdo food

3.    Technical Aspect

3.1    Location Factor

Situated at the corner of R. Papa and Dr. Nicanor Reyes streets at the heart of the University belt, this food center will surely draw customers from the cross-section of society.  The following factors will back-up the company’s foresight:

3.1.1    Topography

The 2,000 square-meter lot does not need labeling because the area is already flat.  Although the place lies in the lowest part of Manila, Mayor Atienza’s Buhayin ang Maynila program has eradicated the perennial floods that residents of the area suffer from.  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 McDonald.

3.1.2    Cost of Land

The fertile business venture will cheapen the current Php 20,000 per square meter piece of land.  The forty million peso worth of property will double after only three years of operation.

3.1.3    Security

The place will be very 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 the 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 50 meter land area, the engineers will erect 20 x 30 meter proposed three 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.

3.3    Equipment

The San Jose 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 Php 43,500,000 which is roughly broken into the following:

Cost of 2,000 meter lot – Php 40,000,000
Cost of the 3-storey building – Php 3,000,000
Accessories and equipment – Php 500,000
Total Cost – Php 43,500,000

The 40 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 San Jose Builders for the proposed three-storey building is Php 3,000,000.  This includes materials and labor.  With the five-month paying scheme, McDonald will pay Php600,000 every month until the last month.  The food center will need Php500,000 for the imported accessories like tables, chairs and other needs.

4.2    Franchise

The food center will pay the current Php1,000,000 McDonald franchise.

4.3    Sources of Financing

The proprietor will put in Php3,500,000  The remaining Php40,000,000 will be borrowed from the bank

5.    Business Operation

5.1  Revenues

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 – Php 1,500,000
First year – Php 18,000,000
Second year – Php 36,000,000
Third year – Php 54,000,000
Fourth year – Php 72,500,000

After four years of operation, this venture will have gained Php 11,500,000 as shown in the following computations:

Net income in four years – Php 72,500,000
Minus the sum of investments – Php 61,000,000
Difference – Php 11,500,000

Loaned money from the bank – Php 42,500,000
Interest of loaned money – Php 17,000,000
Franchise – Php 1,000,000
Maintenance – Php 500,000

Total – Php 61,000,000

5.2 Accessories and Equipments

Being of high quality, the accessories will still be usable after four years.  However,  Php 500,000 pesos is allotted for maintenance and replacements of damaged property,

Summary

The figures above prove how financially rewarding this business venture is.  Because food is a necessity, a venture like this guarantees 99% success  This is especially so if the location is the University belt like McDonald N. Reyes.

(This feasibility study was taken from Technical Writing Revised Edition by Corazon C Obnamia, et al)

Business Franchising Tips

Franchising is allowing one party to another party the right to use its trademark or trade name  as well its business system and processes.  Business owner offer their business franchising to expand their business at a fast pace. Franchisee or franchisor is the one who owns the overall rights and trademarks of the company and allows its franchisees to use these rights and trademarks to do business.  The franchisee charge a franchisee fee for the rights to do business under the franchise name.  Also, the franchisor collects an ongoing franchise royalty fee from the franchisee.
Business franchising is considers one of the safest and risk free ways to start a business but it cost a lot of money.  These amounts of money are worth it if you choose a right business franchise according to your interest.

The following are some tips before franchising a particular business

  • Research the best franchise.  It is important to do a research because there are thousand of different business franchises.  Ask existing franchisees and customer to gather information and seek advice from friends, relatives and colleagues to determine the reputation of the business you want to franchise. Also, research for the local market to know the demands of the products or services you would like to offer.
  • Choose a franchise that you will enjoy.  Most business is successful because the owner of the business is very passionate.  If you are interested in your product or services, you will learn rapidly.  Being an expert to your business is important to running to any business.
  • Make sure that your franchise has a good profit model.  If there is a good profit model, it is easy to start up, run and maintain a successful business.  Business with reputation and strong brand names usually have a stronger profit model since customer pays higher price to receive best and trusted product or services.
  • Look for Integrity.  It is important that the business you want to franchise has integrity. It means that if your business is with high integrity, your reputation will grow and shines.
  • Make sure to understand contract clearly before signing it.