What is a Feasibility Study? :What is a Feasibility Study?

A feasibility study is an analysis of the viability of an idea through a disciplined and documented process of thinking through the idea from its logical beginning to its logical end. The discipline of planning, organi ing, and managing resources to bring about the successful completion of specific pro!ect goals and ob!ectives. A feasibility study provides an "nvestigating function that helps ans#er $"s the pro!ect feasible? %an it be done? &oes it make sense? Should #e proceed #ith the proposed pro!ect idea? A feasibility study should be conducted to determine the viability of an idea '(F)*( proceeding #ith the development of a business. Three main areas of the Business Feasibility Study :Three main areas of the 'usiness Feasibility Study +A*,(T -)T(.T"A/ ASS(SS+(.T T(%0."%A/ A.& )-(*AT").A/ ASS(SS+(.T F".A.%"A/ ASS(SS+(.T Levels of Feasibility Assessment :/evels of Feasibility Assessment A feasibility study of an idea is conducted at three levels )perational Feasibility $Will it #ork?1 Technical Feasibility $%an it be built?1 (conomic Feasibility $Will it make economic sense if it #orks and is built?1 $ Will it generate -*)F"TS?1 Why do a Feasibility Study? :Why do a Feasibility Study? -rovide a thorough e2amination of all issues and assessment of probability of business success 3ive focus to the pro!ect and outline alternatives .arro# business alternatives Surface ne# opportunities through the investigative process "dentify reasons .)T to proceed (nhance the probability of success by addressing and mitigating factors early on that could affect the pro!ect -rovide 4uality information for decision making 0elp to increase investment in the company -rovide documentation that the business venture #as thoroughly investigated 0elp in securing funding from lending institutions and other monetary sources Goals of the Feasibility Study :3oals of the Feasibility Study Add value to the decision5making process based on the results of agency planning and design efforts. "ntroduce the concept of time value of money by incorporating .et -resent 6alue "nternal *ate of *eturn 'reakeven Analysis %ost7'enefit Analysis. -rovide formats for clear and concise cost and benefit rationale to assist in the investment evaluation process. Data Sources for a Feasibility Assessment :&ata Sources for a Feasibility Assessment &ata re4uired for a feasibility study can come from primary or secondary sources -rimary data can include formal intervie#s and surveys %ollection of primary data can be e2pensive and time consuming Secondary data can include industry and trade publications, statistics of industry associations, and government agency reports Feasibility Study Outline :Feasibility Study )utline (2ecutive Summary *egional Socio5(conomic Situation /egal Study Financial -lan -ro!ect "mplementation Schedule +arket Study and +arketing &etail &escription of Activities (nvironmental protection %ontrol Financial Analysis and -ro!ections Social (conomic (ffects 7 +ultiplier effects, related studies )ptions Analysis on different hypothesis and scenarios Steps for an conomic Feasibility Study :Steps for an (conomic Feasibility Study "dentify and (stimate all %apital (2penditures "dentify and (stimate all 6ariable %osts related to the -roposed 'usiness 6enture "dentify -eople and Skills re4uired to operate &etermine Wages, Salaries, and 'enefits "dentify and (stimate -ro!ect *elated %osts "nfrastructure development or improvements Advertising and -romotion /egal Fees +unicipal 8 State &evelopment ta2es "dentify and (stimate all Fi2ed %osts stimatin! Total "apital #e$uirements :(stimating Total %apital *e4uirements Assess the $seed capital1 needs of the business pro!ect and ho# these needs #ill be met (stimate capital re4uirements for facilities, e4uipment and inventories *eplacement capital re4uirements and timing for facilities and e4uipment (stimate #orking capital needs (stimate start5up capital needs until revenues are reali ed at full capacity (stimate contingency capital needs 9constructions delays, technology malfunction, market access delays, etc.: (stimate other capital needs $uity and "redit :(4uity and %redit (stimate (4uity and %redit .eeds "dentify alternative e4uity sources and capital availability -roducers, /ocal "nvestors, Angel "nvestors, 6enture %apitalists "dentify and assess alternative credit sources 'anks, 3overnment 9direct loans or loan guarantees:, 3rants, /ocal and State (conomic &evelopment "ncentives Assess e2pected financing needs and alternative sources "nterest *ates, Terms, %onditions, %ovenants, /iens, (tc. &ebt to (4uity /evels "ost%Benefit Analysis :;tili e data collected to determine economic feasibility: (stimate (2pected %osts and *evenue (stimate the -rofit +argin and (2pected .et -rofit (stimate the sales or usage needed to break5even (stimate the returns under various production, price and sales levels to create a $sensitivity analysis1 Assess the reliability of the underlying assumptions of the financial analysis 'enchmark against

industry averages and7or competitors "dentify limitations or constraints of the economic analysis -ro!ect e2pected cash flo# during the start5up period -ro!ect income statement, balance sheet #hen reaching full operation %ost5'enefit Analysis What Defines Feasibility? :A feasible business venture is one #here the business #ill generate ade4uate cash flo# and profits, the business #ill #ithstand the risks it #ill encounter, the business #ill remain viable in the long5term, and the business #ill meet the goals of the founders. What &efines Feasibility? What &e't? :What .e2t? After the feasibility study has been completed and presented to the leaders of the pro!ect, they should carefully study and analy e the conclusions and underlying assumptions .e2t they #ill decide #hich course of action to pursue -otential %ourses of action include %hoosing the most viable business model, developing a business plan and proceeding #ith creating and operating a business "dentifying additional scenarios for further study &eciding that a viable business opportunity is not available and moving to end the business assessment process Follo#ing another course of action