What is a feasibility study?

A controlled process identifying problems and opportunities, determining objectives, describing situations,
defining successful outcomes and assessing the range of costs and benefits associated with several alternatives
for solving a problem
It is used to support the decision-making process based on a cost benefit analysis of the actual business or
project viability

Framework of the dimension of business viability:

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6.

Market viability
Technical viability
Business model viability
Management model viability
Economic and financial model viability
Exit strategy viability

How to conduct a business feasibility study

Step One. Conduct a preliminary analysis
1. Describe or outline as specifically as possible the planned services, target markets and unique
characteristics of the services by answering these questions:
Does the business serve a currently unserved need?
Does the business serve an existing market in which demand exceeds supply?
Can the business successfully compete with existing businesses because of an advantageous
situation such as better design, price, location or availability?
2. Determine whether there are any unsurmountable obstacles. A yes response to the following
indicates that the idea has little chance for success
Are capital requirements for entry or continuing operations unavailable and unaffordable?
Do any factors prevent effective marketing to any or all referral sources?
Step Two. Prepare a projected income statement
o Anticipated income must cover direct and indirect costs, taking into account the expected income
growth curve. Factors that determine this are services provided, fees for services, volume of services
and adjustments to revenue.
Step Three. Conduct a market survey.
o Define geographic influence on the market
o Review population trends, demographic features, cultural factors and purchasing power in the
community
o Analyse competing services in the community to determine their major strengths and weakness. Factors
to consider includes pricing, product lines, sources of referral, location, promotional activites, wuality of
service, consumer loyalty and satisfaction, and sales
o Determine total volume in the market area and estimate expected market share
o Estimate market expansion opportunities
Step Four. Plan business organization and operations
o Equipment
o Merchandising methods
o Facility location and design (layout)
o Availability and cost of personnel
o Supply availability (vendors, pricing schedules, exclusive or franchised products)
o Overhead (utilities, taxes, insurance)
Step Five. Prepare an opening day balance sheet
o Prepare a list of assets required for starting operations
o The list should include item, source, cost, and available financing methods.
o Prepare a list of liabilities to be incurred and investment required by the business. Consider the
following;
Whether to buy or lease land, buildings and equipment
How to finance an asset purchase
How to finance accounts receivable
Step Six. Prepare financial projections.
Step Seven. Review and analyse all data

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Re-examine all financial data. Does if reflect realistic expectations?

Analyse risk and contingencies. Consider the likelihood of significant changes in the current market that
could alter projections.

Business feasibility outline

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III.

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COVER SHEET
EXECUTIVE SUMMARY
TABLE OF CONTENTS
Introduction
Product or service
Technology
Market environment
Competition
Industry
Business model
Marketing and sales strategy
Production/operating requirements
Management and personnel requirements
Intellectual property
Regulations/environmental issues
Critical risk factors
FINANCIAL PROJECTION
Balance Sheet Projections
Income Statement Projections
Cash Flow Projections
Break Even Analysis
Capital Requirements and Strategy
Recommendation and Findings
Conclusion

EXECUTIVE SUMMARY - a summary of all key sections of the study and should work as a separate, standalone document
o

Key points
Write after content of feasibility study is completed
Written last, but presented first
No more than one page long

Table of Contents Product/Service

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Key points
For description, use simple language
Description of how customers would use and buy product/service
Describe key components or materials used
Described plans to test the product to ensure it works
Describe plans to upgrade the product or expand product line

Table of Contents Product/Service

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Key points
As necessary, provide further technical information about product/service
Describe additional ongoing research and development needs
Use understandable technical terms

Table of Contents Intended Market Environment

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Key points
Target market
Define and describe the target market (s)

 Be clear how end users and customers benefit

B2B (business to business) marketing
Know your industry
Estimation of market size, market share, etc.
B2C (business to consumer) marketing
Know relevant demographic, psychographic and behavioural factors

Table of Contents Competition

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Key points
Describe direct and indirect competition
For key competitors give market share, resources, product and market focus, goals strategies,
strengths and weaknesses
List all key entry barriers
Describe how unique is your product in comparison with competitors
Ste how difficult it is to copy your product
State how your competitors will react to your launch

Table of Contents Industry

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Key points
Clear definition and description of the industry
Describe demand and supply factors and trends
Describe the largest forces that drive the market

Table of Contents Business Model

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Key points
Describe the proposed enterprises business model
Describe the model in enough detail to support financial projections presented later

Table of Contents Marketing & Sales Strategy

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Key points
Lay out basic marketing and sales strategy
Discuss any strategic partnership in place or planned
Describe distribution strategy
Describe pricing strategy
Outline other issues e.g. after sales service, warranties etc.
Quantify the marketing budget

Table of Contents Production/Operating Requirements

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Key points
Describe how and where will be the product produced
What physical premises are required?
Will space be owned or leased? Need of renovations?
How complex is the manufacturing process?
Do you need outsourcing?

Table of Contents Management and Personnel

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Key points
List proposed key managers, titles, responsibilities, relevant background, experience, skills, costs
Sketch personnel requirements

Table of Contents Intellectual Property

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Key points
Briefly describe patents, copyrights and trademarks obtained and in process

Table of Contents Regulation/Environmental Issues

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Key points
Outline non-economic forces that might affect your business case:
Government regulations
Environmental problems
Political stability
Any other regulatory or political issues

Table of Contents Critical Risk Factors

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Key points
Use tools as:
SWOT
Porters Five Forces
PEST Analysis

Financial Projections
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Capital requirements and strategy

How much funding will you need and when?
What sources will provide the funding?
What ration of debt to equity financing will occur?
When will investors begin to see a return?
Break even analysis
SP Selling price
VC Variable costs
CM Contribution margin
FC Fixed costs
X Units
Units sold at break-even
SP (X) = VC (X) + FC
Break-even revenue =
Break-even revenue (Peso) = Break-even units times Selling price

Final findings and recommendations

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A significant component of findings should relate to the likelihood of success, projected returns on
investment and how any identified risks should be mitigated.