How to Write a Financial Feasibility Study

Part 1 - What is a Financial Feasibility Study & Start-Up Capital Requirement

A financial feasibility study projects how much start-up capital is needed, sources of capital,
returns on investment, and other financial considerations. It looks at how much cash is needed,
where it will come from, and how it will be spent.

What is a Financial Feasibility Study?

A financial feasibility study is an assessment of the financial aspects of something. If this case, for
starting and running a business.

It considers many things including start-up capital, expenses, revenues, and investor income and
disbursements. Other portions of a complete feasibility study will also contribute data to your
basic financial study.

A financial feasibility study can focus on one particular project or area, or on a group of projects
(such as advertising campaigns). However, for the purpose of establishing a business or
attracting investors, you should include at least three key things in your comprehensive financial
feasibility study:

Start-Up Capital Requirements,

Start-Up Capital Sources, and
Potential Returns for Investors.

Start-Up Capital Requirements

Start-up capital is how much cash you need to start your business and keep it running until it is
self-sustaining. You should include enough capital funds (cash, or access to cash) to run the
business for one to two years.

Finding Start-Up Capital Funding Sources

There are many ways to raise capital for your business, but no matter what route you take,
investors are more likely to invest, banks are more likely to approve loans, and large
corporations are more likely to give you contracts if you have personally invested in the business
yourself.

When you make a list of funding resources, be sure to include anything that you can contribute
to the business, including free labor. If you are starting a nonprofit organization, your donated
professional time may even be tax deductible for you.

Potential Returns for Investors Feasibility Study

Investors can be a friends, family members, professional associates, client, partners, share
holders, or investment institutions. Any business or individual willing to give you cash can be a
potential investor. Investors give you money with the understanding that they will receive
"returns" on their investment, that is, in addition to the amount that is invested they will get a
percentage of profits.

In order to entice investors you need to show how your business will make profits, when it will
begin to make profits, how much profit it will make, and what investors will gain from their
investment. The investment return section should offer both a description of how investors will
be involved and discuss different variables that will affect the profitability of your business,
offering more than one scenario.

FINANCIAL ASPECT

Summary of Conclusion for Feasibility Study of Snack Stand

Marketing Aspects

1. The Snack stand will be very much positive in offering a lot of services to satisfy customers
needs, accept suggestion and criticisms to improve our business

2. Snack stand will utilize with honesty and credibility thru our products and services.
3. Snack stand will be always open-minded to those other competitors and will seek only the
best.

Technical Aspect

1. The final location of the business will be at the Common Terminal, Balanga City, Bataan.

2. Raw materials will be obtained during its freshness and nearness to the source which is
Elizabeth Supermarket in Balanga City itself.

3. The management will provide cleanliness of the stall, especially the food for satisfaction of
customers.

Management Aspect

1. The best organizational structure to adopt in the same manner communication will be
facilitated from the top to bottom and from the bottom to the top.

2. The democratic atmosphere will always prevail in the business to ensure hormones
interpersonal relationship between management and personnel.

3. The Snack stand will develop the service activity to satisfy the need of the customer.

Socio-Economic Aspect

1. The Snack stand will be very much responsible in promoting environmental, clean air act and
proper waste disposal.

2. Taxes assured for the city government.

3. The partners will make sure of the observance and God-fearing to all of them.
Financial Aspect

1. The amount of fifty thousand pesos (Php50,000.00) is substantially enough to put up the
proposed project Snack stand.

2. Based on the projections as depicted by the financial statements, the proposed project is a
kind of lucrative undertaking.

3. The proponent of the project will be responsible in producing the capital requirement.

How Should I Pay Back Investors?

How investors will be paid will vary according to individual investment offers.

Read every offer over very carefully - not all investors may be right for your business.

The investment section of your financial feasibility study should not make specific or binding
offers to investors. Do not state investors will be paid specific dollar amounts by certain dates.
Instead, list general practices for how investments return will be distributed, assuming different
business scenarios. For example, you might state that investors will be paid X amount of dollars
or X% on their investment at the end of any business quarter where profits exceed a certain
threshold.

Project total revenue, deduct business expenses, and then from the remaining amount, decide
what percentage will be distributed to investors. You should never promise 100% of the
remaining amount to investors. You need to keep cash on hand to continue operating your
business, to grow your business, and to build reserves.

Most investment returns are typically distributed on a quarterly, bi-annual, or annual basis.
Consider how the various distribution cycles could affect your business' cash flow during the first
two years of operation. In other words, do not just run one set of numbers, examine each type
of distribution and support why you think the option you choose is the best one.
INTRODUCTION
The purpose of the introduction of a feasibility report is two-fold:
To answer the readers' question: "Why do we need to look into these alternatives-do they
matter?"
In order to answer this question, it is necessary to identify the problem that your report will help
resolve or what your report is aimed at accomplishing.
To talk about the other options that you have looked at and analyzed, as well as to tell how you
went about researching and analyzing them.
Note: Usually, the introduction to a feasibility report briefly discloses some of the important
conclusions and the most feasible options for change. Other elements of a report of this nature,
such as the criteria, method, or any other kind of general background, may also be concisely
noted and mentioned in this portion of the report.

The Feasibility Report is a document that assesses potential solutions to the business problem or
opportunity and determines which of these are viable for further analysis.

The purpose of the Feasibility Report is to present the project parameters and define the
potential solutions to the defined problem, need or opportunity. Having brainstormed a variety
of potential solutions, the project team expands on each of these potential solutions, providing
sufficient detail, including very high level costing information, to permit the project leader to
recommend to the approving authority all of the viable potential solutions that should be further
analyzed in the Analysis Phase (Business Case). Project constraints and limitations of expenditure
are among the various factors that will determine viability.

This document is approved at the Feasibility Report Approval (FRA) control point.