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Successfully Launching
New Ventures, 2/e
Bruce R. Barringer
R. Duane Ireland
Chapter 3
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2008 Prentice Hall
What Is Feasibility Analysis?
Feasibility Analysis
Feasibility analysis is the process of determining whether a
business idea is viable.
It is the preliminary evaluation of a business idea,
conducted for the purpose of determining whether the idea
is worth pursuing.
Feasibility analysis takes the guesswork (to a certain
degree) out of a business launch, and provides an
entrepreneur with a more secure notion that a business idea
is feasible or viable.
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When To Conduct a Feasibility Analysis
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Feasibility Analysis
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Four Forms of Feasibility Analysis
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Product/Service Feasibility Analysis
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Preparing a Concept Statement
(1 of 3)
Concept Statement
Before a company undertakes product/service feasibility
analysis, a concept statement should be developed.
A concept statement is a one page description of a business
that is distributed by a startup entrepreneur to people who
are asked to provide feedback on the potential of the
business idea.
The feedback will hopefully provide the entrepreneur (1) a
sense of the viability of the business idea, and (2)
suggestions for how the idea can be strengthened or
tweak before proceeding further.
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Preparing a Concept Statement
(2 of 3)
Information to Include
A description of the product or service being offered.
The intended target market.
The benefits of the product or service.
A description of how the product will be positioned relative
to similar ones in the market.
A description of how the product or service will be sold
and distributed.
Information about the founder or founders of the firm.
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Preparing a Concept Statement
(3 of 3)
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Usability Test
(1 of 2)
Usability Testing
Is the method by which users of a product are asked to
perform certain tasks in order to measure the products
ease-of-use and the users perception of the experience.
Usability tests are sometimes called user tests, beta tests, or
field trials, depending on the circumstances involved.
While it is tempting to rush a new product or service to market,
conducting a usability test is a good investment of an
entrepreneurs or firms resources.
Many products that consumers find frustrating to work with have
been brought to market too quickly.
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Usability Test
(2 of 2)
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Product/Service Feasibility Analysis in Action
Role of feasibility analysis in the development of successful
business ideas at Activision (an electronic games company)
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Industry/Market Feasibility Analysis
(1 of 6)
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Industry/Market Feasibility Analysis
(2 of 6)
Are large and growing (with growth being more important than size).
Are important to the customer.
Are fairly young rather than older and more mature.
Have high rather than low operating margins.
Are not crowded.
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Industry/Market Feasibility Analysis
(3 of 6)
Industry Attractiveness
Although the criteria shown on the preceding slide is an
ideal list, the extent to which a new businesss proposed
industrys growth possibilities satisfy these criteria should
be taken seriously.
In addition to evaluating an industrys growth potential, a
new venture will want to know more about the industry it
plans to enter.
This can be accomplished through both primary and
secondary research, as explained in the next slide.
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Industry/Market Feasibility Analysis
(4 of 6)
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Industry/Market Feasibility Analysis
(5 of 6)
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Industry/Market Feasibility Analysis
(6 of 6)
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Organizational Feasibility Analysis
(1 of 4)
Organizational Feasibility
Is concerned with determining whether the business itself
has sufficient skills and resources to bring a particular
product or service idea to market successfully.
There are two primary issues to consider in this area:
Management prowess.
Resource sufficiency.
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Organizational Feasibility Analysis
(2 of 4)
Management Prowess
A firm should candidly evaluate the prowess, or ability, of
its management team to satisfy itself that management has
the requisite passion and expertise to launch the venture.
Two of the most important factors in this area are:
The passion that the solo entrepreneur or the founding team has for
the business idea.
The extent to which the solo entrepreneur or the founding team
understands the markets in which the firm will participate.
Solo entrepreneurs or founding teams with established
social and professional networks also have an advantage.
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Organizational Feasibility Analysis
(3 of 4)
Resource Sufficiency
This topic pertains to an assessment of whether an
entrepreneur has sufficient resources to launch the
proposed venture.
The focus here should be on nonfinancial resources in that
financial feasibility is considered separately.
To test resource sufficiency, a firm should list the 6 to 12
most critical nonfinancial resources that will be needed to
move the business idea forward successfully.
If critical resources are not available in certain areas, it may be
impractical to proceed with the business idea.
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Organizational Feasibility Analysis
(4 of 4)
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Financial Feasibility Analysis
(1 of 5)
Financial Feasibility
For feasibility analysis, a quick financial assessment is
usually sufficient.
The most important issues to consider at this stage are:
Total start-up cash needed.
Financial performance of similar businesses.
Overall attractiveness of the proposed venture.
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Financial Feasibility Analysis
(2 of 5)
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Financial Feasibility Analysis
(3 of 5)
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Financial Feasibility Analysis
(5 of 5)
Steady and rapid growth in sales during the first 5 to 7 years in a clearly
defined market niche.
High percentage of recurring revenuemeaning that once a firm wins a
client, the client will provide recurring sources of revenue.
Ability to forecast income and expenses with a reasonable degree of
certainty.
Internally generated funds to finance and sustain growth.
Availability of an exit opportunity for investors to convert equity to
cash.
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