Feasibility Studies

Definition of Feasibility Studies:

 
A feasibility study is the analysis and evaluation of a proposed project to determine if it (1) is technically feasible, (2) is feasible within the estimated cost, and (3) will be profitable. Feasibility studies are almost always conducted where large sums are at stake.

A feasibility study looks at the viability of an idea with an emphasis on identifying potential problems and attempts to answer one main question: Will the idea work and should you proceed with it?

Method:
 
1-   Executive Summary
a.    Summary of all key sections of the study
 
2-   Product or Service
a. Describe product
b. Describe how customers would use
c. Describe raw materials or key components to be used in product
d. Describe plans to test product
 
3-  Technology
a. Technical information
b. Research and Development
 
4-  Market Environment
a. Define Target environment
b. Business to consumer 
                    i. Demographic factors (income, age, gender…)
                   ii. Psychographic factors
                   iii. Behavioral factors (personality, values, attitudes, interests, lifestyles)
 
5-  Competition
a. Direct and Indirect Competitors
b. Describe key Competitors (market share, resources…)
c. Describe uniqueness of product
d. Reaction of competitors to product
 
6- Industry
a. Size, growth rate, outlook
b. Supply and demand factors
c. Driving forces
 
7- Business Model
a. Generate revenue
b. Support financial projections
 
8- Marketing and Sales Strategy
a. Describe any strategic partnerships of the company
b. Distribution strategy
c. Pricing strategy
d. Payment terms
e. Marketing budget
 
9- Production/ Operating Requirements
a. How and where it will create the product
b. Location, size, condition…
c. Owned or leased
d. Equipment needed
 
10-Management and Personnel Requirements
a.    List proposed management and personnel
 
11- Intellectual Property
a. Patents, copyrights, trademarks…
b. Licensing agreement

12- Regulations / Environment Issues
a. Governmental regulations
b. Environmental problems
c. Political stability
 
13- Critical Risk Factors
a.    SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats)
                        i.        Internal / external
                        ii.        Favorable / unfavorable
b. Porters five forces analysis 
                        i.        Derive five forces which determine the competitive intensity and therefore profitability of a market.
1.      The threat of substitute products
2.      The threat of the entry of new competitors
3.      The intensity of competitive rivalry
4.      The bargaining power of customers
5.      The bargaining power of suppliers
c.       PESTanalysis (Political, Economic, Social, and Technological)
 
Financial Projections:
1-     Balance Sheet Projections
2-     Income Statement Projections
3-     Cash Flow Projections
4-     Break-even Analysis
5-     Capital Requirements and Strategy
6-     Recommendations and Findings 


a.    Analyze the findings outlined in the feasibility study. You should examine the company's market viability, exit strategy viability, technical viability, economic and financial viability, business model viability and management model viability. Then make recommendations on how your start-up plan can be improved, what areas need more research and development, etc.


Documents Required:
·         Provide documentation for your financial projections.
o    Balance sheet projection for three years with highlight inflows of capital
o    cost benefit analysis
o    income projections for the first year
o    break-even analysis
 
·         Description of product/ service
o    physical description of the product, how it will be used by customers, how it will be tested for safety and effectiveness, and how it will be upgraded in the future.
 
·         Description of technology that is used by your company
 
·         Description of market environment
 
·        Description of your target market, how the customers will benefit from your products or services, what niche or need your products or services will fulfill, estimate of market size, targeted geographical area and factors that will impact the sales volume of your products or services.
 
·         Describe Competition
 
·         Description of industry
 
·         Draft of business model.
o    Identify how your company will generate revenue, what recurring revenue you expect, and include enough detail to support your financial projections
 
·         Describe your marketing and sales strategy.
o    How you will gain market access, what your basic marketing and sales strategies are, how you plan to distribute your merchandise or services, how you plan to price your products or services, set out an amount you plan on budgeting for the first year's marketing, and identify any other factors that may influence the productivity of your proposed marketing campaign.
 
·         Describe both your production requirements and your operating requirements.
o    how items will be manufactured, where they will be manufactured, how items will be transported, how much space you will need to manufacture your goods, how much space you will need to contain the operational staff, disclose whether you plan to rent or buy your warehouse facility and headquarters, how much money you plan to use for renovations and how complex it is to manufacture your product. You will need to disclose any information about your suppliers, a description of any pre-existing contracts you have in place, how services will be designed, how services will be delivered to customers, how services can be improved or modified and whether there are any stakeholders already in place.
 
·         Describe the management and personnel of your business.
o    A list of prospective key employee names, titles, respective duties and responsibilities and the costs associated with employing these people. You will also want to outline support staff positions and employment costs.
 
·         Describe the intellectual property that your company will develop and utilize.
o    Patents, copyrights and trademarks. Also include any licensing agreements that you have secured for another company's intellectual material.
 
·         Describe the regulations and environmental issues that your company will need to address.
o    local, state, and federal laws that you will need to follow, as well as environmental factors like waste disposal plans, international trade policies, etc. that you will need to take into consideration when developing, producing or delivering merchandise or services.
 
·         Describe any critical risk factors,
o    Economic stability and forecasts, investments, internal organization of the company, etc.
 
·         Describe your capital requirements and your strategy.
o    This section will need to outline how much capital you need to start up your business, what assets the company has in place to secure financing, what types of funding the company is looking for, the anticipated debt to equity ratio the company hopes to maintain and when investors will be paid a return on their investment.

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