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.
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 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.
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.
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.
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.
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.
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.
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 partner’s will make sure of the observance and God-fearing to all of them.
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.
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.
