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: 1. 2. 3. 4. 5. 6.
Market viability Technical viability Business model viability Management model viability Economic and financial model viability Exit strategy viability
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 answe ring 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 c hance 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 Anticipated income must cover direct and indirect costs, taking into account the expected income o 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. Define geographic influence on the market o Review population trends, demographic features, cultural factors and purchasing power in t he o community Analyse competing services in the community to determine t heir major strengths and weakness. Factors o 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) Availability and cost of personnel o Supply availability (vendors, pricing schedules, exclusive or franchised products) o Overhead (utilities, taxes, insurance) o Step Five. Prepare an opening day balance sheet 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 o 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 expe ctations? Analyse risk and contingencies. Consider the likelihood of significant changes in the current m arket that could alter projections.
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 t he 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 o
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 o
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 o
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 o
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 c ompetitors Ste how difficult it is to copy your product State how your competitors will react to your launch
Table of Contents – Industry o
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 o
Key points Describe the proposed enterprise’s business model Describe the model in enough detail to support financial projections presented later
Table of Contents – Marketing & Sales Strategy o
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 o
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 o
Key points List proposed key managers, titles, responsibilities, relevant background, experience, skills, costs Sketch personnel requirements
Table of Contents – Intellectual Property o
Key points Briefly describe patents, copyrights and trademarks obtained and in process
Table of Contents – Regulation/Environmental Issues o
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 o
Key points Use tools as: SWOT Porter’s Five Forces PEST Analysis
Financial Projections o
o
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 o
A significant component of findings should relate to the likelihood of success, projecte d returns on investment and how any identified risks should be mitigated.
