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Chapter 5

Conducting a Feasibility Analysis

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Learning Objectives

• Prepare to conduct a feasibility analysis• Understand the feasibility tests• Draw conclusions from the analysis


Preparing for Feasibility Analysis

• Is there a customer and a market of sufficient size to make the concept viable?

• Do the capital requirements to start, based on estimates of sales and expenses, make sense?

• Can an appropriate start-up or founding team be assembled to effectively execute the concept?


Preparing for Feasibility Analysis(continued)

• Pre-Feasibility Quick Look Assessment – draft description of the business – examine the industry– identify the product’s customer benefit– examine the capabilities and experience of

management team


Figure 5.1: The Process of Feasibility Analysis


Areas To Be Analyzed And Questions To Ask

• Business Concept – Who is the customer?– What is the value proposition?– What is the product/service being offered?– What does the value chain look like?– Which distribution channel alternatives are available,

and which customers will be served by them?– Are there ways to innovate in the distribution

channel?


Areas To Be Analyzed And Questions To Ask (continued)

• Industry And Market/Customer – What are the demographics, life cycle stage, patterns of

change, and trends in this industry?– Are there any barriers to entry? If so, what are they?– What is the status of technology and R&D expenditures?– What are typical profit margins in the industry?– Who are the opinion leaders in the industry and how do they

affect the industry?– What are distributors, competitors, retailers, and others

saying about the industry?– What are the demographics of the target market?– What is the profile of the first customer? Are there other

potential customers?– Have you talked with customers?– Who are your competitors, and how are you differentiated

from them?



• Product/Service – What are the features and benefits of the product or

service you plan to offer?– What product development tasks must be

undertaken, and what is the timeline for completion?– Is there potential for intellectual property rights?– How is the product or service differentiated from

others in the market?



• Founding Team – What experience and expertise does each

team member have?– Where are the gaps and how will you fill

them?



• Financial Needs Assessment – What are your start-up costs (…capital and noncapital)?– What are your working capital requirements?– What are your fixed costs?– How long will it take to achieve a positive

cash flow from the revenues generated?– What is the break-even point for the

business?


Feasibility Analysis Outline for a Written Report

• Cover page• Executive summary• Title page• Table of contents• Feasibility decision• Business concept


Feasibility Analysis Outline for a Written Report (contd)

• Industry/Market Analysis• Founding team • Product/Service development plan• Financial plan• Timeline• Bibliography• Appendix


New Venture Checklist

Have you…• identified an opportunity that you would like

to pursue?• conducted a quick look assessment to see if

a feasibility study is warranted?• undertaken a feasibility analysis to

understand the risks?• drawn a conclusion as to whether to move

forward with this opportunity?

Small Business & Entrepreneurship

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