Feasibility StudyMBA Program

Faculty of Business StudiesUniversity of Dhaka

Group Details

StellarName of Members ID No.

Promit Debnath 18103

Bikash Chandra Paul 18115

Md. Kaikobad Hossain 18120

Anjan Kumar Das 18124

Pobittro Saha 18133

Project Cycle

Pre-investment Phase

Investment Phase

Operation Phase

Pre-investment Phase

Opportunity Study

Pre-feasibility Study

Feasibility Study

Appraisal Report

Pre-investment Phase

Opportunity Study

Pre-feasibility Study

Feasibility Study

Appraisal Report

• Screening innovative ideas

• Reviewing country importing items

• Assessing local community needs

• Projecting future demand on

certain product or service

• Examining current diversified

industrial trends

• Reviewing available skill &

workforce

• Expert research

Pre-investment Phase

Opportunity Study

Pre-feasibility Study

Feasibility Study

Appraisal Report

• Describing the product or service

• Describing the market supply & demand

• Describing production methodology

• Describing initial inputs and infrastructure

supporting services

• Location

• Estimate capital & operating cost

• Estimate revenue

Feasibility Study

A feasibility study is defined as an evaluation or analysis of the potential impact of a proposed project or program. It is conducted to assist decision makers in determining whether or not to implement a particular project or program.

Feasibility Study (Cont.)

Feasibility Study

Based on extensive research

Contain wide-ranging of dataShould have clear

supporting evidence

Feasibility Study V/S Business Plan

An investigating function

Outlines and analyzes several alternatives

Conducted before business plan

Excuses for NOT Doing Feasibility Study

• We know it’s feasible.  An existing business is already doing it.• Feasibility studies are just a way for consultants to

make money• The market analysis has already been done by other

same business• Feasibility studies are a waste of time.  We need to

buy the building, tie up the site and start the business.

Reasons to Do Feasibility Study• Gives focus to the project and outline alternatives.• Narrows business alternatives• Identifies new opportunities through the investigative

process.• Identifies reasons not to proceed.• Enhances the probability of success by addressing and

mitigating factors early on that could affect the project. • Provides quality information for decision making.• Provides documentation that the business venture was

thoroughly investigated.• Helps in securing funding from lending institutions and

other monetary sources.• Helps to attract equity investment.

Dimensions of Business Viability

Market Viability

Technical Viability

Business Model Viability

Management Model Viability

Economic & Financial Model Viability

Exit Strategy Viability

Market Viability

Opportunity

Target Customer

Competitors

Market Environment

Technical Viability

Capacity Resources

Manufacturing Process

Business Model Viability

Uniqueness of Model

Competitor’s Ability to Duplicate

Ability to Create Value

Ability to Create Wealth

Management Model Viability

Application of knowledge & skills Training

Employee management & recruitment

Management of intellectual property

Management of risk Ability to delegate to the staff

Economic & Financial Viability

Startup cost Working capital Operating cost

Raw material cost Overall return on investment

Overall profitability

Break Even PointSustainability of market versus

projected revenue

Ability to generate economic value

Exit Strategy Viability

Create wealth from exit strategy

Ability to define exit strategy

Identify potential buyer

or strategies

Schedule exit strategy

Issues to be Considered

Market Feasibility

Technical Feasibility

Resource Feasibility

Cultural Feasibility

Operational feasibility' Legal Feasibility

Schedule Feasibility

Economic Feasibility

Market Feasibility

•Industry description.•Industry competitiveness.•Market potential•Access to market outlets.•Sales projection

Market assessment is

needed to identify the opportunities in the market. If no opportunities exist, there may be no reason to proceed further.

Technical Feasibility

•Determine facility needs.•Suitability of production technology.•Availability & suitable of site.•Raw materials.•Other inputs.

Product methodology need to be determined. It

involves which technology will be

needed for production, how it

will be operated and the experience of the

firm in using the technology.

Resource Feasibility

• Required time for completion

• Effect on normal business operation

• Amount of resources

The time required for the project and

resources needed to be determined here.

Contingency & mitigation plans

should also be stated here so that if the

project does over run the company is ready for this eventuality.

Cultural Feasibility

•Impact on the local & general culture•Environmental factors need to be considered•Impact of enterprise's own culture

Culture has great effect on

business. So local culture as well as corporate culture need to be taken

into consideration here.

Operational Feasibility

•Compatibility of current work practices & procedures with new system required by the project.•Effect of social factors such as how the organizational changes will affect the working lives of those affected by the new system

Focuses on the degree to which the proposed development projects fits in with the existing business environment

and objectives with regard to development

schedule, delivery date, corporate culture

& existing business process

Legal Feasibility

• Legal Implication• Ethical Issues• Authorization• Political Issues• Environmental Issues

Whether the project

conflicts with legal

requirement is need to be checked.

Schedule Feasibility

• Project timetable• Project deadline

A project will fail if it takes too long to

be completed before it is useful. Typically

this means estimating how long the system will take to develop, & if it

can be completed in a given time period using some methods like payback period.

Economic Feasibility

•Availability of required resources•Determine the benefits & savings•Compare the benefits with cost

The purpose of the economic feasibility

assessment is to determine the positive

economic benefits to the organization that the proposed system will provide. It includes quantification and

identification of all the benefits expected. This

assessment typically involves a cost/ benefits

analysis.

Parts of Feasibility Report

Cover Sheet Executive Summery Table of Content

1. Introduction2. Product or Service3. Technology4. Market Environment5. Competition6. Industry

7. Business Model8. Marketing & Sales

Strategy9. Production Requirement10. Management & Personnel

Requirement11. Intellectual Property12. Regulations Issues13. Critical Risk Factors

Parts of Feasibility Report

Financial Projections1. Balance Sheet Projections2. Income Statement Projections3. Cash Flow Projections4. Break-Even Projections5. Capital Requirement & Strategy

Findings & Recommendations Conclusion

Executive Summery

Executive summery is the summarized outcome of the feasibility report. It is a separate and standalone document. It helps the interested parties to understand the entire report and decision making. Few things to remember:It should be presented immediately after the content

section.It should not exceed more than one page.

1. Introduction

Introduction includes the basic concept of the study. It also includes the background of the study as well. Few things to remember:Introduction should be brief and clear.Introduction should reflect the insight reasons of

the study.

2. Product or Service

This section of the feasibility report describes the entire product(s) or service(s) details of the company. It also gives a brief idea about:Product mix (if any)Usefulness of product or serviceKey components or raw materials and its

availabilityImplementation planUpgrade or expand the product line

3. Technology

Technical knowledge of the feasibility study includes several issues such as:It provides details information about the product or

service.Describe additional or ongoing research or

development needs.

4. Market Environment

•Details about target market•Emphasis on costumers’ benefit

Target Market

•Target industry, key players•Market size, targeted market shareB2B Market

•Demographic factors•Psychological and behavioral factorsB2C Market

5. Competition

Market competition is a vital issue of starting new business if the competitors exist. Few things to remember:Details about competitorsList of barriers to entryDescribe uniqueness of product(s)Copyright issuesCompetitors reactions

6. Industry

A feasibility study should clearly define and describe the industry in which the enterprise operates. It also includes the following issues:Industry sizeIndustry growth rateIndustry segmentIndustry supply and demandIndustry forces that drives the market

7. Business Model

Proposed enterprise’s business model is presented in this part which includes:How the business will generate revenue.Will there be recurring revenue?Describe the model fully so that it will support the

financial projection.

8. Marketing & Sales Strategy

Basic marketing and sales strategy should be presented in here. It may describe any strategic partnership the enterprise has or is planning to form. This section also includes:Distribution strategyProjected profit margin or markupPricing strategy and justificationPayment terms for customersOther issues (e.g. warranties, marketing budget)

9. Production Requirement

This section describes the various issues regarding the production of product or service. It may include:How and where the company will manufacture and

at what cost?What physical premises are required?Will space be owned or leased? At what cost?How complex the manufacturing process is?

Describe equipment needed and cost.

9. Production Requirement (Cont.)

In some cases, the enterprise may outsource the production or other materials. Few things to remember:Describe supply sources and availabilityOutline the relevant contract termsDetails about quality control

10. Management & Personnel

To run the enterprise, it must need a management and some personnel to control the management issues. This section also includes:Managers’ names, tittles, responsibilities, background,

experiences, skills, cost etc.Sketch personnel requirement

11. Intellectual Property

Patent

Copyright

Trademark

11. Intellectual Property (Cont.)

In case of licensing agreement, enterprise should disclose the name of the licensor, key terms and give termination or renewal date.

If the concept of the business is scientific, intellectual property extremely important.

Sometimes business planning associated with intellectual property must occur prior to a business concept being developed and validated.

12. Regulations Issues

In this part, enterprise should outline the non-economic forces that might affect the prospect of the enterprise. It includes several issues such as:Key government regulationsEnvironmental problems and associated cost (if any)Political stability (if any)

13. Critical Risk Factors

In this part, enterprise has to identify the critical risk factors of the business by:SWOT AnalysisPorters Five ForcesPEST Analysis

N.B: Make sure how the enterprise will mitigate those associated risks!

Financial Projections

Balance Sheet Projections

Income Statement Projections

Cash Flow Projections

Break-Even Projections

Capital Requirement & Strategy

Capital Requirement & Strategy

In this step, enterprise has to answer several questions such as:How much funding (equity) will the firm need & when?What projected revenue or assets does the proposed

business have to secure the financing?What sources will provide the funding, i.e. investors,

lending institutions etc.?What ratio of debt to equity financing will occur?When will investors begin to see a return? What is the

expected return on investment (ROI)?

Findings & Recommendations

Findings and recommendations part of the feasibility study should be honest, short and direct. It is important to note that final recommendations should be based on the dimensions of the feasibility study separately. Few things are important in here such as:Likelihood of successProjected return of investment How the risk will be mitigatedArgument based on strong evidence for justification

Conclusion

The conclusion of the report should highlight the contribution of the business to the larger society. Such issues as employment opportunities, provision of inputs for industrial development, export potentials, and revenue to be generated will be addressed by this aspect.

Helping Hands

You cannot prepare a perfect feasibility report without the help of other parties. Those helping hands includes:• Business Enterprise Center• Accountant• Solicitor• Banks• Business advisers or consultants• Trade associations• Potential suppliers• Competitors• Libraries and Online entrepreneurship recourses

Monitoring the StudyHiring a consultant does not negate the responsibility for insuring that the feasibility study is conducted properly. You need to be engaged in the project and the evaluation process, understand the issues involved, question the basic assumptions used in the study and challenge the conclusions of the study. Few things to remember:Represent the project committee’s needs and interests

to the consultantReview and clarify what is needed from the consultantMonitor the work of the consultantProvide periodic reports to the project committee

How to Accept or Reject the Study?At the end of the study, the authorized party will submit the draft or final report. It is not uncommon for the project committee to reject the draft of the report and ask for further clarification and analysis. So, it is important to determine if it is accurate, relevant and complete. Few things are important to consider such as:Understandable and easy to readAddresses all of the relevant issues and questionsLists and discusses all of the underlying assumptions of the

project analysislogically consistent within sections and among sectionsThoroughly researched using good research techniquesContains all of the relevant information

References

• Thomson, Alan (2005), Business Feasibility Study Outline, Appendix 1, PP: 185-198

• Wikipedia, (2016), Feasibility study, [online] Available at: https://en.wikipedia.org/wiki/Feasibility_study [Accessed 18 Apr, 2016]

• Hofstrand, Don & Holz-Clause, Mary (November, 2009), When to Do and How to Use a Feasibility Study

• Hofstrand, Don & & Holz-Clause, Mary (October, 2009), What is a Feasibility Study?

• Matson, James (October 2000), Cooperative Feasibility Study Guide, United States Department of Agriculture, RBS Service Report 58

• W. Behrens, P. M. Hawranek (1995), Manual for the Preparation of Industrial Feasibility Study, United Nations Industrial Development Organization

Suggested Questions!

1. Why Feasibility Study is important before starting new business?

2. How to do the Feasibility Study?3. Describe the dimensions of Feasibility Study?4. Is there any differences between Business Plan and

Feasibility Study? Explain.5. What are the factors that influences the exit strategy

viability?6. Explain B2B and B2C market with real market

examples.

Suggested Questions! (Cont.)

7. Differentiate between Patent, Copyright and Trademark. Explain with examples.

8. Is it necessary to monitor the Feasibility Study? Give your arguments.

9. “Feasibility Study is a waste of time & money. It’s not necessary to do it. Let’s start the business first and see what will happen!”- Do you agree or not? Explain your arguments.

10. How the risks related to the project will be determined and reported on Feasibility Study?