What do we learn?
a. What
is feasibility and why its important?
Ø
What
is feasibility analysis?
·
process
of determining if a business idea is viable.
·
Assessment
of a potential business rather than strictly a product or service idea.
·
Investigative
in nature.
·
Designed
to critique the merits of proposed business.
Ø
Why
feasibility analysis is important?
·
According
to John w. Mullins: avoid falling into the “everything about my opportunity is
wonderful” mode.
·
Failure
to properly investigate the merits of bsiness idea before developing a business
model and a business plan will create a risk of blinding an entrepreneur to
inherent risks associated with potential business.
Ø
Completeing
a feasibility analysis requires:
·
Primary research: collected the person or persons completeing the
amalysis. (includes prospective customers)
Example: feedback from
industry experts.
·
Secondary research: investigate data that is already collected.
(includes industry studies)
Example: census bereau data,
analysis forecasts.
b. 4
key areas of feasibility analysis.
Ø
Product/
service feasibility analysis
·
Assessment
of the overall appeal of the product / service being proposed.
·
2
components:
1.
Product/
service desirability
-
Product/
service is desirable and serves a need in the marketplace.
-
Concept test: tool that is useful in soliciting feedback and
advice from customers prospective.
-
Concept
test involves showing preliminary description of a product or service idea
called concept statement.
-
Contents
in concept test one- page document:
1.
Description
of the product or service.
2.
The
intended target market.
3.
Benefits
of the product or service.
4.
Description
of how the product or service will be positioned relative to competitors.
5.
Brief
description of the company’s management team.
2.
Product/
service demand
-
Determine
if there is a demand for the product or the service.
-
3
utilized methods:
1.
Talking
face-to-face with potential costumers.
§
the
only way to know what kind of product or sevice people want.
2.
Utilizing
online tools.
§
using
the landing page methods. Landing page is a single web that
provides direct sales copy.
3.
Library,
internet, and gumshoe research.
§
to
collect feedback from customer prospective and industry related data.
§
Library
act as a archival.
§
Internet
provides specific recommendations of online recources to utilize.
§
Gumshoe
research is important for gaining a sense of the likely demand. This research
act as a investigator.
Ø
Industry/
target market feasibility analysis
·
Assessment
of the overall appeal of the industry and the target market.
·
Industry is a group of firms producing similar product or service.
·
Target market is the limited poertion of the industry that it goes
after or to which it wants to appeal.
·
2
components:
1.
Industry
attractiveness
-
Attractive
industry have 5 main characteristics:
§
Young
rather than old.
§
Early
rather than late in their life cycle.
§
High
rather than low operating margins.
§
Fragmented
rather than concentrated.
§
Growing
rather than shirnking.
2.
Target
market attractiveness
-
Place
within a larger market segment that represents a narrower group of customer
with similar needs.
-
Challenges
in identifiying an attractive target market is to find a market that’s large
enough for the proposed business but yet small enough to yet attracting small
competitors.
Ø
Organizational
feasibility analysis
·
To
determine whether the proposed business has sufficient management expertise,
organizational competence, and resources to successfully lauch.
·
2
primary issues:
1.
Management
prowess
-
Requires
the individuals starting the firm to be honest and candid.
-
2
important factors are passion and the understanding of the markets.
-
New
venture team: group of founders, key employees, and advisers that either manage
or help manage new business.
2.
Resources
sufficiency
-
The
focus in organizational feasibility analysis is on nonfinancial resources.
-
The
objective is to identify the most important nonfinancial resources and assess their
ability.
-
Another
key resources sufficiency issue is the ability to obtain intellectual property
protection on key aspects of the business.
Ø
Financial
feasibility analysis
·
A
preliminary financial analysis of whether a business idea is wirth pursuing.
·
3
important areas to consider:
1.
Total
start- up cash needed
-
Showing
how a new venture’s start- up costs will be covered and repaid.
-
It
is better to overestimate rather thanunderestimate the costs involved.
2.
Financial
performance of similar businesses
-
Estimating
a proposed start- up’s potential financial performance by comparing it to
similar , already establish businesses.
-
Several
ways of doing this:
§
Substantial
archival data: offers detailed financial reports on thousands of individual
firms available online.
§
Obtain
financial data on smaller firms.
3.
Overall
financial attractiveness of the proposed venture
-
Based
primarily on a new venture’s sales and rate of return (or profitability).
-
Factors
to assess whether the venture is financially feasible:
§
Amount
of capital invested.
§
Risk
assumed in launching the business.
§
Exsisting
alternatives for the entrepreneur’s time and efforts.
c. Feasibility
analysis template.
Ø
first
screen is a template entrepreneurial firms use to complete feasibility
analysis. Called first screen because feasibility analysis is an
entrepreneurial’s intia pass at determining the feasibility of the business
idea.
Ø
It
maps the 4 keys of feasibility analysis.
