ANALYSIS, PREPARATION

AND PLANNING

Feasibility
The feasibility study
investigating function.

Business Plan
provides

an The business plan provides a planning

function.

Answers the question: is the project Lays out the actions to be taken to bring
viable?
the ideas to reality.
The feasibility study outlines and analyses The business plan focuses on only one
several alternatives or methods of alternative or scenario.
achieving project success. Therefore it
assists to narrow the scope of the project to
identify the best project scenario(s) to
about two or three.
The feasibility study is conducted before A business plan is prepared only* after
the business plan.
the business venture has been deemed to
be feasible.
It is a decision point; to continue or not The outcome does not provide
based on the outcome.
information to continue or drop the
project.
Feasibility provides information to choose The business plan provides a blue print
the blue print or roadmap.
or roadmap.

 Some argue that:

We know its feasible. An existing
business is already doing it.
Feasibility has been done a few years ago
so there is no need to do another one.
Feasibility studies are just a way for
consultants to make money.
The business is too small for a feasibility
study.

 Some argue that:

The market analysis has already been
done by the business that is going to
supply the equipment.
By hiring a general manager, the study
can be accomplished.
Feasibility studies are a waste of time.
Money is to be spent on building, tie up
the site and bid on the equipment; why
spend money on feasibility.

Reasons For Feasibility

Once decisions have been made about
proceeding with a proposed business,
they are often very difficult to change. An
entrepreneur may have to live with these
decisions for a long time.
Successful businesses thoroughly
examine all of the issues and assess the
probability of business success first before
going into it.

Reasons For Feasibility

Feasibility studies gives focus to the project
and outline alternatives and narrow project
alternatives
Feasibility studies bring to the fore new
opportunities through the investigative
process.
They identify reasons not to proceed.
They enhance the probability of success by
addressing and mitigating factors earlier on
that could affect the project.

Reasons For Feasibility

Feasibility studies provide quality
information for decision-making.
They help to increase likelihood of finding
funds and investors for the project.
And provide documentation that the
business venture was thoroughly
investigated.

Aspects of Project Preparation and

Analysis

Technical
Institutional-Organisational-Managerial
Social
Commercial
Financial
Economic

Aspects of Project Preparation and

Analysis
Technical
Relates to underlying principles of
knowledge where the product and or the
method of the project
For a crop production project, the
concerns will be agronomy; knowledge of
plants and crops, effects of weather, soil
conditions, seeds; generally, inputs and
outputs.

Aspects of Project Preparation and

Analysis
The relationship among the various
factors; with the final product or method in
mind.
Internet caf project; the knowledge area
is information and communications
technology (ICT).

Aspects of Project Preparation and

Analysis

Issues about computers,

Internet connectivity,
networking of computers
business management

Aspects of Project Preparation and

Analysis
The purpose is to assess the current
status of the essentials with the view to
identify gaps.
The team to be selected or put together
depends on the technical areas involved

Aspects of Project Preparation and

Analysis
Institutional, organisational
How does the proposed project relate to the
various levels of power as well as the
existing institutions?
What are the links of the projects and team
with existing government departments and
organisations are considered here?
Within the project, what are the lines of
authority, delegation, line of reporting, and
organisational procedures?

Aspects of Project Preparation and

Analysis
Will the project keep and operate its own
accounts?

Aspects of Project Preparation and

Analysis

Managerial
Assessment of availability of staff to
manage the project; if there is a gap will
there be the need to train or hire others
locally or for expatriate staff?
Are the target groups equipped to use the
product or adopt the technology or
innovation being introduced?

Aspects of Project Preparation and

Analysis

Social
Social implications of projects are important.
For public projects the social aspect vis--vis the
objectives are crucial.
For non public projects the review of social
aspect is to assess the negative impact on
society if the project is implemented.
Where positive influences they are often
secondary in importance.
The focus is on income distribution, the
response of the project to national objectives.

Aspects of Project Preparation and

Analysis
Social
Effect of project on employment, possible
side effects on some people, issues of
quality of life.
For the company, how does the project fit
into the mission and vision of the
organisation?

Aspects of Project Preparation and

Analysis
Social
Environmental issues are social issues.
Both locally and internationally, there are
regulations and laws on governing the
effects of undertakings on the
environment.

Aspects of Project Preparation and

Analysis
Social
What are the possible effects of the undertaking
on the physical environment; water, air, soil.
Noise pollution is to be considered.
Projects in mining do have tremendous adverse
effects on the environment.
The outcome of these considerations is to
identify the enable the planners to find ways of
mitigating the environmental effects.

Aspects of Project Preparation and

Analysis
Social
At this stage environmental regulations
have to be reviewed to appreciate the
requirements and limits within which the
project can or cannot operate.

Aspects of Project Preparation and

Analysis
Commercial
This relates to the product.
The sale of the output produced, arrangements
for sale, and pricing.
This stage is also referred to as market
feasibility stage.
The demand of the product or service is needs
to be assessed; the potential demand as well as
the effective demand, the size of the market,
segments, and targets of the product.

Aspects of Project Preparation and

Analysis
Commercial
What advertising means are available, media
consumption habits of the target market or
consumers?
Questions like what is the buying behaviour of
the target market, income their income
distribution and some other characteristics of the
customers.
On the input side what are the sources of the
raw material, what are the pricing mechanisms,
regularity of supply etc.

Aspects of Project Preparation and

Analysis
Financial
Under the financial aspect, the totality of
the financial dimension of the proposed
project is examined.
In social or public projects, there are
several participants.
These participants in an agricultural
project include; farmers, suppliers, project
agencies and customers.

Aspects of Project Preparation and

Analysis
Financial
In a production and distribution project of a
manufacturer, the participants are customers,
distributors, transporters, and finally the
company or manufacturer.
Financial effects must be examined for each
participant because participants are impacted
differently.
The financial effects of the participants in the
project are examined here.
There effect on them must be appropriately
assessed.

Aspects of Project Preparation and

Analysis
Financial
Separate budgets and accounts (income
and expenditure, balance sheet and
cashflow) must be prepared.
The aim is to make judgements of the
financial efficiency, incentives,
creditworthiness and liquidity of the project
and its participants.

Aspects of Project Preparation and

Analysis
Financial
In private sector projects the proforma or
projected final accounts (profit and loss, balance
sheet, and cashflow) are prepared.
And this is from the perspective of the company
initiating the project.
It must be stated, that, several participants
(suppliers, competitors, customers) are affected
differently, but the company is mostly interested
in effects on her.

Aspects of Project Preparation and

Analysis
Financial
At this stage what is most required to
assess financial feasibility using the
cashflow.
The others only serve as an input. Indeed,
some approaches to building the cashflow
do not use the income statement and
balance sheet.

Aspects of Project Preparation and

Analysis
Financial
From the cashflow the feasibility of the project is
established using measures such as Net
Present Value (NPV), Internal Rate of Return
(IRR), and Benefit Cost Ratio (BCR) among
others.
The aim is to find out if the project is viable or
not.
The issue of profitability does not arise here at
all. If the project is viable, then, a detailed project
plan is prepared.

Aspects of Project Preparation and

Analysis
In the case of projects with profit motive, a
detailed business plan follows.
The time frame for considered fro
projections in feasibility study is quite long,
longer than that of the business plan
which is the magic five years.
In unstable economies, this can be as
short as three years.

Aspects of Project Preparation and

Analysis
Economic
Economic aspects of project analysis use
financial aspects as raw materials.
Essentially, the financial analysis is
adjusted to accomplish economic analysis.
The overarching goal of economic
analysis is the determination of the
contribution of a proposed project to the
total economy.

Aspects of Project Preparation and

Analysis
Economic
The principal question is: does the level of
contribution of the project warrant the use
of scare resources of the society to
execute it?
Despite the complementary nature of the
financial and economic analysis there are
some differences.