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Full Feasibility Analysis

From “Preparing Effective Business Plans” by Bruce R. Barringer
Note: All fields can be epanded to provide additional space to respond to t!e "uestions. A
copy of t!is template# along $it! eac! of t!e assessment tools# is also available in
P%F format at t!e aut!ors& 'eb site at $$$.pren!all.com(entrepreneurs!ip.
Introduction
A. Name of t!e proposed business
B. Name of t!e founder )or founders*
+. ,ne paragrap! summary of t!e business
Part 1: Product/Service Feasibility
Issues Addressed in This Part
A. Product(service desirability
B. Product(service demand
Assessment Tools
Concept Statement Test
• 'rite a concept statement for your product(service idea. -!o$ t!e concept statement
to . to /0 people. -elect people $!o $ill give you informed and candid feedbac1.
• Attac!ed a blan1 s!eet to t!e concept statement# and as1 t!e people $!o read t!e
statement to )/* tell you t!ree t!ings t!ey li1e about your product(service idea# )2*
provide t!ree suggestions for ma1ing it better# )3* tell you $!et!er t!ey t!in1 t!e
product or service idea is feasible )or $ill be successful*# and )4* s!are any additional
comments or suggestions.
• -ummari5e t!e information you obtain from t!e concept statement into t!e follo$ing
t!ree categories:
6 -trengt!s of t!e product or service idea7t!ings people $!o evaluated your
product or service concept said t!ey “li1ed” about t!e idea
6 -uggestions for strengt!ening t!e idea7suggestions made by people for
strengt!ening or improving t!e idea
6 ,verall feasibility of t!e product or service concept7report t!e number of
people $!o t!ing t!e idea is feasible# t!e number of people $!o t!in1 it isn&t
feasible# and any additional comments t!at $ere made
6 ,t!er comments and suggestions
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Buying Intentions Survey
• %istribute t!e concept statement to /. to 30 prospective customers )do not include
any of t!e people $!o completed t!e concept statement test* $it! t!e follo$ing
buying intentions survey attac!ed. As1 eac! participant to read t!e concept statement
and complete t!e buying intentions survey. Record t!e number of people $!o
participated in t!e survey and t!e results of t!e survey !ere.
• Along $it! t!e ra$ data recorded !ere# report t!e percentage of t!e total number of
people you surveyed t!at said t!ey $ould probably buy or definitely $ould buy your
product or service if offered. 8!is percentage is t!e most important figure in gauging
potential customer interest.
• ,ne caveat is t!at people $!o say t!at t!ey intend to purc!ase a product do
not al$ays follo$ t!roug!# so t!e numbers resulting from t!is activity are almost
al$ays optimistic. -till# t!e numbers provide you $it! a preliminary indication of
!o$ your most li1ely customers $ill respond to your potential product or service
offering.
9o$ li1ely $ould you be to buy t!e product or service described above:
;;;;;; %efinitely $ould buy
;;;;;; Probably $ould buy
;;;;;; <ig!t or mig!t not buy
;;;;;; Probably $ould not buy
;;;;;; %efinitely $ould not buy
Additional "uestions may be added to t!e buying intentions survey.
Conclusion )epand fields and report findings# in discussion form# for eac! area*
A. Product(service desirability
B. Product(service demand
+. Product(service feasibility )circle t!e correct response*
Not Feasible Unsure Feasible
%. -uggestions for improving product(service feasibility.
Part 2: Industry/ar!et Feasibility
Issues Addressed in This Part
A. =ndustry attractiveness
B. 8arget mar1et attractiveness
+. 8imeliness of entry into t!e target mar1et
Assessment Tools
Industry Attractiveness
• 8o t!e etent possible# assess t!e industry at t!e five>digit NA=+- code level your
potential business $ill be entering. ?se a broader industry category )less N+=+-
digits* if appropriate )!ttp:(($$$.census.gov(epcd($$$(naicstab.!tm*.
• Assess t!e attractiveness of t!e industry t!e potential business plans to enter on eac!
of t!e follo$ing dimensions.
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Industry Attractiveness Assessment Tool
"used to assess t#e broad industry$ rat#er t#an t#e speci%ic target mar!et$ you plan
to enter&
@o$ Potential <oderate Potential 9ig! Potential
/. Number of competitors <any Fe$ None
2. Age of industry ,ld <iddle aged Aoung
3. Bro$t! rate of industry @ittle or no
gro$t!
<oderate gro$t! -trong gro$t!
4. Average net income for
firms in t!e industry
@o$ <edium 9ig!
.. %egree of industry
concentration
+oncentrated Neit!er
concentrated nor
fragmented
Fragmented
C. -tage of industry life
cycle
<aturity
p!ase or
decline p!ase
Bro$t! p!ase Emergence
p!ase
D. =mportance of industry&s
products and(or services
to customers
“Ambivalent” “'ould li1e to
!ave”
“<ust !ave”
E. Etent to $!ic! business
and environmental
trends are moving in
favor of t!e industry
@o$ <edium 9ig!
F. Number of eciting ne$
product and services
emerging from t!e
industry
@o$ <edium 9ig!
/0. @ong>term prospects 'ea1 Neutral -trong
Target ar!et Attractiveness
• =dentify t!e portion or specific mar1et $it!in your broader industry t!at you plan to
target.
• Assess t!e attractiveness of t!e target mar1et on eac! of t!e follo$ing dimensions.
Target ar!et Attractiveness Assessment Tool
"used to assess t#e speci%ic target mar!et$ rat#er t#an t#e broader industry$ you
plan to enter&
@o$ Potential <oderate Potential 9ig! Potential
/. Number of competitors
in target mar1et
<any Fe$ None
2. Bro$t! rate of firms in
t!e target mar1et
@ittle to no
gro$t!
-lo$ gro$t! Rapid gro$t!
3. Average net income for
firms in t!e target
@o$ <edium 9ig!
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mar1et
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall
@o$ Potential <oderate Potential 9ig! Potential
4. <et!ods for generating
revenue in t!e industry
?nclear -ome$!at clear +lear
.. Ability to create “barriers
to entry” for potential
competitors
?nable to
create
<ay or may not be
able to create
+an create
C. %egree to $!ic!
customers feel satisfied by
t!e current offerings in t!e
target mar1et
-atisfied Neit!er satisfied or
dissatisfied
?nsatisfied
D. Potential to employ lo$
cost guerrilla and(or bu55
mar1eting tec!ni"ues to
promote t!e firm&s product
or services
@o$ <oderate 9ig!
E. Ecitement surrounding
ne$ product(service
offerings in t!e target
mar1et
@o$ <edium 9ig!
ar!et Timeliness
• %etermine t!e etent to $!ic! t!e “$indo$ of opportunity” for t!e proposed business
is open or closed based on t!e follo$ing criteria.
• %etermine t!e timeliness of entering a specific target mar1et based on ot!er criteria.
ar!et Timeliness Assessment Tool
@o$ Potential <oderate Potential 9ig! Potential
/. Buying mood of
customers
+ustomers are
not in a buying
mood
+ustomers are in a
moderate buying
mood
+ustomers are
in an aggressive
buying mood
2. <omentum of t!e mar1et -table to losing
momentum
-lo$ly gaining
momentum
Rapidly gaining
momentum
3. Need for a ne$ firm in t!e
mar1et $it! your offerings
or geograp!ic location
@o$ <oderate 9ig!
4. Etent to $!ic! business
and environmental trends
are moving in favor of t!e
target mar1et
@o$ <edium 9ig!
.. Recent or planned
entrance of large firms
into t!e mar1et
@arge firms
entering t!e
mar1et
Rumors t!at large
firms may be
entering t!e mar1et
No larger firms
entered t!e
mar1et or are
rumored to be
entering t!e
mar1et
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall
Conclusion )epand fields and report findings# in discussion form# for eac! area*
A. =ndustry attractiveness
B. 8arget mar1et attractiveness
+. <ar1et timeliness
%. =ndustry(mar1et feasibility )circle t!e correct response*
Not Feasible Unsure Feasible
E. -uggestions for improving industry(mar1et feasibility.
Part ': (rgani)ational Feasibility
Issues Addressed in This Part
A. <anagement pro$ess
B. Resource sufficiency
Assessment Tools
anagement Pro*ess
• ?se t!e follo$ing table to candidly and obGectively rate t!e “pro$ess” of t!e founder
or group of founders $!o $ill be starting t!e proposed venture.
anagement Pro*ess Assessment Tool
@o$ Potential <oderate Potential 9ig! Potential
/. Passion for t!e business
idea
@o$ <oderate 9ig!
2. Relevant industry
eperience
None <oderate Etensive
3. Prior entrepreneurial
eperience
None <oderate Etensive
4. %ept! of professional
and social net$or1s
'ea1 <oderate -trong
.. +reativity among
management team
members
@o$ <oderate 9ig!
C. Eperience and epertise
in cas! flo$
management
None <oderate 9ig!
D. +ollege graduate No college
education
-ome college
education but not
currently in college
Braduated or
are currently
in college
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+esource Su%%iciency
• 8!e focus in t!is section is on nonfinancial resources. ?se t!e follo$ing table to rate
your “resource sufficiency” in eac! category.
• 8!e list of resources is not meant to be e!austive. A list of t!e C to /2 most critical
nonfinancial resources for your proposed business is sufficient.
An eplanation of t!e rating system used in t!e first portion of t!e table is as follo$s:
/ Available
2 @i1ely to be available: $ill probably be available and $ill be $it!in my budget
3 ?nli1ely to be available: $ill probably be !ard to find or gain access to# and
may eceed my budget
4 ?navailable
. NA: not applicable for my business
+esource Su%%iciency Assessment Tool
Ratings Resource -ufficiency
/ 2 3 4 . ,ffice space
/ 2 3 4 . @ab space# manufacturing space# or space to launc! a
service business
/ 2 3 4 . +ontract manufacturers or outsource providers
/ 2 3 4 . Hey management employees )no$ and in t!e future*
/ 2 3 4 . Hey support personnel )no$ and in t!e future*
/ 2 3 4 . Hey e"uipment needed to operate t!e business
)computers# mac!inery# delivery ve!icles*
/ 2 3 4 . Ability to obtain intellectual property protection on 1ey
aspects of t!e business
/ 2 3 4 . -upport of local and state government if applicable for
business launc!
/ 2 3 4 . Ability to form favorable business partners!ips
Ratings: -trong# Neutral#
or 'ea1
Proimity to similar firms )for t!e purpose of 1no$ledge
s!aring*
Proimity to suppliers
Proimity to customers
Proimity to a maGor researc! university )if applicable*
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall
Conclusion )epand fields and report findings# in discussion form# for eac! area*
A. <anagement pro$ess
B. Resource sufficiency
+. ,rgani5ational feasibility )circle t!e correct response*
Not Feasible Unsure Feasible
%. -uggestions for improving organi5ational feasibility
Part ,: Financial Feasibility
Issues Addressed in This Part
A. 8otal startup cas! needed
B. Financial performance of similar businesses
+. ,verall financial attractiveness of t!e proposed venture
Assessment Tools
Total Start-.p Cas# /eeded
• 8!e startup costs )$!ic! include capital investments and operating epenses* s!ould
include all t!e costs necessary for t!e business to ma1e its first sale. Ne$ firms
typically need money for a !ost of purposes# including t!e !iring of personnel# office
or manufacturing space# e"uipment# training# researc! and development# mar1eting#
and t!e initial product rollout.
• At t!e feasibility analysis stage# it is not necessary for t!e number to be eact.
9o$ever# t!e number s!ould be fairly accurate to give an entrepreneur an idea of t!e
dollar amount t!at $ill be needed to launc! t!e firm. After t!e approimate dollar
amount is 1no$n# t!e entrepreneur s!ould determine specifically $!ere t!e money
$ill come from to cover t!e startup costs.
• 8!e total startup cas! needed can be estimate using t!e follo$ing table.
Total Startup Cas# /eeded "to a!e First Sale&
Capital Investments Amount
Property
Furniture and fitures
+omputer e"uipment
,t!er e"uipment
Ie!icles
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Operating Expenses Amount
@egal# accounting# and professional services
Advertising and promotions
%eposits for utilities
@icenses and permits
Prepaid insurance
@ease payments
-alary and $ages
Payroll taes
8ravel
-igns
8ools and supplies
-tarting inventory
+as! )$or1ing capital*
,t!er epense /
,t!er epense 2
8otal -tartup +as! Needed J
Comparison o% t#e Financial Per%ormance o% Proposed 0enture to Similar Firms
• ?se t!e follo$ing tables to compare t!e proposed ne$ venture to similar firms in
regard to annual sales )Aear / and Aear 2* and profitability )Aear / and Aear 2*.
Comparison o% t#e Financial Per%ormance o% Proposed 0enture to Similar Firms
Assessment Tool
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Annual Sales
Estimate of Proposed Ienture&s
Annual -ales7Aear /
Eplanation of 9o$ t!e Estimate
'as +omputed
Estimate of Aear / -ales ;;;;;;;;;;
-ummary: 9o$ proposed annual sales# on
average# compares to similar firms )circle one*
Belo$ Average Average Above Average
Estimate of Aear 2 -ales ;;;;;;;;;;
-ummary: 9o$ proposed annual sales# on
average# compares to similar firms )circle one*
Belo$ Average Average Above Average
/et Income
Estimate of Proposed Ienture&s
Net =ncome7Aear /
Eplanation of 9o$ t!e Estimate
$as +omputed
Estimate of Aear / Net =ncome ;;;;;;;;;;
-ummary: 9o$ proposed net income# on
average# compares to similar firms )circle one*
Belo$ Average Average Above Average
Estimate of Aear 2 Net =ncome ;;;;;;;;;;
-ummary: 9o$ proposed net income# on
average# compares to similar firms )circle one*
Belo$ Average Average Above Average
(verall Financial Attractiveness o% t#e Proposed 0enture
• 8!e follo$ing factors are important in regard to t!e overall financial attractiveness of
t!e proposed business.
• Assess t!e strengt! of eac! factor in t!e follo$ing table.
(verall Financial Attractiveness o% Proposed 0enture Assessment Tool
@o$ Potential <oderate Potential 9ig! Potential
/. -teady and rapid gro$t! in ?nli1ely <oderately li1ely 9ig!ly li1ely
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall
sales during t!e first one to
t!ree years in a clearly
defined target mar1et
2. 9ig! percentage of
recurring income7meaning
t!at once you $in a client#
t!e client $ill provide
recurring sources of
revenue
@o$ <oderate -trong
3. Ability to forecast income
and epenses $it! a
reasonable degree of
certainty
'ea1 <oderate -trong
4. @i1eli!ood t!at internally
generated funds $ill be
available $it!in t$o years
to finance gro$t!
?nli1ely <oderately li1ely 9ig!ly li1ely
.. Availability of eit
opportunity for investor if
applicable
?nli1ely to be
unavailable
<ay be available @i1ely to be
available
Conclusion )report finding for eac! area*
A. 8otal startup cas! needed
B. Financial performance of similar businesses
+. Financial feasibility )circle t!e correct response*
Not Feasible Unsure Feasible
%. -uggestions for improving financial feasibility
(verall Feasibility: Summary and Conclusion
,verall Feasibility of t!e
Business =dea Based on
Eac! Part
-uggestions for =mproving
t!e Feasibility
Product(<ar1et Feasibility Not feasible
?nsure
Feasible
=ndustry(<ar1et Feasibility Not feasible
?nsure
Feasible
,rgani5ational Feasibility Not feasible
?nsure
Feasible
Financial Feasibility Not feasible
?nsure
Feasible
,verall Assessment Not feasible
?nsure
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Feasible
Conclusion7briefly summari5e your Gustification for your overall assessment.
Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall