WEEK 6-7

Conducting a Feasibility Study

and Crafting a Business Plan

ITE-6301 Technopreneurship
Week 6: conducting a Feasinility Study and Crafting a Business Plan
Module Learning Outcomes:

By the end of this module, a student is able to:

1. Understand the elements of Feasibility Study
2. Determine how attractive an industry is overall as a home for a new
business.
3. Identify the possible niches a small business can occupy
profitability.
Topics Covered Conducting a
• Definition of Feasibility Study Feasibility Study and
•
•
Five Forces Model
Financial Feasibility Study Crafting a Business
•
•
Business Plan
Business and Marketing Strategy Plan
Feasibility Analysis

The process of determining

whether an entrepreneur’s
idea is a viable foundation for
creating a successful business
Elements of a Feasibility Analysis

Financial Feasibility

Industry and Product or

Market Feasibility Service Feasibility
Five Forces Model

.
Potential
Entrants

Threat of new entrants

Rivalry among
Suppliers existing firms Buyers
Bargaining Bargaining
Power of Power of
suppliers buyers

Substitutes
Rivalry

q Number of competitors is large or few

(less than 5)
Competitors are not similar in size or
capability
The industry is growing at a fast pace
The opportunity to sell a differentiated
product or service is present
Suppliers

q Many suppliers sell a commodity

product to the companies in it
Substitute products are available
for the items suppliers provide
Companies in the industry find it
eas to switch from one supplier to
another
The items suppliers provide
account for a relatively small
portion of the cost of finished
products
Buyers

q Switching costs to competitors is high

Number of buyers is large
Customers demand differentiated products
Customers find it difficult to gather info on
suppliers costs etc
The items account for a relatively small
portion of the customers’ finished products
New Entrants

q Advantages of economic scale are not

present
Capital requirements to enter are low
Cost advantages are not related to
company size
Buyers are brand-loyal
Governments do not restrict entry
Substitute Products

q Quality substitute products are not

readily available
Prices of substitute products are
not lower
Buyers’ cost of switching to
substitute products is high
Product or Service Feasibility Analysis

q Are customers wiling to purchase our goods

and services?
Can we provide the product or service to
our customers at a profit?
Research

q Primary research Customer surveys and

i questionnaires
Focus groups
Secondary research
Trials

q Prototypes: an original, functional model of a

new product that entrepreneurs can put into
the hands of potential customers so they can
see it, test it and use it
In-home trials: a research technique that
involves sending researchers into customers’
homes to observe them as they use the
company’s product or service
Financial Feasibility Analysis
q Capital
Requirement
s
Estimated
Earnings
Return on
Investment
 A Business Plan

A written summary of an entrepreneur’s

proposed business venture, its
operational and financial details, its
marketing opportunities and strategy,
and its managers’ skills and abilities
3 Functions

q Guides an entrepreneur
Attracts lenders and investors
Reality Test
Competitive Test
Value Test
Represents/reflects its creator
Elements of a Business Plan
q Title Page and Contents
Executive Summary
Vision and Mission Statement
Company History
Business and Industry Profile
Business Strategy
Description of the Firm’s Product or Service
Marketing Strategy
Competitor Analysis
Description of Management Team
Plan of Operation
Pro Forma Financial Statements
The Loan or Investment Proposal
What Lenders and Investors Look for in a Business Plan?

q Capital
Capacity
Collateral
Character
Conditions
Executive Summary

q The company’s business model

and basis for competitive edge
The company’s target markets
and the benefits its product or
service will provide
The qualification of the
founders and/or key employees
The key financial highlights
Business and Industry Profile

q Overview of industry or market

segment
Existing or anticipated profitability of
the industry
Company’s general business goals
Company’s immediate objectives
Business Strategy

q How to gain competitive edge

How to achieve the goals
and objectives
Methods to satisfy KSFs of
the industry
Description of Product or Service

q Overview of how customers will use it

Any patents, trademarks or copyright
Honest comparison with competition
Feature (descriptive fact about a product or
service) vs Benefit (what a customer gains from
the product or service)
Description of production process, strategic
raw materials, sources, costs.
Marketing Strategy
q Defining the target market
Who? Where? How many? Why?
Proving that a profitable market exists
Showing customer interest
Documenting market claims
Marketing Strategy

q Advertising
Market Size and trend
Location
Pricing
Distribution
Competitor Analysis

Each significant competitor

has an advantage over
each
Description of Management Team

q Qualifications of those with

at least 20% ownership
Resumes
How to avoid primary
reasons for business failures
Pro Forma Financial
Statements

q Monthly for 3 years by quarter

3 sets: pessimistic, most likely,
optimistic
Statement of assumptions
Loan or Investment Proposal

q Purpose of financing
Amount requested
Plans for repayment/exit strategy
Timetable for implementation
Evaluation of risks
Conclusion

ØElements of Feasibility
Analysis:
Financial Feasibility
Industry and Market Feasibility
Product or Service Feasibility
END