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CHAPTER 4
THE VIABILITY OF A SMALL
BSM1501: Business Management IA BUSINESS IDEA
CHAPTER 4

MARKET POTENTIAL

VIABILITY STUDY

1. Market research

2. Establish the need

MARKET PROFIT
POTENTIAL POTENTIAL
3. Market analysis

MARKET
ANALYSIS VIABILITY STUDY

1 2 3
Determine Determine Determine MARKET PROFIT
potential target expected POTENTIAL POTENTIAL
market market market share

1
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PROFIT POTENTIAL 4. Do projections

1. Calculate the total cost per unit

A. Pro forma income statement

2 Calculate the selling price

2.
B. Break-even point

3. Calculate the expected income

C. Cash budget
4. Do projections

WHEN IS AN IDEA VIABLE? PLANNING STAGE: Make decisions

The enterprise must be able to: Test viability

¾ Generate sustainable profits over

the long term Viable Not viable

¾ Generate enough cash over the

short term (to meet its daily expenses) Business plan