2.2.

1 Understanding Business Opportunity

A business opportunity is an attractive investment idea or proposition that provides the

possibility of a return for the person taking the risk. Such opportunities are represented by
customer requirements and lead to the provision of a product or service which creates or adds
value for its buyer or end-user.

In other words, a business opportunity is a business idea that has been researched upon, refined
and packaged into a promising venture that is ready to launch.

Multiple business ideas may be generated on a daily basis but only few of them will be profitable
in the long run based on market research and feasibility study conducted. Only these few are the
real business opportunities.

An opportunity, in order to be a business opportunity, must fulfill the following criteria:

 There should be a real demand
 Return on investment
 Availability of resources and skills
 Meet objectives
 Be competitive
 It must have a high level of gross profit margins
 It must have the potential to start generating profit within 12 months – 36 months
 The startup capital investments must be realistic and within the range of what an
entrepreneur can provide.
 It must have the potential to keep on improving with time
 It must have a low level of liability to risk

2.2.2 Identifying and Assessing Business Opportunities

Ideas and opportunities need to be screened and assessed for viability once they have
been identified or generated. Identifying and assessing business opportunities involves
determining risks and rewards/returns reflecting the following factors:
 Market
  Length of the “window of opportunity”
 Personal goals and competencies of the entrepreneur
 Management team
 Competition
 Capital, technology and other resource requirements
 Environment
The above factors are elaborated below:

Market
Is there a market for the idea? Are there any customers’ people with money who are able
and willing to buy the product or service? Can you provide what they need or want? How
many are there?

Length of the ‘window of opportunity’

Can you create or seize the opportunity until its full utilization?

Personal goals and competencies of the entrepreneur

Do you really want to venture into the business? Do you have what it takes? Are you
motivated enough?

Management team
Who else will be involved with you in the business? Do they have the experience, know-
how, contacts or other desirable attributes required?

Competition
Who are your competitors? Do you have something customers want that your competitors
do not have? For example, can you produce or market at lower costs?

Capital, technology and other resource requirements

How much capital, technology or other resources are required? Do you already have them
or could you get them?

Environment
Are the political, economic, geographical, legal, and regulatory contexts favorable? Will
the business do any damage to the physical environment?
Responses to the above questions will determine the attractiveness of any business
opportunity.
 Information Sheet - 3 Feasibility study/analysis

Introduction
This lesson explains a feasibility analysis and its major components. It also discusses each and

every step to be followed to make a feasibility analysis.

2.3.1 Meaning of a feasibility study/analysis

Feasibility study/analysis is the process of determining if a business idea is viable. As a

preliminary evaluation of a business idea, a feasibility analysis is completed to determining if an
idea is worth pursuing and to screen ideas before spending resources on them. It comes before
the development of a business Plan. When a business idea is deemed unworkable, it should be
dropped or rethought. If it is rethought and slightly different version of the original idea emerges,
the new idea should be subject to the same level of feasibility analysis as the original ideas. A
feasibility study can be carried out on an idea, a campaign, a product, a process or an entire
business.

A feasibility study precedes a business plan. Before writing a business plan, one needs to
identify how, where, and to whom they intend to sell a service or product. One also needs to
assess the competition and to figure out how much money they need to start the business and to
keep it running until it is established where all of these are achieved through a feasibility study.
Feasibility studies address things like where and how the business will operate. They provide in-
depth details about the business to determine if and how it can succeed. They serve as a valuable
tool for developing a winning business plan.

Benefits of a feasibility study/analysis

The followings are the major benefits of any feasibility study/analysis
 It enables to identify problems that may encounter the business and their solutions;
  It enables someone to develop marketing strategies to convince a bank or investor that
your business is worth considering as an investment;

 It serves as a solid foundation for developing a business plan

 It enables someone to know what customers want, test a product's usability and the
quality of the user's experience

2.3.2 Components of a feasibility study/analysis

The components of a feasibility study/analysis include all the things that should be considered in
conducting a feasibility study/analysis. These are shown in the following diagram:

1
Description
of a
business

6
Organization 2
and Marketing
production study
study

Feasibility
study

5
3
Management
Technical
personnel
study
study

4
Financial
study

Figure 1: Components of a feasibility study

1. Description of the Business
Here, there should be descriptions of the following issues:
 The product or services to be offered and how they will be delivered.
 How customers would use and buy the product or service
 Key components or raw materials that will be used in the product, how the business will
source these and how available they are.
 Plans to test the product to ensure it works as planned and is sufficiently durable, strong,
secure, etc.
2. Market Feasibility study
 Here, there should be descriptions of the following issues:
 The industry in which the business operates. Include the size, growth rate, etc
 Demand and supply factors and trends
 Target market for the products and clearly state why would customers buy the produce
 The level of actual market demand and anticipated future market potential
 Direct and indirect competition (as it pertains to the target market only).
 Unique about the enterprise’s product compared to the competition?
 List all key barriers to entry
3. Technical Feasibility study
Here, there should be descriptions of the following issues:
 Details how you will deliver a product or service (i.e., materials,
 Labor, transportation, where your business will be located, technology needed, etc.).
 additional or ongoing research and development needs
4. Financial Feasibility study
Here, there should be descriptions of the following issues:
 Projects how much start-up capital is needed and when? What sources will provide the capital?
 balance sheet projections
 income projections
 cash flow projections
 When will the enterprise begin to turn a profit, Break even analysis (BEA)?
 What is the expected return on investment (ROI)?
 Will the enterprise provide a viable return on investment (ROI) for the entrepreneur (cost
benefit analysis)?

5. Organizational and production feasibility study

Here, there should be descriptions of the following issues:
 Defines the legal and corporate structure of the business (may also include professional
background information about the founders and what skills they can contribute to the
business).
 What physical premises are required? Give location, size, condition, and capacity of
planned production and warehouse facilities.
 How complex is the manufacturing process? Describe equipment needed and costs.
  Will space be owned or leased? Will renovations be required? At what costs?

6. Management and personnel Feasibility study

There should be descriptions of the following issues:
 List the proposed key managers, titles, responsibilities, relevant background, experience,
skills, costs
 Sketch personnel requirements: what people will be needed now, in a year, in the long
term? What skills and qualifications are required and what financial implication results?

2.3.3 Steps for conducting feasibility study...

The basic steps that apply to all feasibility studies are the followings:
Step 1: Assessment Stage
Step 2: Analysis Stage
 Conducting Market Research
 Performing Organizational and Technical Analysis
 Performing Financial Analysis
Step 3: Interpretation Stage
 Completing the Feasibility Study

Each step is described below:

Step 1: Assessment Stage
In this step, decision is made if you need to do a feasibility study or not
 Conduct a preliminary analysis: A little bit or early research will help you determine if
you need to proceed with a complete study.
 Consider your options: Completing a thorough feasibility study is a time-consuming and
sometimes expensive process. Thus, you want to try to save your time and money for study
only the most promising of your ideas. For example, you should carefully identify other
possible alternatives to this business before you decide to jump full steam into a feasibility
study.
 Begin to assess the demand for your idea: Before you decide to invest the time and
money into a complete feasibility study, you need to realistically assess whether or not
  there is a need or demand for your idea. If there is, then you can proceed to study the idea
in more depth. If not, then you can move on to your next idea.
 Begin to assess the competition: Perhaps you've determined that there is in fact a demand
for your idea or services
 Assess the challenges. Before you move on to the active stages of your feasibility study,
you should consider whether or not there will be any impossible obstacles.
 Decide if you should hire expert consultants. If you initial investigation suggests that it
looks like you have an idea that may be successful, it could be helpful to hire a consultant
to manage and conduct your feasibility study.
 Set a time-table. Performing a feasibility study can be an involved process and can easily
taken up a lot of time. If your initial analysis has indicated that you're sitting on a good idea
and that you thus need to complete a more detailed study, you'll want to make sure that you
can get the job done in a timely manner.

Step 2: Analysis Stage

In this step, three things are done; these are
 Conducting a market research
 Performing Organizational and Technical Analysis
 Performing Financial Analysis
Conducting a market research
 Learn about the market. Once you've determined that you have a potentially workable
idea, you need to learn as much as you can about what the market currently for your product
or service is like, if it's changing, and how you can fit into it.
 Use data from the Economic Census. You should be able to find even more detailed
information for the demand for your product or service by studying the results of the
government's Economic Census, which is conducted every time.
 Survey people directly. A great way for you to learn as much as possible about what your
potential consumers or audience want and need is to interview them and ask them specific
questions
 Design your surveys carefully. Make sure that whatever methods you choose to learn
about your audience's needs and wants, you take the time to compose detailed, specific
questions for your survey
 Analyze the competition's claim on the market. It's also important that you try to
determine how much of a share your top competitors have, and how long they've held on to
that position.
 Identify your potential share of the market. Once you understand how your competitors
fit into the market, you should be able to estimate how you'll be able to fit in.

Financial feasibility analysis

The final part of your study should address the financial feasibility of the business idea which
involves the following:
 Preparing a sales forecast;
 Estimating start-up and working capital requirements;
 Estimating profitability;
 Assessing financial viability

Performing Organizational and Technical Analysis

 Determine where you'll need to work: Part of your feasibility study should be devoted
to exploring the details of where you'll be working.
 Decide how your company or team needs to be structured: If you won't be heading
this project alone, you'll have to think about what sort of help (paid or volunteer) you'll
need from others.
 Determine what materials you will need: This is the point at which you'll have to
carefully research and list all of the materials you'll need for each specific stage of your
project
 Identify the cost of your materials. While you will get more specific with the details of
your budget in the next phase of the feasibility study, make sure to record the prices of
the materials you'll need as you research their availability

Performing Financial Analysis

  Outline your start-up costs. An important part of your feasibility study is a detailed
budget, which should include the costs that you'll need to handle as you start your business
 Estimate your operating costs. These are the everyday costs of running a business, and
will include such things as rent, materials, and wages that you'll need to account for
regularly
 Estimate your revenue predictions. Use your prior research on the current prices of
comparable items to help you set the price of your services or goods.
 Identify your funding sources: You need to know how you'll be able to cover all of your
costs throughout this operation. Thus, carefully outline all of your available sources of
income and funding
 Interpreting the data : The final step when considering the financial aspects of your idea
is to perform what is called a profitability analysis

Step 3: Interpretation Stage

This is the last stage to complete the Feasibility Study by doing the following tasks
 Compile all of the information: Once you've completed all of the stages of the study,
you'll need to organize your findings.
 Look at your financial predictions first: In most cases, the ultimate feasibility of your
idea will come down to questions about money. Take a hard, honest look at what your
anticipated profit margin for your business will be, and determine whether or not you can
be satisfied and secure with those numbers.
 Balance your estimated business profits against your personal financial needs: If you
hope to make a living off your new business, you will need to have your personal budget
outlined
 Consider the human costs of your business: Even if the numbers look decent to you,
you should think about how much time, effort, and attention this new business will
demand.
 Analyze your findings: Considering all of the associated risks and potential benefits, does
it look and evaluate it.
 Write it up and distribute it: You may have completed this feasibility report just for
your own sake—to learn for yourself whether or not your idea was workable