Professional Documents
Culture Documents
GUIDE TO
WRITING A
FEASIBILITY
STUDY
A PRACTICAL GUIDE TO WRITING A FEASIBILITY STUDY NMM PRINTERS
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PRACTICALGUIDETOFEASIBILITYSTUDY
Agency,
ISBN:
618.5–dc22
PREFACE
Everyone wants to open and operate a successful business or project. This is the sole intention
of any project developer or entrepreneur. However, these are confronted with a serious reality.
This reality is that not all business or projects are viable of feasible. In other words, these
projects or business are faced by the difficult issue of long-term sustainability. This the critical
challenge or question confronting all business or projects. In this case, it is important to conduct
a feasibility study to determine the viability or sustainability of the project in the future. A
feasibility study provides a blueprint to determine feasibility of a business endeavor or a
planned project.
A feasibility study is a systematic plan and analysis of the sustainability of a project taking into
consideration factors such marketing, production or technical issues, organizational and
management aspects and financial implications. In other words, feasibility study is the
evaluation and assessment of a proposed project or business. This is an important endeavor
before any further action can be taken. On the hand, it influences the decision or course of
action to be taken by an investor, financier or management of an organization.
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There are several benefits of conducting a feasibility study. one the major benefits is that a
feasibility study identifies the merits and demerits of a projects. In reality, it provides a cost
benefit analysis of undertaking a specific activity, project or business. Therefore, someone can
make an informed decision about a specific activity or project. At the same time, a feasibility
study also minimized risks by taking actions without understanding and comprehending their
financial, legal or reputational ramification to an organization or a business. For this reason, a
feasibility study provides a comprehensive understanding about a project or plan. Furthermore,
a feasibility study identifies potential challenges and problems while executing the plan or
project. Moreover, a feasibility study takes into consideration all relevant factors to be
considered in the implementation of the project or plan.
Given the significance of a feasibility study in decision making and implementation of the
project, many people especially potential investors, financiers or even management lack the
practical knowledge of feasibility study. In this regard, it becomes difficult to write a feasibility
study which will provide a roadmap for a particular project. Based on this notion, this book sets
A PRACTICAL GUIDE TO WRITING A FEASIBILITY STUDY NMM PRINTERS
to address those practical challenges in preparing a feasibility study. The purpose of the book is
to provide practical guide to write a feasibility study to determine the viability of a specific
project. Specifically, this will book will provide the description of every important section in a
feasibility study with vivid illustration.
He is the author of several books and papers in accounting, management, research and
education. Some of the his books include Introduction to Business Research, A practical guide to
dissertation and thesis writing, Essentials in higher education administration and a Job
Evaluation for workbook for students pursuing human resource management. In addition, He is
the founding editor of the International Journal of Innovation in Education and Business (IJIEB) a
bi- annual peer review journal publishing innovative articles in business and education.
He has been serving in the administrative and governing boards of institutions in secondary
school and higher learning institutions. He undertakes consultancy in a diverse range of
industries including health, education and research. His wealth of experience has a significant
contribution to the completions of this book.
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A PRACTICAL GUIDE TO WRITING A FEASIBILITY STUDY NMM PRINTERS
ACKNOWLEDGEMENTS
First and foremost, I would like to extend my appreciation toward my family especially my wife
for the unwavering support toward the completion of this book. She has been instrumental
toward the success of this endeavor.
During the process of writing the book, the author sought advice and counsel from experts in
the business world and in various sectors. There has been numerous feedback and constructive
criticism from various experts. My gratitude and appreciation goes to everyone who provided
their advice and feedback for this book.
I extend my gratitude to all businesses and entrepreneurs who contributed toward the final
preparation of this book.
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TABLE OF CONTENTS
Preface……………………………………………………………………………………………………………………… i
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study……………………………………………………………………………………….. 1
1.2 Statement of the Problem………………..……………………………………………………………………. 3 1.3
Objectives of the Study………………………………………………………………………………………….. 4
1.4 Significance of the Study……………………………………………………………………………………….. 8
1.5 Scope and Limitation…………………………………………………………………………………………….. 9
1.6 Methodology………………………………….……………………………………………………………………… 10
1.6.1 Research Design and Framework…………..……………………………………………………… 12
1.6.2 Sampling Procedure…………….………………………………………………………………………. 13
1.6.3 Treatment of Data……………………………….………………………………………………………. 13
1.6.3.1 Internal Rate of Return (IRR)……………………………………………….……………. 15
1.6.3.2 Payback Period in Years…………………………………………..………………………… 16
1.6.3.3 Net Present Value (NPV)……………………………….………………………………….. 16
1.6.3.4 Profit Margin…………………………………………………………………………………….. 17
1.7 Review of Related Literature…………………………………………………………………………………. 17
1.7.1 Marketing Demand………………………………………………………………………………………. 18
1.7.2 Management and Organization……………………………………………………………………. 19
1.7.3 Financing……………………………………………………………………………………………………… 21
1.7.4 Technical/ Production………………………………………………………………………………….. 22
1.8 Definition of Terms………………………………………………………………………………………………… 23
CHAPTER TWO
MARKETING STUDY
2.1 Product Description……………………………………………………………………………………………….. 23
2.2 Industry Profile…………….…………………………………………………………………………………..……. 25
2.2.1 SWOT Analysis………………………………………………………………………………………………. 27
2.2.1.1 Strengths…………………………………………………………………………………………… 29
2.2.1.2 Weaknesses………………………………………………………………………………………. 31
2.2.1.3 Opportunities……………………………………………………………………………………. 33
2.2.1.3 Threats……………………………………………………………………………………………… 35
2.3 Demand…………………………………………………………………………………………………………………. 39
2.4 Supply………………….………………………………………………………………………………………………… 43
2.5 Demand-Supply Analysis/Market Share…………………………………………………………………. 49
2.6 Marketing Plan………………………………………………………………………………………………………. 55
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2.6.1 Promotion……………………………………………………………………………………………………. 59
2.6.1.1 Television and Radio……………………..………………………………………………….. 65
2.6.1.2 Billboard and Posters……………………………..…………………………………………. 69
2.6.1.3 Online…………………………..…………………………………………………………………… 77
2.6.1 Pricing…………………………………………………………………………………………………………… 81
CHAPTER THREE
TECHNICAL AND PRODUCTION
3.1 Process Flow/Operational Process………………………………………………………………………… 85
3.2 Equipment, Furniture and Fixtures………………………………………………………………………… 90
3.3 Building………….……………………………………………………………………………………………………… 95
3.4 Location………………………………………………………………………………………………………………… 99
3.5 Layout/Floor Plan………………………………………………………………………………………………….. 102 3.6
Capital/Scheduling………………………………………………………………………………………………… 107
3.7 Water Disposal………………………………………………………………………………………………………. 115
3.8 Location…………………………………………………………………………………………………………………. 119
3.9 Layout/Floor Plan...………………………………..…..…………………………………………………………. 121
3.10 Capacity/Scheduling…………………………………………………………………………………………….. 125
3.11 Waste Disposal…………………………………………………………………………………………………….. 129
3.12 Utilities and Other Operating Costs……………………………………………………………………… 134
CHAPTER FOUR
ORGANIZATION AND MANAGEMENT STUDY
4.1 Form of Organization……………………………………………………………………………………………… 137
4.2 Organizational Structure………………………………………………………………………………………… 141
4.2.1 Functional Organizational Structure……………………………………………………………… 146
4.2.2 Product/Market Organizational Structure…………………………………………………….. 148
4.2.3 Matrix Organizational Structure/Multiple Command Systems………………………. 150
4.3 Personnel Requirements………………………………………………………………………………………… 153
4.4 Qualification Requirements……………………………………………………………………………………. 158
4.5 Compensation Package…….……………………………………………………………………………………. 162
4.6 Projected Timetable………………………………………………………………………………………………. 169
CHAPTER FIVE
FINANCIAL STUDY
5.1 Major Assumptions………………………………………………………………………………………………… 173
5.2 Capital Requirements/Investments……………………….………………………………………………. 177
5.3 Preparation of Financial Statements………………………………………………………………………. 181
5.4 Financial Analysis…………………………………………………………………………………………………… 185
CHAPTER SIX
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ECONOMIC DESIRABILITY
6.1 Stockholder Theory………………………………………………………………………………………………… 188 6.2
Stakeholder Theory………………………………………………………………………………………………… 193
6.3 Stakeholders of the Business…………………………………………………………………………………. 196
6.3.1 Stockholders/Owners……………………………………………………………………………………. 199
6.3.2 Customers…………………………………………………………………………………………………….. 202
6.3.3 Employees…………………………………………………………………………………………………….. 209
6.3.4 Suppliers………………………………………………………………………………………………………. 211
6.3.5 Government…………………………………………………………………………………………………. 217
6.4 Environmental Impact Assessment……………………………………………………………………….. 219
CHAPTER SEVEN
FINDINGS……………………………………………………………………………………………………………………… 223
CHAPTER EIGHT
CONCLUSION AND RECOMMENDATION
8.1 Conclusion……………………………………………………………………………………………………………… 229
8.2 Recommendations……………………………………….………………………………………………………… 238
BIBLIOGRAPHY……………………………….…………………………………………………………………………… 243
APPENDIX
A. Research Instrument……………………………………………………………………………………….. 248
B. Curriculum Vitae……………………………………………………………………………………………… 252
C. Tabulated Data………………………………………………………………………………………………… 257
D. Statement of Retained Earnings………………………………………………………………………. 261
E. Administrative and Operational Expenses……………………………………………………….. 265
F. Cash Flow Calculation………………………………………………………………………………………. 269
G. Building, Equipment and Facilities Schedule……………………………………………………. 273
H. Amortization Schedule for Credit Facility…………………………………………………………. 279
I. Legal Requirement and Documents for the Project…………………………………………… 281
J. Capacity Schedule…………………………………………………………………………………………….. 286
INDEX…………………………………………………………………………………………………………………….…… 291
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TABLE OF TABLES
Table Description No.
1 Demand………………………………………………………………………………… 31
2 Supply…………………………………………………………………………………… 32
3 Demand and Supply Analysis………………………………………………… 33
4 Revenue……………………………………………………………………………….. 33
5 Television and Radio Advertisement Costs…………………………… 35
6 Billboard and Poster Advertisement Costs……………………………. 36
7 Online and Social Media Advertisement Costs……………………… 36
8 Equipment, Furniture and Fixtures………………………………………. 43
9 Depreciation Schedule…………………………………………………………. 44
10 Operating and Running Costs……………………………………………….. 53
11 Administrative and Advertising Costs…………………………………… 64
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12 Personnel Requirement……………………………………………………….. 65
13 Qualification Requirement…………………………………………………… 71
14 Compensation Package………………………………………………………… 72
15 Projected Timetable…………………………………………………………….. 81
16 Working Capital……………………………………………………………………. 82
17 Capital Expenditure………………………………………………………………. 83
18 Total Capital Requirement……………………………………………………. 86
19 Projected Income Statement……………………………………………….. 181
20 Projected Balance Sheet………………………………………………………. 182
21 Projected Cash Flow Statement……………………………………………. 183
22 Estimated Cash Flows…………………………………………………………… 185
23 Profit Margin……………………………………………………………………….. 190
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24 Asset Turnover…………………………………………………………………….. 192
TABLES OF FIGURES
Figure Description No.
1 Research Framework…………………………………………………………… 13
2 Household Income Level……………………………………………………… 32
3 Process Flow……………………..………………………………………………… 33
4 Work Layout Plan………………………………………………………………….. 33
5 Organizational Structure…………………………..…………………………… 35
6 Net Profit………………………………………………………………………………. 36
7 Capital Balances…………………………………………….……………………… 36
A PRACTICAL GUIDE TO WRITING A FEASIBILITY STUDY NMM PRINTERS
A PRACTICAL GUIDE TO WRITING A FEASIBILITY STUDY NMM PRINTERS
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
This section provides the historical background of the project or
business. It provides a brief but comprehensive description of the
product or services in the feasibility study. In addition, this section
provides the main characteristics of the project. This involves the reason
to write the project, the necessary prerequisites and the possible
results for the completion of the project.
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In developed countries, business incubators have been the norm for any
small size business endeavor. Specifically, Silicon Valley in SanFrancisco
in USA has been an epicenter for start-up business activities. This
involves providing financial assistance and expertise in starting and
operating the business (Cirdonom 2018). Other areas are following
trend like London, Tel-aviv and other global cities who have been
promoting business incubators.
From an African point of view, South Africa, Nigeria and Kenya have
been leading the way on business incubators (Ozolo, 2020). Other
countries like Rwanda have made significant strides to create a
knowledge based economy (Nkurunzinza, 2019). In this case, Tanzania
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has been lagging behind. For this matter, this is a feasibility study to
determine the viability to open a business incubator in Tanzania.
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Financial objectives
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Marketing Objectives
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1. To determine the type and form of business that will enhance the
growth of small and medium size entrepreneurs in Arusha,
Tanzania.
2. To determine the most appropriate form of set up of the business
incubator in Arusha, Tanzania.
3. To identify the duties and responsibilities to be accomplished at
the business incubator located in Arusha
4. To determine competitive remuneration packages for employees
at the business incubator in Arusha, Tanzania.
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Third and lastly, this study will help the government and local
authorities to understand the necessity of business incubator as a tool
to foster small and medium size business growth in Tanzania and
specifically in Arusha.
This section provides the coverage and the boundaries of the feasibility
study. It refers to the parameters and the areas the feasibility study will
explore and investigate. This includes the location to conduct the
investigation and the time framework to complete the feasibility study.
Moreover, the scope and limitation provides the type of information to
be included in the study. At the same time, the limitations might include
the constraints beyond the ability of the researchers which might
jeopardize the execution of the feasibility study.
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1.6 Methodology
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This section provides sources of data used in the study. This includes the
use of primary and secondary data. The methodology includes the
research design, sampling procedures, and treatment of data.
Primary Data
Secondary Data
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The research approach will be quantitative and the research design will
be descriptive and exploratory in nature. The descriptive research
design will be used to describe the different characteristics and
attributes of the small and medium sized entrepreneurs in Arusha. At
the same time, exploratory design will be used to examine the need and
demand of small and medium sized entrepreneurs in relation to
knowledge and expertise in establishing a sustainable business plan and
model.
Figure 1
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DEMAND SUPPLY
Questionnaire/Survey administered Questionnaire/Observation of
to small and medium size business incubator establishment in
entrepreneurs on the need of a Arusha.
business incubator in Arusha
MARKET NICHE
SURVEY ANDANALYSIS OF
• Marketing Plans
• Productions and Operations
• Financial and Accounting
• Organizational and Management
• Economic Desirability
PROJECT VIABILITY
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Sampling Procedure
n = __N___
(1+Ne2)
The study applied the 5% margin of error and an estimated sample size
of 397 small and medium size business entrepreneurs located in Arusha.
Treatment of Data
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data coded. The whole process of data cleaning improves the efficiency
of the results for data analysis and therefore improves the data quality.
The following are some of the financial ratios and capital budget
techniques that are applied to analyze and evaluate the financial
viability and sustainability of the feasibility study.
T
0 = NPV = ∑_ Ct____ - C0
T=1 (1+IRR)t where:
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The payback period is the amount of time it takes to gain back the
original cost of a specific investment. The best case scenario of a
payback period is the least amount of time and therefore the
investment is desirable and attractive for investment purposes.
The net present value is the difference between the present value of
cash inflows and outflows in a specific period of time. It is normally
applicable in capital budgeting and investment planning to determine
the profitability of a proposed project of investment in the future.
n
NPV = ∑_ _CFt__ - C0
T=1 (1+i)t
Where:
periods
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Profit Margin
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Marketing Demand
Based on the statistics provided by Chamber of commerce in Tanzania,
the results indicate that there is a growing of small and medium size
business in Tanzania. Specifically, there are 54 new business opened
every month in Arusha. These businesses offer a variety of services in
different sectors which have an instrumental impact on the economic
output of Tanzania.
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words, register and filling for a new business with all necessary
legal document required by law.
3. The business incubator will assist in the management of the
business. This involves providing financial and technical advice
wherever possible. At the same time, monitoring the daily
operations for the business to ensure its survival and success in
the long-run.
4. The business incubators will help the growth of the business.
These activities include securing new funding, locations and
potential customers to increase the market share of the business.
This is an integral part of any small or medium sized business in
Arusha.
Form of Business
The first challenging task for any small or medium sized business is to
determine the form of business. This is because of tax purposes and
legal obligation to operate as a business entity. Normally, there are
three forms of business which are a sole proprietorship, partnerships,
and a corporation or a company.
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not personally liable for the company debts. Moreover, it is a not always
that corporations are meant for profits. Sometimes the purpose of the
corporation is for social entrepreneurial purposes whereby benefits are
for the welfare of members or a particular community. This is the best
form of business since it is possible to raise funds as a legal entity to
fund and support small and medium sized business.
Financing
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Technical/Production
Cost of Operation/Maintenance
The entrepreneurs from small and medium sized business must apply
for admission in the program. The admission criteria vary depending on
the nature of the business. However, the main criteria depend on the
business idea and the implementation of the business plan.
Definition of Terms
This is a list of main or common words used in the feasibility study. The
definitions of terms provide the operational definition of the main and
common words or terms used in the study. The definition provides an
explanation and understanding of how these terms or words are
applied in the feasibility study.
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