Managerial Skills and

Entrepreneurship
Feasibility
Analysis
Business
Model
Business
Plan
Opportunity
Analysis
Becoming an
Entreprenuer

Business
Start Up
Created by Dr James V Green
THE NEW VENTURE
CREATION PROCESS
The environment is the most comprehensive
component in the venture creation process.
It includes all the factors that affect the decision to
start a business, for example, government
regulation, competitiveness, and life cycle stage.
Within specific industries and in specific geographic
regions, environmental variables and the degree of
their impact will differ.
The new venture process begins with an idea for a
product, service, or business.
Feasibility Analysis
The entrepreneur develops an idea into a business opportunity
or business concept that is then tested in the market through a
process of feasibility analysis.

Feasibility analysis is used to inform the entrepreneur about
the conditions required to move forward and develop the
business. This may involve market research.

Once the entrepreneur has determined that the concept is
feasible, a business plan is developed to detail how the
company will be structured and to describe its operation
Viability
Testing the business concept in the real world is what
actually determines if the business has viability. Thus,
the business must actually be launched and operated in
the environment to determine viability.

In a business, the term viability is the point when the
company is able to generate sufficient cash flows to allow
the business to survive on its own without cash infusions
from outside sources such as the entrepreneur's own
resources, investors, or a bank loan.
The Five Stages of a Businesss
Life Cycle
Pre Start-up
Start-up
Growth
Maturity
Rebirth or Decline

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Figure 3.1 The Life Cycle of the
Company
LAUNCHING A NEW BUSINESS
Three key issues in the pre-start-up phase:

1) Testing concept feasibility
2) Developing a business plan
3) Acquiring resources ($$$ and personnel)

Three key issues in the start-up phase:

1) Finding customers
2) Building a structure
3) Generating positive cash flows
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Opportunity Creation
Developing a product, service, process, or niche that has not existed
before. Opportunity recognition requires high levels of creativity.
x
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Opportunity Creation
Typically, opportunity creation involves an invention process
that is characterized by four activities:

connection,
discovery,
invention, and
application
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Opportunity Creation
Connection occurs when two ideas are brought together that
normally are not juxtaposed, such as nature and machines, which
produced the field of nanotechnology or microscopic machines that
copy nature in the way that they operate.

Discovery happens once a connection has been made. It is actually
the result of the connection in the form of an idea.

Inventions are the product of turning an idea into a product or
service.

Application comes about when the inventor is able to apply the
invention to a number of different uses or applications in a variety of
industries and situations.
Opportunity Recognition
The process of using creative
skills to identify a new innovation
--- (a product, service, process, or marketing
method) ---
which is often based on
something already existing in the
marketplace.
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How to recognize a business
opportunity
List all the ideas in no particular order.

Eliminate those ideas that cant generate a profit
and dont fit the business model very well.

Review the remaining ideas and choose the one
that inspires the most passion and enthusiasm
The Initial Business Concept:
There are four essential elements required to test whether
or not a potential business idea is feasible:

What is the product and/or service that is the basis for the
business?

Who is the customer likely to be?

What is the benefit of your product/service to the
customer?

How will the benefit be delivered?
Goals of Market Research
To find out:

Who is most likely to purchase the product or
service at market introduction?
What do these customers typically buy, how do
they buy it, and how do they hear about it?
What is their buying pattern? How often do they
buy?
What are the customers needs and how can the
new venture meet those needs?
Introduction to Feasibility Analysis

Modified from Barringer and Ireland (2006)
What Is Feasibility Analysis?
Feasibility Analysis
Preliminary evaluation of idea to determining if its worth
pursuing
Provides more secure notion that a business idea is viable
Did analysis, feasible business: Intuit (Quicken, Quickbooks,
etc.)
Personal experience, observed others, surveyed customers
Did analysis, not feasible: Retailing Insights (grocery cart)
Determined not a sufficient scale for advertising, needed large
proportion of grocery stores
Dropped idea, focused on core competency, developed Trakus
No analysis, failed firm: Iridium (satellite phones)
Too complex technology, too long to develop, new technology took
over, line of sight to satellite, large phone, low battery power
Preparing a Concept Statement
Concept Statement
One page description of a business
Given to people who provide feedback on the potential of the idea
Purpose of feedback:
Give sense of the viability of the business idea
Suggestions for how the idea can be strengthened or altered before
proceeding
Prepare before feasibility analysis
Preparing a Concept Statement
Components of Concept Statement (similar to elevator
pitch components)
Description of the product or service
Description of target market
Benefits of the product or service (value proposition)
Description of product/service differentiators
Description of how product/service sold/ distributed
Description of the founder(s) of the firm
When To Conduct a Feasibility Analysis
Timing of Feasibility Analysis
After concept statement evaluation
After opportunity recognition, before business plan
Before a lot of resources are invested
Four Components of Full Feasibility Analysis
Product/Service Feasibility
Industry/Market Feasibility
Organizational Feasibility
Financial Feasibility
Feasibility Analysis
Figure 3.1
Role of feasibility analysis in developing successful business ideas
Product/Service Feasibility
Composed of two primary tests
Concept testing
Usability testing
Industry/Market Feasibility
Three primary issues a proposed business should consider:
Industry attractiveness
Market timeliness
Identification of a niche market.
Organizational Feasibility
There are two primary issues to consider in this area:
Management prowess
Resource sufficiency
Financial Feasibility
The most important issues to consider at this stage are:
Capital requirements
Financial rate of return
Overall attractiveness of the investment


Overview of Full Feasibility Analysis
(4 forms of feasibility analysis)

Product/Service Feasibility
Composed of two primary tests
Concept testing
Usability testing
Industry/Market Feasibility
Three primary issues a proposed business should consider:
Industry attractiveness
Market timeliness
Identification of a niche market.
Organizational Feasibility
There are two primary issues to consider in this area:
Management prowess
Resource sufficiency
Financial Feasibility
The most important issues to consider at this stage are:
Capital requirements
Financial rate of return
Overall attractiveness of the investment


Overview of Full Feasibility Analysis

Product/Service Feasibility
Product/Service Feasibility Analysis
Assessment of overall appeal of proposed
product/service
Main idea: before rushing to development, be sure
product/service is what prospective customers want
Two components of product/service feasibility
analysis:
1. Concept testing
2. Usability testing
Product/Service Feasibility: 1
st
Component
Concept Testing
Purpose: Gauge customer interest, desirability, purchase
intentions
Involves showing a representation of product/service to
prospective users
Occurs before the prototype stage
Websites and graphic designs are taking this to a new level
Concept test concept statement
Concept test: tests feasibility of specific product/service idea
Concept statement: is a preliminary evaluation of entire business idea
Product/Service Feasibility: 3 reasons to conduct
1. Validate underlying premises of product/ service idea
Use phone interviews, focus groups, watch consumers perform tasks,
customer advisory boards
Ex: PepsiCo developed model of 5 types of teens and tries to predict
how trends move through teen populations
2. Help developing idea
Iteratively show idea to potential customers and make changes along
the way
Ex: IDEO product development firm
3. Estimate potential market share
Survey questions
Market research surveys
Caution: Numbers always optimistic
Product/Service Feasibility: 2
nd
Component
Usability Testing
Purpose: determine ease-of-use and users perceptions of
using product
While tempting to rush a product/service to market usability tests are
good investments of resources
Eliminate potentially frustrating aspects of product/services
Involves creating a physical prototype and giving it to users,
measuring usage results, and making modifications as necessary
Iterative in nature
Also called: user tests, beta tests, or field trials
http://scholar.google.com
Product/Service Feasibility:
3 forms of usability testing
1. Basic Prototype: fairly simple prototype that is
given to friends/colleagues for feedback
American Inventor
Gym class exercise mat
2. Elaborate Usability Test: large-scale tests for well-
funded or existing ventures
Lab testing, elaborate customer measurement devices
(e.g., Google), etc.
3. Hybrid Test: Follow-me-home testing (e.g., day-in-
the-life research)
Product/Service Feasibility: 5 Benefits
1. Getting product right the first time
2. Create a beta (or early adopter community)
3. Avoid obvious flaws in product/service design
MobileStar wireless hotspots
4. Use time and resources more efficiently
5. Potentially identify complementary product/ service offerings
iPod accessories
Product/Service Feasibility
Composed of two primary tests
Concept testing
Usability testing
Industry/Market Feasibility
Three primary issues a proposed business should consider:
Industry attractiveness
Market timeliness
Identification of a niche market.
Organizational Feasibility
There are two primary issues to consider in this area:
Management prowess
Resource sufficiency
Financial Feasibility
The most important issues to consider at this stage are:
Capital requirements
Financial rate of return
Overall attractiveness of the investment


Overview of Full Feasibility Analysis

Industry/Market Feasibility Analysis
Industry/Market Feasibility Analysis
Purpose: assess overall appeal of the market
3 primary issues to consider:
1. Industry attractiveness,
2. Market timeliness, and
3. Identification of a niche market

Industry/Market Feasibility Analysis:
Industry Attractiveness
Issue 1: Industry Attractiveness
Primary determinant of feasibility is attractiveness of industry
chosen
Characteristics of attractive industries:
Large and growing (growth is very important)
Industries are important to customers (e.g., must haves vs. likes)
Early in the industry lifecycle to avoid price competition
Industries are not crowded with competitors
How to assess industry attractiveness?
Forces in the broad environment (e.g., technological,
sociocultural/demographic, political/legal, economic, global trends)
Porters Five Forces analysis (well cover next week)
Other primary and secondary research

Industry/Market Feasibility Analysis:
Market Timeliness
Issue 2: Market Timeliness
Will the market be receptive to the product/service?
If its a modification on existing offerings (e.g., cell phones
with cameras) ask:
Is the window of opportunity open?
Are customers buying?
Are competitors making money?
If its a breakthrough product/service (e.g., Yahoo with
internet search engines, eBay with online auctions, etc.) ask:
Can we capture a first-mover advantage?
Example: Microsoft in computer operating systems
Will we suffer from a second-mover advantage?
Example: IBM vs. Dell in personal computer retailing
Industry/Market Feasibility Analysis:
Niche Markets
Issue 3: Identification of a Niche Market
Niche markets are places in larger market segments that
represent narrower groups of customers
2 reasons for new firms to sell to niche markets:
Allows a firm to establish itself in industry and avoid competing
against major competitors (e.g., specialty retailers vs. Wal-Mart)
Allows a firm to focus on serving specialized markets very well
Avoids trying to be everything to everybody in a broad market
Successful example: buyandhold.com and small scale
investments
Problematic example: Iridium and satellite phones (tried to
serve everyone)
Product/Service Feasibility
Composed of two primary tests
Concept testing
Usability testing
Industry/Market Feasibility
Three primary issues a proposed business should consider:
Industry attractiveness
Market timeliness
Identification of a niche market.
Organizational Feasibility
There are two primary issues to consider in this area:
Management prowess
Resource sufficiency
Financial Feasibility
The most important issues to consider at this stage are:
Capital requirements
Financial rate of return
Overall attractiveness of the investment


Overview of Full Feasibility Analysis

Organizational Feasibility Analysis
Organizational Feasibility
Purpose: determine if business has sufficient skills/resources to bring
product/service to market successfully
Non-financial factors important to consider here
2 primary issues to consider:
1. Management prowess
2. Resource sufficiency
Organizational Feasibility Analysis:
Management Prowess
Issue 1: Management Prowess
Firm must evaluate the ability of the management team
Determine if has the passion and expertise to launch the
venture
2 most important factors in this area:
Passion the solo entrepreneur/founding team has for the idea
Extent the entrepreneur/founding team understands the markets in
which the firm will participate
Ventures with established networks have an advantage
Successful Example: eBay
Failed Example: Garden.com (e.g., no gardening/ gardening
retail expertise

Organizational Feasibility Analysis:
Resource Sufficiency
Issue 2: Resource Sufficiency
Assessment of resources needed to launch proposed venture
Focus is on nonfinancial resources:
Availability of affordable office or lab space,
Likelihood of government support,
Labor pool quality,
Proximity to key suppliers, customers, and similar firms (clusters)
Likelihood of strategic partnerships,
Likelihood of attaining IP
To test resource sufficiency: list critical nonfinancial
resources needed to move idea forward successfully
If resources not available, it may be impractical to proceed with the
business idea
Product/Service Feasibility
Composed of two primary tests
Concept testing
Usability testing
Industry/Market Feasibility
Three primary issues a proposed business should consider:
Industry attractiveness
Market timeliness
Identification of a niche market.
Organizational Feasibility
There are two primary issues to consider in this area:
Management prowess
Resource sufficiency
Financial Feasibility
The most important issues to consider at this stage are:
Capital requirements
Financial rate of return
Overall attractiveness of the investment


Overview of Full Feasibility Analysis

Table 3.1 Feasibility Analysis:
Key Questions