Professional Documents
Culture Documents
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A course for a master degree
of economic development
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An important work in project
evaluation in developing
countries
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1. Manual for OECD
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2. Manual for UNIDO
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3. World Bank Guidelines
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business success
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Key factor
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Countless feasibility studies
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Preliminary investigation
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Types of feasibility Study
1. Technical feasibility
can a solution be supported with the existing
technology or not?
2. Economic feasibility
is the existing technology cost effective?
3. Operational feasibility
Will the solution work in the organization if
implemented?
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The Components of a
Feasibility Study
1. Description of the Business: The product or
services to be offered and how they will be
delivered.
2. Market Feasibility: Includes a description of the
industry, current market, anticipated future
market potential, competition, sales projections,
potential buyers, etc.
3. Technical Feasibility: Details how you will
deliver a product or service (i.e., materials, labor,
transportation, where your business will be
located, technology needed, etc.).
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4. Financial Feasibility: Projects how much start-up
capital is needed, sources of capital, returns on
investment, etc.
5. Organizational Feasibility: 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).
6. Conclusions: Discusses how the business can
succeed. Be honest in your assessment because
investors won’t just look at your conclusions they
will also look at the data and will question your
conclusions if they are unrealistic. 13
Feasibility Study
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Definition of Feasibility
Studies
A feasibility study looks at the viability of
an idea with an emphasis on identifying
potential problems and attempts to
answer one main question: Will the idea
work and should you proceed with it?
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Objective
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Feasibility includes
1. Project name
2. Problem or opportunity definition
3. Project description
4. Expected benefit
5. Consequence of rejection
6. Resource requirements
7. alternatives
8. Other consideration
9. Theorization
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Five common factors
(TELOS)
1. Technology and system feasibility
2. Economic feasibility
3. Legal feasibility
4. Operational feasibility
5. Schedule feasibility
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1. Technology and system
feasibility
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2. Economic feasibility
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4. Operational feasibility
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5.schedule feasibility
A project will fail if it takes too long to be
completed before it is useful. Typically this
means estimating how long the system will
take to develop, and if it can be completed in a
given time period using some methods like
payback period. Schedule feasibility is a
measure of how reasonable the project
timetable is. Given our technical expertise, are
the project deadlines reasonable? Some
projects are initiated with specific deadlines.
You need to determine whether the deadlines
are mandatory or desirable.
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Other feasibility factors
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Market and real estate
feasibility
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Resource feasibility
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Cultural feasibility
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Description of the Project
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Identification and exploration of
business scenarios
.Identify alternative scenarios or business
models of what the project will entail, how it will
be organized, and how it will generate profits.
These may come from the idea assessment or
market assessment that you may have already
completed.
Eliminate scenarios that don’t make sense.
Flesh-out the scenario(s) that appear to have
potential for further exploration.
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Define the project and
alternative scenarios
Describe the type and quality of
product(s) or service(s) to be marketed.
Outline the general business model (i.e.
how the business will make money).
Include the technical processes including
size, location, kind of inputs, etc.
Specify the time horizon from the time
the project is initiated until it is up and
running at capacity.
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Relationship to the surrounding
geographical area.
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Market Feasibility
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Industry description
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Industry competitiveness
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Market potential
Identify whether the product be sold into a commodity
market or a differentiated product/service market.
Identify the demand and usage trends of the market or
market segment in which the product or service will
participate.
Examine the potential for emerging, niche or segmented
market opportunities.
Explore the opportunity and potential for a branded
product.
Assess market usage and your potential share of the
market or market segment.
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Access to market outlets
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Sales projection
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Technical Feasibility
Facility needs.
Estimate the size and type of production
facilities.
Investigate the need for related
buildings, equipment, rolling-stock, etc.
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Suitability of production
technology
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Availability and suitability of
site
1. Investigate access to:
2. raw materials
3. transportation
4. labor
5. production inputs (electricity, natural gas,
water, etc.)
6. Investigate potential emissions problems.
7. Analyze other environmental impacts.
8. Identify regulatory requirements.
9. Explore economic development incentives.
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Raw materials
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Other inputs
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Financial/Economic Feasibility
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Estimate the total capital
requirements
1. Assess the “seed capital” needs of the business project
during the investigation process and start-up, and how
these needs will be met.
2. Estimate capital requirements for facilities, equipment
and inventories.
3. Estimate working capital needs.
4. Estimate start-up capital needs until revenues are
realized at full capacity.
5. Estimate contingency capital needs due to construction
delays, technology malfunction, market access delays,
etc.
6. Estimate other capital needs.
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Estimate equity and credit
needs
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Budget expected costs and
returns of various alternatives
Estimate the expected revenue, costs, profit
margin and expected net profit.
Estimate the sales or usage needed to break-
even.
Estimate the returns under various production,
price and sales levels. This may involve
identifying “best case”, “typical”, and “worst
case” scenarios or more sophisticated analysis
like a Monte Carlo simulation.
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Assess the reliability of the underlying assumptions of the
analysis (prices, production, efficiencies, market access,
market penetration, etc.)
Benchmark against industry averages and/or competitors
(cost, margin, profits, ROI, etc.).
Identify limitations or constraints of the economic
analysis.
Calculate expected cash flows during the start-up period
and when the business reaches capacity.
Prepare pro forma income statement, balance sheet, and
other statements of when the business is fully operating.
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Organizational/Managerial
Feasibility
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Business structure
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Business founders
Character matters - are the people involved of
outstanding character?
Do the founders have the “fire in the belly”
required to take the project to completion?
Do the founders have the skills and ability to
complete the project?
What key individuals will lead the project?
Is there a reward system for the founders? Is it
based on business performance?
Have the founders organized other successful
businesses?
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Study Conclusions
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Why Are Feasibility Studies
so Important?
1. The information you gather and present in
your feasibility study will help you:
2. List in detail all the things you need to make
the business work;
3. Identify logistical and other business-related
problems and solutions;
4. Develop marketing strategies to convince a
bank or investor that your business is worth
considering as an investment; and
5. Serve as a solid foundation for developing
your business plan.
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Even if you have a great business idea you still have to
find a cost-effective way to market and sell your products
and services. This is especially important for store-front
retail businesses where location could make or break
your business.
For example, most commercial space leases place
restrictions on businesses that can have a dramatic
impact on income. A lease may limit business
hours/days, parking spaces, restrict the product or
service you can offer, and in some cases, even limit the
number of customers a business can receive each day.
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Feasibility studies V
business plans
A feasibility study is designed to discover if a
business is "feasible" or not. It will answer
questions such as "will your idea work?" [new
window] It is an essential first step before
spending money and time on more detailed
plans. The information gathered is not wasted
as it can be incorporated into the Business
Plan.
On the other hand a Business Plan is a more
detailed and in depth document that
incorporates the information gained from a
feasibility study plus specific timelines, detailed
budgets with forecasts and a detailed financial
strategy.
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Feasibility before business
plan
Before you begin writing your business plan
you need to identify how, where, and to whom
you intend to sell a service or product. You
also need to assess your competition and
figure out how much money you need to start
your business and keep it running until it is
established.
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Feasibility is a tool for a
business plan
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, and serve as a
valuable tool for developing a winning
business plan.
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Before you get started...
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Use this template to:
Perform a preliminary study to determine a project's
viability.
Analyze an existing system to see if it is worth upgrading.
Determine if there is sufficient time to build the new
system, when it can be built, whether it interferes with
operations, type and amount of resources required,
dependencies, etc.
Establish the cost-effectiveness of the proposed system.
Determine if the system conflicts with legal requirements.
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