Chapter 4

Conducting a Feasibility Analysis

and Designing a Business Model

New Business Planning Process
 Idea Assessment
• Idea assessment is the process of examining:

– A need in the market,

– Developing a solution for that need, and
– Determining the entrepreneur’s ability to
successfully turn the idea into a business.
 Idea Assessment (cont.)
• An idea assessment helps to:

– Efficiently evaluate the numerous ideas resulted from the

creative process before committing the time and effort to
craft a business plan,

– Design a business model, or even

– Conduct a feasibility analysis.

 Idea Assessment (cont.)
• Rather than act on a hunch, successful entrepreneurs are
disciplined in evaluating each new idea.

• One effective tool used to help assess ideas is the “Idea

Sketch Pad” (Alex Bruton).

• The idea sketch pad helps an entrepreneur assess ideas in a

relatively short period of time.
 Feasibility Analysis
• Entrepreneurs do not lack creative ideas,
but…
• Is a particular idea a viable foundation for creating a
successful business?
• Feasibility study addresses the question:
“Should we proceed with this business idea?”
 Feasibility Study
• Serves as a filter, screening out ideas that lack
the potential for building a successful business
before an entrepreneur commits the necessary
resources to building a business plan.
• An investigative tool.
Elements of a Feasibility Analysis
 Industry and Market Feasibility
Analysis

Two areas of focus:

1. Determining how attractive an industry
is overall as a “home” for a new
business.
2. Identifying possible niches a small
business can occupy profitably.
Industry and Market Feasibility
Analysis
 5 Forces Model
• 5 forces interact with one another to
determine the setting in which companies
compete and, hence, the attractiveness of the
industry:

1. Rivalry among companies in the industry

2. Bargaining power of suppliers
3. Bargaining power of buyers
4. Threat of new entrants
5. Threat of substitute products or services
Michael E. Porter’s
The Five-Forces Model of
Competition: A Key
Analytical Tool
Factors Affecting the
Strength of Rivalry
Factors Affecting the
Threat of Entry
Factors Affecting the
Bargaining Power of
Suppliers
Factors Affecting
Competition from
Substitute Products
Factors Affecting the
Bargaining Power of
Buyers
5 Forces Matrix
 Product/Service Feasibility Analysis: Is there a
Market?
• Determines the degree to which a product/service idea
appeals to potential customers and identifies the
resources necessary to produce it.

• Two important questions are answered here:

1. Are customers willing to purchase our good or service?

2. Can we provide the product or service to customers at a
profit?