:1

WEEK 3: TPT 1

THE LITMUS
TEST OF A PLAN
Prepared by:
Dr. Jun Alejo Bathan
 Chapter Learning Objectives
1. Review Template for Completing a Feasibility Analysis
:2 2. Determine Product/Service Feasibility

3. Research Industry/Target Market Feasibility

4. Complete Organizational Feasibility

5. Develop Financial Feasibility

Copyright © 2015 Pearson Education, Ltd. 3-2

 Feasibility Analysis
Definition: Process of Determining if a Business Idea
:3 is Viable

• Sequential Steps

• Critically Assess Merits of Idea

• Lays Foundation for a Well-Reasoned and

Researched Business Plan

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 Comprehensive Feasibility Analysis/Business
Planning Process
:4 Step 1
Identify a business
idea.

Step 2 Favorable Step 3 Favorable Step 4

Screen (or test) the results/proceed Conduct a full results/proceed Prepare
idea to determine feasibility a written
its preliminary Unfavorable analysis Unfavorable business
Feasibility. Results/stop or results/stop or plan
reevaluate idea reevaluate idea

Step 5
Present
the business
Figure 3-1 plan to
investors
and others

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 Template for Completing a
Feasibility Analysis
See Table 3-1

:5 • Introduction

• Part1: Product/Service Feasibility Analysis:

• Not Feasible
• Part 2: Industry/Target Market • Unsure
• Feasible

• Part 3: Organizational

• Part 4: Financial

• Summary and Conclusion

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 Primary and Secondary
Research
:6 • Primary Research
• Original Research Collected by Person
Completing the Analysis
• Industry Experts
• Prospective Customers
• Surveys

• Secondary research
• Probes Data Already Collected
• Internet and Library Sources
• Examples: Industry Studies, Census Data

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 Step 1: Product/Service Feasibility
:7 Product Desirability
Questions to Answer Through Research

• Does it Make Sense?

• Is it Reasonable?
• Will Consumers Get Excited?
• Take Advantage of Environmental Trend, Solve a Problem, or
Fill a Gap?
• Good Time to Introduce to the Market?
• Any Fatal Flaws in Basic Design or Concept?

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 Concept Test
Definition: Preliminary Written Description Shown to
:8 Industry Experts and Prospective Customers to Obtain
Feedback

Concept Statement Outline:

• Description of Product/Service
• Intended Target Market
• Benefits of Product/Service
• How Positioned vs. Competitors
• How it Will be Sold
• Management Team

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 Step 1: Product/Service Feasibility
:9 Product/Service Demand

• Buying Intentions Survey Attached to Concept

Statement
• Example: How Likely Are You to Buy?
___Definitely Would Buy
___Probably Would Buy
___Might or Might Not Buy
___Probably Would Not Buy
___Definitely Would Not Buy

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 Step 2: Industry/Target Market Feasibility
Definitions
:10
• Industry: Group of Firms Producing Similar
Product
• Example: Shoes

• Target Market: Limited Portion of Industry

Which the Firm Wants to Attract
• Example: Children’s Shoes

Must Research Both Industry and Market

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 Industry Attractiveness
:11 • Choose Industry That is:
• Large, Growing, Young, Fragmented, and Has Low Operating
Margins

• Structurally Attractive: Low Barriers to Enter, so is Easy to Enter and

Compete

• Favorable Environmental & Business Trends

• Importance of Product to Customers: No Good Substitutes

Available in Other Industries
• Example: Very Few Substitutes for Prescription Drugs

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 Target Market Attractiveness
• Target is Group of Customers with Similar Needs
:12 • Start-Ups Lack Resources to Participate in Larger Markets

• Ideal Target Market is:

• Large Enough for New Business to be Profitable

• Small Enough to Avoid Head-to-Head Competition with Industry

Leaders

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 Market Timeliness
:13 • Window of Opportunity is
• Determine if Timing is Right to Enter a Market

• Economics Trends in the Industry

• Determine if Timing is Right to Enter an Industry

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 Step 3: Organizational Feasibility
• Management Prowess:
:14 • Understand the Market

• Prior Entrepreneurial Experience

• Professional & Social Networks

• Creativity

• Experience and Education

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 Organizational Feasibility, Continued
• Resource Sufficiency:
:15 • Location Availability

• Key Managers and Support Personnel

• Favorable Government Regulations

• Proximity to Similar Firms

• Intellectual Property

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 Step 4: Financial Feasibility
:16 • Total Start-Up Cash Needed

• Financial Performance of Similar Businesses

• Overall Financial Attractiveness of the

Proposed Venture

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 Did You Learn?
1. Review Template for Completing a Feasibility Analysis
:17 2. Determine Product/Service Feasibility

3. Research Industry/Target Market Feasibility

4. Complete Organizational Feasibility

5. Develop Financial Feasibility

Copyright © 2015 Pearson Education, Ltd. 3-17