Download Conducting a Feasibility Study

Stage 7
Conducting a Feasibility Study
Part 1: Technical and Market Assessment
How to Do a
Financial Feasibility Study
By Ameen Ahsan
Conducting a Feasibility Study: Part 1
Start a new business
Develop the concept for your venture
Develop a preliminary marketing plan
Evaluate technical feasibility
How will product be produced
Determine fixed production costs
Determine variable production costs
Establish a price structure for your
product or service
Research customers
and markets
Assess market size,
segments and trends
Test your product
or service
Evaluate the
competition
Develop a sales forecast
Flesh out your marketing plan
Market through
traditional distribution
channels
Market direct
to the consumer
Market to the
government
Market in
foreign markets
Develop a detailed marketing program for each channel you plan to use
Market through
specialty channels
A Typical Feasibility Study
Feasibility Study Contents
Concept for your
venture
Technical feasibility
of your idea
Market
assessment
•Explain clearly and concisely the principal
concept underlying your venture and what sets it
apart from other businesses.
•Indicate the degree of innovativeness of your
venture idea and the risks associated with it.
•Does it need to be subjected to some form of
technical evaluation or assessment?
•Describe the profile of your principal target
customers.
•Indicate current market size, trends and seasonal
patterns.
•How do you plan to test your idea?
•Describe any market research or customer
surveys you plan to conduct.
•Assess the nature of your competition.
•Estimate your expected sales and market share.
Continued
A Typical Feasibility Study
(Continued)
Feasibility Study Contents
Your marketing
plan
•Detail the marketing strategy you plan to
use.
•Describe your marketing plan, including
your sales strategy, advertising and
promotion plans, pricing policy, and
channels of distribution
Managing the
supply situation
•How do you plan to assure continuing
access to critical supplies of raw materials
and component parts at reasonable
prices?
•Will you produce or subcontract your
production?
Continued
A Typical Feasibility Study
(Continued)
Feasibility Study Contents
Conduct cost
and profitability
assessment
•Determine the funds required to set up
your business.
•Develop short-term financial projections
including:
• Cash flow forecasts
• Pro forma profit and loss statements
• Pro forma balance sheet
• Breakeven analysis
Plan for
future action
•What are the strong and weak points of
your venture idea?
•Did your assessment indicate the business
was likely to be profitable?
•Is it sufficiently attractive to proceed with
the development of a complete business
plan?
Technical Feasibility
Moderately
Innovative
Highly
Innovative
New Invention
Slightly
Innovative
Degrees of
Innovativeness
“Copycatting”
Marketing Mix
Ice Cream Store
Marketing Mix Presentations
S
What is Market Research?
How to Write a Market
Research Questionnaire?
Do-It-Yourself Market Research
S Some things you should keep in mind
1. In conducting a survey, your information is
only as good as your sample
2. Design your survey or questionnaire
carefully
3. Keep your survey or questionnaire as short
as possible
4. Always provide some opportunity for the
respondent to provide detailed answers
Do-It-Yourself Market Research
5. Work out how you intend to record the
information and analyze the data in
advance
6. Before you give the questionnaire,
establish the criteria you will use to make
decisions based on the information
7. Market research is needed at all stages of
a business’ life
Some Guidelines for
Market Research Questionnaires
Pre-test the survey
on a small group
Ask the “right”
questions
Decide how you
intend to use the
information
Keep your survey
concise and
understandable
Ask direct questions
that relate
specifically to the
topic
If you are providing
a range of answers,
try to provide a
maximum of five
Make sure your
questions can be
easily answered by
your respondents
Don’t offend
anyone
Don’t mislead
respondents
Continued
Some Guidelines for Market Research
Questionnaires (Continued)
Don’t answer the
questions for them
Give respondents
time to answer
Ask all personal
information at the
end of the survey
Don’t bias
responses by
personally reacting
to answers
By courteous, they
are doing you a
favour
How to Market Test Your Idea
Develop a Prototype
Obtain Opinions from Prospective Distributors
Compare with Competitor’s Products
Conduct a One-Store Test
Exhibit at Trade Shows
Conduct a Customer Survey
Young Entrepreneurs
S
What is a Customer?
Deserve the most
courteous
attention we can
give.
Lifeblood of
every business.
Without them we
would have to
close our doors.
Are people who
come to us with
needs and
wants. It is our
job to fill them.
Customer
Things to Consider If Planning
to Rent or Lease Your Facilities
S
The duration of the agreement
S
The rent
S
The ownership of any additions or improvements
to the facility
S
Any restrictions of the use of the property
S
Whether you are permitted to sublet some or all of
the property
S
The nature of any default and penalty clauses
Retail Pricing
Strategies
Pricing Strategies
1.
Cost-based Pricing
S
2.
Value-based Pricing
S
3.
The cost of your product is determined and used
as the base, and then a markup is added to
determine what the selling price should be.
The price of the service or product is based on the
estimate of the market’s perceived value.
Competition-based Pricing
S
Base your price largely on competitors’ price
with less attention to your own cost or expected
demand.
Why Advertise?
1. Create an image for the company and/or
its product(s) or service(s)
2. Reposition your competition
3. Try to stand apart from or above the
competition
4. Build an audience for future sales calls and
mail advertising
Why Advertise?
5. Make announcements
S Introduce your company’s name
S Introduce new products or services
S Publicize job openings and promotions
S Report your company’s performance
S Enhance the morale and pride of your
employees
S Clarify your company’s position or philosophy on
an important issue
Why Advertise?
6. Take advantage of positive publicity or
counter negative publicity
S Regain the loyalty of customers
S Keep existing customers
7. Open communication with customers or
clients
S Give important information to your customers or clients
S Reinforce the message made via sales calls and letters
8. Generate more leads and prospects
S Increase sales volume
S Increase sales in the off season
Why Advertise?
9. Enter new markets and/or promote new uses
for existing products
10. Develop and acceptance of your product or
service
11. Enhance the morale and pride of employees
The Most Common
Advertising Methods
Newspapers
Magazines
Radio
Television
Direct Mailing
Billboards
Point of
Purchase
Phone
Directory
Transportation
Advertising
The Internet
What are Two
Advantages and Disadvantages
of Each Advertising Method?
Newspapers
Magazines
Radio
Television
Direct Mailing
Billboards
Point of
Purchase
Phone
Directory
Transportation
Advertising
The Internet
A Model for Small Business Growth
Stage 1 - Inception
Stage 2 - Survival
Stage 3 - Growth
Stage 4 - Expansion
Stage 5 - Maturity
A Model for Small Business Growth
S Stage 1: Inception
S Key Issue
S Obtaining customers
S Product and Market Research
S None
S Product Market
S Single basic product line
S Emphasis of Marketing Plan
S Limited channels of distribution, cost-plus pricing, heavy
sales promotion
A Model for Small Business Growth
S Stage 2: Survival
S Key Issue
S
Increasing competition
S Product and Market Research
S
Little
S Product Market
S
Single product line and market but greater scale
S Emphasis of Marketing Plan
S
Reach expanding markets, broader channels of
distribution
A Model for Small Business Growth
S Stage 3: Growth
S Key Issue
S
Expansion into new products or markets
S Product and Market Research
S
Some new product development
S Product Market
S
Broader but limited product line, single market
S Emphasis of Marketing Plan
S
Emphasis on cost-efficiency, penetration pricing, build
market awareness and distribution
A Model for Small Business Growth
S Stage 4: Expansion
S Key Issue
S
Greater external emphasis
S Product and Market Research
S
New product development, market research
S Product Market
S
Extended range of products, broader markets
S Emphasis of Marketing Plan
S
Greater focus on customer needs and adapting the
marketing plan (including promotion) to meet those
needs
A Model for Small Business Growth
S Stage 5: Maturity
S Key Issue
S
Finding growth opportunities
S Product and Market Research
S
Production innovation
S Product Market
S
Contained product lines, multiple markets
S Emphasis of Marketing Plan
S
Major investment in the marketing effort, phase out weak
products, cut prices, focus on profitable niches.
Get training
and
acquire
skills.
Be
Persistent
and work
hard
Learn
from
mistakes
Get
started on
your plan.
Motivate
others
Develop
a plan.
Be
positive.
Focus
your time
and
money
Be
different
Secrets to
Success
Be honest
and
dependable