Full Feasibility Analysis

From “Preparing Effective Business Plans” by Bruce R. Barringer
Note: All fields can be expanded to provide additional space to respond to the questions. A copy of this template, along with each of the assessment tools, is also available in PDF format at the authors’ Web site at www.prenhall.com/entrepreneurship.

Introduction
A. Name of the proposed business
B. Name of the founder (or founders)
C. One paragraph summary of the business

Part 1: Product/Service Feasibility
Issues Addressed in This Part
A. Product/service desirability
B. Product/service demand

Assessment Tools
Concept Statement Test

• Write a concept statement for your product/service idea. Show the concept statement to 5 to 10 people. Select people who will give you informed and candid feedback.
• Attached a blank sheet to the concept statement, and ask the people who read the statement to (1) tell you three things they like about your product/service idea, (2) provide three suggestions for making it better, (3) tell you whether they think the product or service idea is feasible (or will be successful), and (4) share any additional comments or suggestions.
• Summarize the information you obtain from the concept statement into the following three categories:

* Strengths of the product or service idea—things people who evaluated your product or service concept said they “liked” about the idea
* Suggestions for strengthening the idea—suggestions made by people for strengthening or improving the idea
* Overall feasibility of the product or service concept—report the number of people who thing the idea is feasible, the number of people who think it isn’t feasible, and any additional comments that were made
* Other comments and suggestions

Buying Intentions Survey
• Distribute the concept statement to 15 to 30 prospective customers (do not include any of the people who completed the concept statement test) with the following buying intentions survey attached. Ask each participant to read the concept statement and complete the buying intentions survey. Record the number of people who participated in the survey and the results of the survey here.
• Along with the raw data recorded here, report the percentage of the total number of people you surveyed that said they would probably buy or definitely would buy your product or service if offered. This percentage is the most important figure in gauging potential customer interest.
• One caveat is that people who say that they intend to purchase a product do not always follow through, so the numbers resulting from this activity are almost always optimistic. Still, the numbers provide you with a preliminary indication of how your most likely customers will respond to your potential product or service offering.
How likely would you be to buy the product or service described above?
______ Definitely would buy
______ Probably would buy
______ Might or might not buy
______ Probably would not buy
______ Definitely would not buy
Additional questions may be added to the buying intentions survey.

Conclusion (expand fields and report findings, in discussion form, for each area)
A. Product/service desirability
B. Product/service demand
C. Product/service feasibility (circle the correct response)
Not Feasible Unsure Feasible
D. Suggestions for improving product/service feasibility.

Part 2: Industry/Market Feasibility
Issues Addressed in This Part
A. Industry attractiveness
B. Target market attractiveness
C. Timeliness of entry into the target market

Assessment Tools
Industry Attractiveness
• To the extent possible, assess the industry at the five-digit NAICS code level your potential business will be entering. Use a broader industry category (less NCICS digits) if appropriate (http://www.census.gov/epcd/www/naicstab.htm).
• Assess the attractiveness of the industry the potential business plans to enter on each of the following dimensions.
Industry Attractiveness Assessment Tool
(used to assess the broad industry, rather than the specific target market, you plan to enter)
Low Potential Moderate Potential High Potential
1. Number of competitors Many Few None
2. Age of industry Old Middle aged Young
3. Growth rate of industry Little or no growth Moderate growth Strong growth
4. Average net income for firms in the industry Low Medium High
5. Degree of industry concentration Concentrated Neither concentrated nor fragmented
Fragmented
6. Stage of industry life cycle Maturity phase or decline phase Growth phase Emergence phase
7. Importance of industry’s products and/or services to customers “Ambivalent” “Would like to have” “Must have”
8. Extent to which business and environmental trends are moving in favor of the industry Low Medium High
9. Number of exciting new product and services emerging from the industry Low Medium High
10. Long-term prospects Weak Neutral Strong

Target Market Attractiveness
• Identify the portion or specific market within your broader industry that you plan to target.
• Assess the attractiveness of the target market on each of the following dimensions.

Target Market Attractiveness Assessment Tool
(used to assess the specific target market, rather than the broader industry, you plan to enter)
Low Potential Moderate Potential High Potential
1. Number of competitors in target market Many Few None
2. Growth rate of firms in the target market Little to no growth Slow growth Rapid growth
3. Average net income for firms in the target market Low Medium High

Low Potential Moderate Potential High Potential
4. Methods for generating revenue in the industry Unclear Somewhat clear Clear
5. Ability to create “barriers to entry” for potential competitors Unable to create May or may not be able to create
Can create
6. Degree to which customers feel satisfied by the current offerings in the target market Satisfied Neither satisfied or dissatisfied Unsatisfied
7. Potential to employ low cost guerrilla and/or buzz marketing techniques to promote the firm’s product or services Low Moderate High
8. Excitement surrounding new product/service offerings in the target market Low Medium High

Market Timeliness
• Determine the extent to which the “window of opportunity” for the proposed business is open or closed based on the following criteria.
• Determine the timeliness of entering a specific target market based on other criteria.

Market Timeliness Assessment Tool
Low Potential Moderate Potential High Potential
1. Buying mood of customers
Customers are not in a buying mood Customers are in a moderate buying mood Customers are in an aggressive buying mood
2. Momentum of the market Stable to losing momentum Slowly gaining momentum Rapidly gaining momentum
3. Need for a new firm in the market with your offerings or geographic location Low Moderate High
4. Extent to which business and environmental trends are moving in favor of the target market Low Medium High
5. Recent or planned entrance of large firms into the market Large firms entering the market Rumors that large firms may be entering the market
No larger firms entered the market or are rumored to be entering the market
Conclusion (expand fields and report findings, in discussion form, for each area)
A. Industry attractiveness
B. Target market attractiveness
C. Market timeliness
D. Industry/market feasibility (circle the correct response)
Not Feasible Unsure Feasible
E. Suggestions for improving industry/market feasibility.

Part 3: Organizational Feasibility
Issues Addressed in This Part
A. Management prowess
B. Resource sufficiency

Assessment Tools
Management Prowess
• Use the following table to candidly and objectively rate the “prowess” of the founder or group of founders who will be starting the proposed venture.

Management Prowess Assessment Tool
Low Potential Moderate Potential High Potential
1. Passion for the business idea Low Moderate High
2. Relevant industry experience None Moderate Extensive
3. Prior entrepreneurial experience None Moderate Extensive
4. Depth of professional and social networks Weak Moderate Strong
5. Creativity among management team members Low Moderate High
6.
Experience and expertise in cash flow management None Moderate High
7. College graduate
No college education Some college education but not currently in college Graduated or are currently in college

Resource Sufficiency
• The focus in this section is on nonfinancial resources. Use the following table to rate your “resource sufficiency” in each category.
• The list of resources is not meant to be exhaustive. A list of the 6 to 12 most critical nonfinancial resources for your proposed business is sufficient.

An explanation of the rating system used in the first portion of the table is as follows:
1 Available
2 Likely to be available: will probably be available and will be within my budget
3 Unlikely to be available: will probably be hard to find or gain access to, and may exceed my budget
4 Unavailable
5 NA: not applicable for my business

Resource Sufficiency Assessment Tool
Ratings Resource Sufficiency
1 2 3 4 5 Office space
1 2 3 4 5 Lab space, manufacturing space, or space to launch a service business
1 2 3 4 5 Contract manufacturers or outsource providers
1 2 3 4 5 Key management employees (now and in the future)
1 2 3 4 5 Key support personnel (now and in the future)
1 2 3 4 5 Key equipment needed to operate the business (computers, machinery, delivery vehicles)
1 2 3 4 5 Ability to obtain intellectual property protection on key aspects of the business
1 2 3 4 5 Support of local and state government if applicable for business launch
1 2 3 4 5 Ability to form favorable business partnerships
Ratings: Strong, Neutral, or Weak
Proximity to similar firms (for the purpose of knowledge sharing)
Proximity to suppliers
Proximity to customers
Proximity to a major research university (if applicable)

 
Conclusion (expand fields and report findings, in discussion form, for each area)
A. Management prowess
B. Resource sufficiency
C. Organizational feasibility (circle the correct response)
Not Feasible Unsure Feasible
D. Suggestions for improving organizational feasibility

Part 4: Financial Feasibility
Issues Addressed in This Part
A. Total startup cash needed
B. Financial performance of similar businesses
C. Overall financial attractiveness of the proposed venture

Assessment Tools
Total Start-Up Cash Needed
• The startup costs (which include capital investments and operating expenses) should include all the costs necessary for the business to make its first sale. New firms typically need money for a host of purposes, including the hiring of personnel, office or manufacturing space, equipment, training, research and development, marketing, and the initial product rollout.
• At the feasibility analysis stage, it is not necessary for the number to be exact. However, the number should be fairly accurate to give an entrepreneur an idea of the dollar amount that will be needed to launch the firm. After the approximate dollar amount is known, the entrepreneur should determine specifically where the money will come from to cover the startup costs.
• The total startup cash needed can be estimate using the following table.
Total Startup Cash Needed (to Make First Sale)
Capital Investments Amount

Property
Furniture and fixtures
Computer equipment
Other equipment
Vehicles

Operating Expenses Amount
Legal, accounting, and professional services
Advertising and promotions
Deposits for utilities
Licenses and permits
Prepaid insurance
Lease payments
Salary and wages
Payroll taxes
Travel
Signs
Tools and supplies
Starting inventory
Cash (working capital)
Other expense 1
Other expense 2

Total Startup Cash Needed =

Comparison of the Financial Performance of Proposed Venture to Similar Firms
• Use the following tables to compare the proposed new venture to similar firms in regard to annual sales (Year 1 and Year 2) and profitability (Year 1 and Year 2).

Comparison of the Financial Performance of Proposed Venture to Similar Firms Assessment Tool

Annual Sales

Estimate of Proposed Venture’s
Annual Sales—Year 1 Explanation of How the Estimate
Was Computed
Estimate of Year 1 Sales __________
Summary: How proposed annual sales, on average, compares to similar firms (circle one)
Below Average Average Above Average
Estimate of Year 2 Sales __________
Summary: How proposed annual sales, on average, compares to similar firms (circle one)
Below Average Average Above Average

Net Income
Estimate of Proposed Venture’s
Net Income—Year 1 Explanation of How the Estimate
was Computed
Estimate of Year 1 Net Income __________
Summary: How proposed net income, on average, compares to similar firms (circle one)
Below Average Average Above Average
Estimate of Year 2 Net Income __________
Summary: How proposed net income, on average, compares to similar firms (circle one)
Below Average Average Above Average

Overall Financial Attractiveness of the Proposed Venture
• The following factors are important in regard to the overall financial attractiveness of the proposed business.
• Assess the strength of each factor in the following table.
Overall Financial Attractiveness of Proposed Venture Assessment Tool
Low Potential Moderate Potential High Potential
1. Steady and rapid growth in sales during the first one to three years in a clearly defined target market Unlikely Moderately likely Highly likely
2. High percentage of recurring income—meaning that once you win a client, the client will provide recurring sources of revenue Low Moderate Strong
3. Ability to forecast income and expenses with a reasonable degree of certainty Weak Moderate Strong
4. Likelihood that internally generated funds will be available within two years to finance growth Unlikely Moderately likely Highly likely
5. Availability of exit opportunity for investor if applicable Unlikely to be unavailable May be available Likely to be available

Conclusion (report finding for each area)
A. Total startup cash needed
B. Financial performance of similar businesses
C. Financial feasibility (circle the correct response)
Not Feasible Unsure Feasible
D. Suggestions for improving financial feasibility

Overall Feasibility: Summary and Conclusion
Overall Feasibility of the Business Idea Based on Each Part Suggestions for Improving the Feasibility
Product/Market Feasibility
Not feasible ?
Unsure ?
Feasible ?

Industry/Market Feasibility
Not feasible ?
Unsure ?
Feasible ?

Organizational Feasibility
Not feasible ?
Unsure ?
Feasible ?

Financial Feasibility
Not feasible ?
Unsure ?
Feasible ?

Overall Assessment Not feasible ?
Unsure ?
Feasible ?

Conclusion—briefly summarize your justification for your overall assessment.