Full Feasibility Analysis - Pearson Education

1 70 APPENDIX Feasibility AnalysisNote:All fields can be expanded to provide additional space to respond to the copy of this template, along with each of the assessment tools, is available in MS Wordand PDF format at the authors Web site at Statement Test Write a concept statement for your product/service idea. Show the concept statementto 5 to 10 people. Select people who will give you informed and candid feedback. Attach a blank sheet to the concept statement, and ask the people who read thestatement 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 theproduct or service idea is feasible (or will be successful), and (4) share any additionalcomments or suggestions. Summarize the information you obtain from the concept statement into the follow-ing three categories: Strengths of the product or service idea things people who evaluated your prod-uct or service concept said they liked about the idea Suggestions for strengthening the idea suggestions made by people for strength-ening or improving the idea Overall Feasibility of the product or service concept report the number of peoplewho think the idea is feasible, the number of people who think it isn t feasible, andany additional comments that were made Other comments and suggestionsA.

2 Name of the proposed businessB. Name of the founder (or founders)C. One paragraph summary of the businessA. Product/service desirabilityB. Product/service demandPART1: PRODUCT/SERVICEFEASIBILITYISSUESADDRESSE D 11/21/07 10:00 AM Page 70 CHAPTER 3 Feasibility Analysis71 Buying Intentions Survey Distribute the concept statement to 15 to 30 prospective customers (do not includeany of the people who completed the concept statement test) with the followingbuying intentions survey attached. Ask each participant to read the concept state-ment and complete the buying intentions survey. Record the number of people whoparticipated in the survey and the results of the survey here. Along with the raw data recorded here, report the percentage of the total number ofpeople you surveyed that said they would probably buy or definitely would buy yourproduct or service if offered. This percentage is the most important figure in gaugingpotential customer interest. One caveat is that people who say that they intend to purchase a product do not al-ways follow through, so the numbers resulting from this activity are almost alwaysoptimistic.

3 Still, the numbers provide you with a preliminary indication of how yourmost likely customers will respond to your potential product or service 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 buyAdditional questions may be added to the buying intentions (expand fields and report findings, in discussion form, for each area)A. Product/service desirabilityB. Product/service demandC. Product/service Feasibility (circle the correct response)Not FeasibleUnsureFeasibleD. Suggestions for improving product/service Industry attractivenessB. Target market attractivenessC. Timeliness of entry into the target marketPART2: INDUSTRY/MARKETFEASIBILITYISSUESADDRESSE D INTHISPARTASSESSMENTTOOLSI ndustry Attractiveness To the extent possible, assess the industry at the five-digit NAICS code level yourpotential business will be entering.

4 Use a broader industry category (less NCICS digits) if appropriate ( ). Assess the attractiveness of the industry the potential business plans to enter oneach of the following 11/21/07 10:00 AM Page 71 Industry Attractiveness Assessment Tool(used to assess the broad industry, rather than the specific target market, you plan to enter) 72 PART II What to Do Before the Business Plan Is WrittenLow PotentialModerate PotentialHigh Potential1. Number of competitorsManyFewNone2. Age of industryOldMiddle agedYoung3. Growth rate of industryLittle or nogrowthModerate growthStrong growth4. Average net income forfirms in the industryLowMediumHigh5. Degree of industryconcentrationConcentratedNeither concentratednor fragmentedFragmented6. Stage of industry life cycleMaturity phaseor declinephaseGrowth phaseEmergencephase7. Importance of industry sproducts and/or servicesto customers Ambivalent Would like tohave Must have 8. Extent to which businessand environmental trendsare moving in favor of theindustryLowMediumHigh9.

5 Number of exciting new prod-uct and services emergingfrom the industryLowMediumHigh10. Long-term prospectsWeakNeutralStrongTarget Market Attractiveness Identify the portion or specific market within your broader industry that you plan totarget. Assess the attractiveness of the target market on each of the following PotentialModerate PotentialHigh Potential1. Number of competitors intarget marketManyFewNone2. Growth rate of firms in thetarget marketLittle to nogrowthSlow growthRapid growthTarget Market Attractiveness Assessment Tool(used to assess the specific target market, rather than the broader industry, you plan to enter) net income forfirms in the target 11/21/07 10:00 AM Page 72 CHAPTER 3 Feasibility Analysis73 for generatingrevenue in the industryUnclearSomewhat to create barriersto entry for potentialcompetitorsUnable tocreateMay or may not beable to createCan to which customersfeel satisfied by the currentofferings in the target marketSatisfiedNeither satisfiedor to employ low costguerrilla and/or buzz market-ing techniques to promote thefirm s product or surrounding newproduct/service offerings inthe target marketLowMediumHighLow PotentialModerate PotentialHigh Potential1.

6 Buying mood of customersCustomers arenot in a buy-ing moodCustomers are in a moderatebuying moodCustomers arein an aggres-sive buyingmood2. Momentum of the marketStable to losingmomentumSlowly gainingmomentumRapidly gainingmomentumMarket Timeliness Determine the extent to which the window of opportunity for the proposed busi-ness is open or closed based on the following criteria. Determine the timeliness of entering a specific target market based on other Timeliness Assessment Tool3. Need for a new firm in themarket with your offeringsor geographic locationLowModerateHigh4. Extent to which business andenvironmental trends aremoving in favor of the targetmarketLowMediumHighLow PotentialModerate PotentialHigh Potential5. Recent or planned entranceof large firms into themarketLarge firmsenteringthe marketRumors that largefirms may beentering themarketNo larger firmsentered themarket orare rumoredto be enter-ing 11/21/07 10:00 AM Page 73 Conclusion(expand fields and report findings, in discussion form, for each area) 74 PART II What to Do Before the Business Plan Is WrittenLow PotentialModerate PotentialHigh Potential1.

7 Passion for the businessideaLowModerateHigh2. Relevant industryexperienceNoneModerateExtensiveA . Industry attractivenessB. Target market attractivenessC. Market timelinessC. Industry/market Feasibility (circle the correct response)Not FeasibleUnsureFeasibleE. Suggestions for improving industry/market : ORGANIZATIONALFEASIBILITYISSUESADDRESSED INTHISPARTA. Management prowessB. Resource sufficiencyASSESSMENTTOOLSM anagement Prowess Use the following table to candidly and objectively rate the prowess of thefounder or group of founders who will be starting the proposed Prowess Assessment Tool3. Prior entrepreneurialexperienceNoneModerateExt ensive4. Depth of professional andsocial networksWeakModerateStrong5. Creativity among manage-ment team membersLowModerateHigh6. Experience and expertise incash flow managementNoneModerateHigh7. College graduateNo collegeeducationSome collegeeducation butnot currently incollegeGraduated orare currentlyin 11/21/07 10:00 AM Page 74 CHAPTER 3 Feasibility Analysis75 Resource Sufficiency The focus in this section is on nonfinancial resources.

8 Use the following table to rateyour resource sufficiency in each category. The list of resources is not meant to be exhaustive. A list of the 6 to 12 most criticalnonfinancial resources for your proposed business is explanation of the rating system used in the first portion of the table is as follows: Available Likely to be available: will probably be available and will be within my budget Unlikely to be available: will probably be hard to find or gain access to, and mayexceed my budget Unavailable NA: not applicable for my businessResource Sufficiency Assessment ToolRatingsResource Sufficiency Office space Lab space, manufacturing space, or space to launch aservice business Contract manufacturers or outsource providers Key management employees (now and in the future) Key support personnel (now and in the future) Key equipment needed to operate the business(computers, machinery, delivery vehicles) Ability to obtain intellectual property protection on keyaspects of the business Support of local and state government if applicable forbusiness launch Ability to form favorable business partnershipsRatings.

9 Strong, Neutral,or Weak_____Proximity to similar firms (for the purpose of knowledgesharing)_____Proximity to suppliers_____Proximity to customersProximity to a major research university (if applicable) 11/21/07 10:00 AM Page 75 Conclusion(expand fields and report findings, in discussion form, for each area) 76 PART II What to Do Before the Business Plan Is WrittenA. Management prowessB. Resource sufficiencyC. Organizational Feasibility (circle the correct response)Not FeasibleUnsureFeasibleD. Suggestions for improving organizational feasibilityPART4: FINANCIALFEASIBILITYISSUESADDRESSED INTHISPARTA. Total startup cash neededB. Financial performance of similar businessesC. Overall financial attractiveness of the proposed ventureASSESSMENTTOOLST otal Start-up Cash Needed The startup costs (which include capital investments and operating expenses) shouldinclude all the costs necessary for the business to make its first sale. New firms typi-cally need money for a host of purposes, including the hiring of personnel, office ormanufacturing space, equipment, training, research and development, marketing,and the initial product rollout.

10 At the Feasibility Analysis stage, it is not necessary for the number to be exact. How-ever, the number should be fairly accurate to give an entrepreneur an idea of thedollar amount that will be needed to launch the firm. After the approximate dollaramount is known, the entrepreneur should determine specifically where the moneywill come from to cover the startup costs. The total startup cash needed can be estimate using the following Startup Cash Needed (to Make First Sale)Capital InvestmentsAmountProperty_____Furniture and fixtures_____Computer equipment_____Other 11/21/07 10:00 AM Page 76 CHAPTER 3 Feasibility Analysis77 Comparison of the Financial Performance of Proposed Venture to Similar Firms Use the following tables to compare the proposed new venture to similar firms inregard to annual sales (Year 1 and Year 2) and profitability (Year 1 and Year 2).Operating ExpensesAmountLegal, accounting, and professional services_____Advertising and promotions_____Deposits for utilities_____Licenses and permits_____Prepaid insurance_____Lease payments_____Salary and wages_____Payroll taxes_____Travel_____SignsTools 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 FirmsAssessment ToolAnnual SalesEstimate of Proposed Venture s Explanation of How the Estimate Annual Sales Year 1 Was ComputedEstimate of Year 1 Sales _____Summary: How proposed annual sales, on average,_____compares to similar firms (circle one)_____Below AverageAverageAbove Average_____Estimate of Year 2 Sales _____Summary: How proposed annual sales, on average,_____compares to similar firms (circle one)_____Below AverageAverageAbove 11/21/07 10.