Chapter Three Feasibility Analysis Dr Bruce Barringer University

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Chapter Three Feasibility Analysis Dr. Bruce Barringer University of Central Florida Copyright © 2009

Feasibility Analysis Most effective business plans l l Identifying a business idea Screening the idea(s) to determine their preliminary feasibility Conducting a feasibility analysis Writing the plan Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 2

Figure 3 - 1 Step 1 Identify a business idea. Step 2 Screen (or test) the idea to determine its preliminary feasibility. Favorable results/proceed Unfavorable Results/stop or reevaluate idea Step 3 Conduct a full feasibility analysis Favorable results/proceed Unfavorable results/stop or reevaluate idea Step 4 Prepare a written business plan Step 5 Present the business plan to investors and others Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 3

Feasibility Analysis l Primary research ¡ l Original research collected by person completing the analysis Secondary research ¡ Probes data already collected Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 4

Product/Service Feasibility ¡ Product desirability l l Is the product desirable and serve a need in the marketplace? Is it reasonable? Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 5

Concept Test A concept test is a preliminary description of a product or service idea to industry experts to solicit their feedback Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 6

Product/Service Demand ¡ Buying intentions survey Gauge customer interest in a product or service How likely would you be to buy a product like this if we make it? l l l Definitely would buy Probably would buy Might or might not by Probably would not buy Definitely would not buy Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 7

Industry/Target Market Feasibility Analysis Industry A group of firms producing a similar product or

Industry / Target Market Feasibility Analysis Target market The limited portion of the industry that the firm goes after or tries to appeal to Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 9

Industry/Target Market Feasibility Analysis Industry attractiveness ¡ Target market attractiveness ¡ Market timeliness ¡

Industry Attractiveness ¡ ¡ Large and growing industries Structurally attractive l ¡ ¡ Start-ups can enter the industry and compete Favorable environmental and business trends Importance of product to its customers Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 11

Target Market Attractiveness Target market Should be large enough for the new business but small enough to avoid attracting larger competitors Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 12

Market Timeliness ¡ Window of opportunity l ¡ Time period that a firm can enter a market Economics of the industry l Determine if the timing is right for a new entrant Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 13

Organizational Feasibility Analysis Management prowess ¡ Resource sufficiency ¡ Copyright © 2009 Pearson Education,

Financial Feasibility Total start-up cash needed ¡ Financial performance of similar businesses ¡ Overall financial attractiveness of the proposed venture ¡ Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 15

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall 3 -

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