Feasibility Analysis Presented by: Julie Messing Kent State University

Except where specified, the slides are from: Launching New Ventures Kathleen Allen Houghton-Mifflin2006

What Is A Feasibility Analysis? Preliminary evaluation of idea to determine if it is worth pursuing Preliminary evaluation of idea to determine if it is worth pursuing Provides more secure notion that a business idea is viable Provides more secure notion that a business idea is viable –Is there a customer base and a market of sufficient size to make the concept viable? –Do the capital requirements to start, based on estimates of sales and expenses, make sense? –Can an appropriate start-up or genesis team be put together to execute the concept? Barringer & Ireland (2006)

Benefits of a Feasibility Analysis Identify viable concepts, including complementary products/services Identify viable concepts, including complementary products/services Get it right the first time; avoid obvious pitfalls Get it right the first time; avoid obvious pitfalls Save valuable time and money Save valuable time and money Validate it is what the customer needs, wants and will purchase Validate it is what the customer needs, wants and will purchase

When To Conduct a Feasibility Analysis Timing of Feasibility Analysis Timing of Feasibility Analysis –After concept statement evaluation –After opportunity recognition, before business plan –Before a lot of resources are invested Four Components of Full Feasibility Analysis Four Components of Full Feasibility Analysis –Product/Service Feasibility –Industry/Market Feasibility –Organizational Feasibility –Financial Feasibility Barringer & Ireland (2006)

Feasibility Analysis (Barringer & Ireland, 2006) Role of feasibility analysis in developing successful business ideas

Feasibility Analysis Process

Feasibility Analysis Outline Cover Cover Executive Summary Executive Summary Title Page Title Page The Business Concept The Business Concept Industry/Market Analysis Industry/Market Analysis Founding Team Founding Team Product/Service Development Plan Product/Service Development Plan Financial Plan Financial Plan Timeline Timeline Bibliography Bibliography Appendices Appendices

Developing a Business Concept A business concept is a concise description of an opportunity that contains four essential elements: A business concept is a concise description of an opportunity that contains four essential elements: 1.The customer definition 2.The value proposition and compelling story 3.The product/service 4.The distribution channel

Business Concept: The Customer Definition –The customer is the one who pays. –The end use customer is as important as the intermediary customer.

Business Concept: The Value Proposition The compelling story is the benefit that the customer derives from the product or service The compelling story is the benefit that the customer derives from the product or service –It is often intangible. The compelling story answers the questions: The compelling story answers the questions: –Why the interest? –What problem does this solve?

Business Concept The Product/Service The Product/Service –What does the customer need? –What is the team’s core competency? The Distribution Channel The Distribution Channel –How will the benefit be delivered to the customer?

The Concept Statement Who is being helped: the primary customer? Who is being helped: the primary customer? What is the market’s burning problem/pain? What is the market’s burning problem/pain? What emotions does the pain evoke? What emotions does the pain evoke? What is the company’s tag line? What is the company’s tag line?

Questions to Answer: Concept What is the product/service being offered? What is the product/service being offered? What is the value proposition? What is the value proposition? Who is the Customer? Who is the Customer? How will the customer get access to your product/service? How will the customer get access to your product/service? Are there ways to innovate the distribution channel? Are there ways to innovate the distribution channel?

Questions to Answer: Industry, Market/Customer What are the demographics and trends in the industry? What are the demographics and trends in the industry? Are there any barriers to entry? If yes, how will you overcome them? Are there any barriers to entry? If yes, how will you overcome them? What are the typical profit margins in the industry? What are the typical profit margins in the industry? Who are your competitors? Who are your competitors? Who is your perfect customer and are there enough of them? Who is your perfect customer and are there enough of them?

Questions to Answer: Founding Team What specific skills or expertise will you need to start this business? What specific skills or expertise will you need to start this business? What are your team gaps and how will you fill them? What are your team gaps and how will you fill them?

Questions to Answer: Product/Service What are the results of concept testing? What are the results of concept testing? What are results of usability testing? What are results of usability testing? What are the features & benefits? What are the features & benefits? Are there opportunities for intellectual property? Are there opportunities for intellectual property? How is your product/service differentiated from others in the market? How is your product/service differentiated from others in the market?

Questions to Answer: Financial Assessment What are your start-up capital requirements? What are your start-up capital requirements? What are the amounts and sources of expected revenues? What are the amounts and sources of expected revenues? What are your anticipated expenses? What are your anticipated expenses?

Questions to Answer: Financial Assessment How long will it take to achieve a positive cash flow from the revenues generated? How long will it take to achieve a positive cash flow from the revenues generated? What is the break even point for the business? What is the break even point for the business? Provide an initial pro forma cash flow statement Provide an initial pro forma cash flow statement

Once Completed, You Can Answer: Is there a customer base and a market of sufficient size to make the concept viable? Is there a customer base and a market of sufficient size to make the concept viable? Do the capital requirements to start, based on estimates of sales and expenses, make sense? Do the capital requirements to start, based on estimates of sales and expenses, make sense? Can an appropriate start-up or genesis team be put together to execute the concept? Can an appropriate start-up or genesis team be put together to execute the concept?

Feasibility Analysis (Barringer & Ireland, 2006) Role of feasibility analysis in developing successful business ideas

Questions? Feasibility Analysis Presented by: Julie Messing Kent State University