Feasibility Analysis Business Plans Entrepreneurship Chapter 5

Feasibility Analysis Testing an Opportunity Through Research

Step #1  Develop a business concept A single statement A single statement Incorporates Incorporates Product or serviceProduct or service Who the customer isWho the customer is The benefitThe benefit The distribution usedThe distribution used

Step #2  Test your concept Testing the industry Testing the industry Talking to customers Talking to customers Testing product or service requirements Testing product or service requirements Evaluate your team Evaluate your team Study your competition Study your competition What are your start up needs What are your start up needs Analyze your distribution channel-value chain Analyze your distribution channel-value chain

Why Test the Industry?  Trends  Major players  Health of the industry

Why Talk to Potential Customers?  The most important part of the analysis  Is there interest?  To better define your features/benefits  May get better insight into your business  To find out your customer profile

Why Test Products/Services?  Develop prototype Not physical business-designs, blueprints, flow charts etc. Not physical business-designs, blueprints, flow charts etc.

Why Evaluate Your Team?  Must be an effective team/works well together  Must be well rounded  Important to have knowledge + experience in venture  Bank pays a lot of attention to this information

Why Study the Competition?  Know their target customer  Know their benefits  Know how they distribute  Know their strengths/weaknesses  Know where you can fit into the equation Can you fill a void in the marketplace? Can you fill a void in the marketplace?

Why Research Start up Cost?  How much money must you have? Payroll Payroll Equipment/supplies Equipment/supplies Purchases of inventory Purchases of inventory Location Location Capital to keep going until profit generates Capital to keep going until profit generates

Why Analyze the Value Chain?  Value chain includes Manufacturers Manufacturers Distributors Distributors Retailers Retailers  Goal-to deliver product to the customer at the least possible cost Belkon (consolidating freight) Belkon (consolidating freight) Wholesale distributor-can buy in larger quantities to save costs Wholesale distributor-can buy in larger quantities to save costs Use of the internet Use of the internet

Why is the Feasibility Analysis an Essential Part of the Development of a Business?

Business Plan Entrepreneurship 5.2

Purpose of Business Plan  Describes the new business  Itemizes the strategies needed for start-up

Recipients of the Plan  Investors  Bankers  Potential Management  Strategic Partners-What do these words relate to?

Items Included in a Business Plan  Executive Summary  Management Team Plan  Company Description  Product and Service Plan  Mission and Vision Statements  Industry Overview  Market Analysis  Competitive Analysis  Marketing Plan

Business Plan con’t  Operational Plan  Organizational Plan  Financial Plan  Growth Plan  Contingency Plan  Cover page, title page, table of contents, and supporting documents in an appendix

The Executive Summary  Not more than 2 pages  Most important part-catches the eye of the reader  Most investors only read the executive summary  Includes important information from each section

Management Team Plan  Qualifications of partners Educational expertise Educational expertise Work experience that relates Work experience that relates How you can you execute and be effective How you can you execute and be effective

Company Description  Outlines the company’s background  Gives basic business concept  Helps investors understand the scope and size

Product and Service Plan  Present the product or service with a clear concept statement  Address any spin-offs that could be possible-shows growth possibilities

Vision and Mission Statements  Vision-talks to the company’s value and belief system  Mission-talks to the specific goals and aspirations of the company

Industry Overview  Shows trends and growth in industry  Ex: WCA growth is directly related to the industrial growth of the county. Walton County’s business growth is expected to quintuple within the next few years. Walton County’s business growth is expected to quintuple within the next few years.

Market Analysis  Include your customer profile  Includes geographic, economic, and demographic data about the site of business (county or city)  Do your customer profile and demographic of the community correlate?  Analyzes your customer and competition

Competitive Analysis  Does your business fill a void within the market?  If so, where.  Gather information from your competitors.

Operational Plan  Hours of operation  How will you get your product or service to the consumer?  Direct vs Indirect Channel to consumers

Organizational Plan  What type of business? Sole Proprietorship Sole Proprietorship Corporation Corporation LLC LLC Partnership Partnership  Compensation packages for mgt.  Employment policies

Financial Plan  Shows that concept is profitable and viable  Presents forecasts  Bankers are interested in longevity  Formed with financial statements

Growth Plan  Talk about future plans Short range (1-5 years) Short range (1-5 years) Long range (beyond 5 years) Long range (beyond 5 years) Plans in place for future retirements? Plans in place for future retirements?

Contingency Plans  Risks Lower sales than expected Lower sales than expected Downturn of economy Downturn of economy Ways to minimize risks Ways to minimize risks Risk transfer-insuranceRisk transfer-insurance SBA loans will require some type of insuranceSBA loans will require some type of insurance

Common Mistakes in Preparing Business Plans  Exaggerated sales growth  Not developing a strong business team  Claiming performance that exceeds industry averages  Under estimating need for capital-most common mistake

Ask for Help  Small Business Administration  Service Corps of Retired Executives  Small Business Development Centers  Chambers of Commerce  Trade Associations  Professionals within same industry

Packaging Plan  Very Important  Haphazard plan reflects your commitment as a business owner  Professionally bind with index tabs for dividers  12 pt Times Roman Font  Bold subheadings with bullets to facilitate fast reading  Include Logo at top of each page  Include a Statement of Confidentiality  Statement on front of packet prohibiting copying