1. 3-1 Chapter Three Feasibility Analysis Dr. Bruce Barringer University of Central Florida

2. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall3-2 Feasibility Analysis Most effective business plans Identifying a business idea Screening the idea(s) to determine their preliminary feasibility Conducting a feasibility analysis Writing the plan

3. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall3-3 Figure 3 - 1 Step 1 Identify a business idea. Step 2Favorable Step 3FavorableStep 4 Screen (or test) theresults/proceedConduct a fullresults/proceedPrepare idea to determinefeasibility a written its preliminaryUnfavorableanalysisUnfavorablebusiness feasibility.Results/stop orresults/stop orplanreevaluate idea Step 5 Present the business plan to investors and others

4. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall3-4 Primary research  Original research collected by person completing the analysis Secondary research  Probes data already collected Feasibility Analysis

5. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall3-5 Product/Service Feasibility  Product desirability Is the product desirable and serve a need in the marketplace? Is it reasonable?

6. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall3-6 Concept Test A concept test is a preliminary description of a product or service idea to industry experts to solicit their feedback

7. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall3-7 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? Definitely would buy Probably would buy Might or might not by Probably would not buy Definitely would not buy

8. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall3-8 Industry/Target Market Feasibility Analysis Industry A group of firms producing a similar product or service

9. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall3-9 Target market The limited portion of the industry that the firm goes after or tries to appeal to Industry / Target Market Feasibility Analysis

10. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall3-10  Industry attractiveness  Target market attractiveness  Market timeliness Industry/Target Market Feasibility Analysis

11. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall3-11 Industry Attractiveness  Large and growing industries  Structurally attractive Start-ups can enter the industry and compete  Favorable environmental and business trends  Importance of product to its customers

12. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall3-12 Target Market Attractiveness Target market Should be large enough for the new business but small enough to avoid attracting larger competitors

13. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall3-13 Market Timeliness  Window of opportunity Time period that a firm can enter a market  Economics of the industry Determine if the timing is right for a new entrant

14. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall3-14 Organizational Feasibility Analysis  Management prowess  Resource sufficiency

15. Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall3-15 Financial Feasibility  Total start-up cash needed  Financial performance of similar businesses  Overall financial attractiveness of the proposed venture

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