WHAT IS A FEASIBILITY STUDY?

PRE- TEST

What is a Feasibility Study? Differentiate Feasibility Study with A

Business Plan. What are the reasons why we should

do a Feasibility Study?

IS THIS FOX PLAYING TRICKS ON YOU?

HE IS NOT ALONE…

CAN YOU SEE WHAT HAUNTING THIS FOX?

How many wolves can you see in this illustration?

FEASIBILITY STUDY

is an analysis of the viability of an idea.

focuses on helping answer the essential question… “should we proceed with the proposed

project idea?”

All activities of the study are directed toward helping answer this question.

A feasibility study

looks at the viability of an idea with an emphasis on identifying potential problems and attempts to answer one main question: Will the idea work and should you

proceed with it?

A feasibility study

Is a preliminary study undertaken before the real work of a project starts to ascertain the likelihood of the project's success.

Is an analysis of all possible solutions to a problem and a recommendation on the best solution to use.

involves evaluating how the solution will fit into the corporation.

can decide whether an order processing be carried out by a new system more efficiently than the previous one.

A feasibility study

could be used to test a new working system, which could be used because: Although few businesses would not

benefit from a computerized system at all, the process of carrying out this feasibility study makes the purchaser/client think carefully about how it is going to be used.

Before you begin writing your feasibility study… identify how, where, and to whom you

intend to sell a service or product assess your competition figure out how much money you need to

start your business and keep it running until it is established.

Feasibility studies address things like where and how the business will operate.

They provide in-depth details about the business to determine if and how it can succeed, and

serve as a valuable tool for developing a winning business plan.

Feasibility studies can be used in many ways but primarily focus on proposed business ventures.

Anybody with a business idea should conduct a feasibility study.. to determine the viability of their

idea before proceeding with the development of a business.

Determining early that a business idea will not work saves

TimeMoneyHeartache

A feasible business venture is one where the business will

generate adequate cash-flow and profits

withstand the risks it will encounter

remain viable in the long-term and

meet the goals of the founders.

The venture can be either:

> a start-up business > the purchase of an existing business > an expansion of current business

operations or > a new enterprise for an existing

business.

A feasibility study is only one step in the business idea assessment ,and business development process

A system's feasibility is typically considered from economic, technical, schedule and organisational viewpoints

Economic Feasibility Study This involves questions such as whether

the firm can afford to build the system, whether its benefits should substantially exceed its costs, and whether the project has higher priority than other projects that might use the same resources.

A system's feasibility is typically considered from economic, technical, schedule and organisational viewpoints

Technical Feasibility Study This involves questions such as whether

the technology needed for the system exists, how difficult it will be to build, and whether the firm has enough experience using that technology.

A system's feasibility is typically considered from economic, technical, schedule and organisational viewpoints

Schedule Feasibility Study This involves questions such as how

much time is available to build the new system, when it can be built (i. e. during holidays), interference with normal business operation, etc.

A system's feasibility is typically considered from economic, technical, schedule and organizational viewpoints

Organizational Feasibility Study This involves questions such as whether

the system has enough support to be implemented successfully, whether it brings an excessive amount of change, and whether the organisation is changing too rapidly to absorb it.

What is a Hotel, Restaurant, Leisure or Retail Feasibility Study

A study being use as the key initial tool for assisting hotel, restaurant, leisure and retail development planning.

Types of these Feasibility Studies

There are two main types of feasibility study – and many people confuse the two. Architects will undertake a development

feasibility study to determine what is possible on a site.

The results should not be confused with a market feasibility study that determines the financial viability of a scheme based on the market(s) for which it will cater. *The results of such a study should then be used to inform the architect’s work to ensure that project budgets are reasonable.

Feasibility Study Objectives Market feasibility studies are required to:

• raise funding,• satisfy grant awarding bodies, where appropriate, both financially and in terms of project outputs,• satisfy the directors that a project is viable,• determine the optimum facility mix to maximise revenue,• ensure that all parties agree on the key elements of a project,• form the basis for initial market and project planning,• in some cases, provide the argument for business closure or change of use applications/ planning appeals,• enable third parties to value operating contracts (for example, enable museums and other visitor attractions to vale catering contracts).

What Does the Study Identify? Hotel, restaurant, leisure and retail market

feasibility studies should be completed for any capital project.

It is essential that they weigh up all of the market information available dispassionately and relate the findings in potential revenue estimates. These estimates should show the number of units (rooms, meals, memberships etc.) estimated to be sold and the expected tariffs to be achieved, resulting in estimates of revenue and project outputs.

Factors Considered The information used to form the base for the above

assumptions should include the:• location and visibility of the proposed facilities in respect of the key sources of demand,• existing and known future competitors, including possible substitutes,• current and forecast levels of demand and market trends – taking into account known levels of current demand, latent demand, frustrated demand. This data may include information in the public domain, competitor research, market surveys and demographic analysis.• impact of non-direct but influencing changes in the competitive environment. Seasonality factors should also be taken into account showing

when demand is likely to be highest and lowest – viability can be greatly different if a business opens at the end or start of a trading season.

End Products

Estimates of the project outputs will enable the study to identify the optimum facility mix and also determine the costs of the operation: costs of sales staffing costs marketing expenditure Maintenance Insurance etc.

End Products

The end results therefore should be statements of revenue and expenditure for the first five years of the project, clearly showing the links between the markets and the forecasts.

From these statements will then follow balance sheet cash flow forecasts, and estimates of project value upon completion.

Why Are Feasibility Studies so Important?

The information you gather and present in your feasibility study will help you: List in detail all the things you need to make

the business work; Identify logistical and other business-related

problems and solutions; Develop marketing strategies to convince a

bank or investor that your business is worth considering as an investment; and

Serve as a solid foundation for developing your business plan.

Why Are Feasibility Studies so Important?

Even if you have a great business idea you still have to find a cost-effective way to market and sell your products and services.

For example, most commercial space leases

place restrictions on businesses that can have a dramatic impact on income. A lease may limit business hours/days, parking spaces, restrict the product or service you can offer, and in some cases, even limit the number of customers a business can receive each day.

The Components of a Feasibility Study

Description of the Business: The product or services to be offered and how they will be delivered.

Market Feasibility: Includes a description of the industry, current market, anticipated future market potential, competition, sales projections, potential buyers, etc.

Technical Feasibility: Details how you will deliver a product or service (i.e., materials, labor, transportation, where your business will be located, technology needed, etc.).

Financial Feasibility: Projects how much start-up capital is needed, sources of capital, returns on investment, etc.

Organizational Feasibility: Defines the legal and corporate structure of the business (may also include professional background information about the founders and what skills they can contribute to the business).

Conclusions: Discusses how the business can succeed. Be honest in your assessment because investors won’t just look at your conclusions they will also look at the data and will question your conclusions if they are unrealistic.

Evaluate Alternatives

A feasibility study is usually conducted after producers have discussed a series of business ideas or scenarios. 

The feasibility study helps to “frame” and “flesh-out” specific business scenarios so they can be studied in-depth. 

During this process the number of business alternatives under consideration is usually quickly reduced.

Eval…

During the feasibility process you may investigate a variety of ways of organizing the business and positioning your product in the marketplace.

It is like an exploratory journey and you may take several paths before you reach your destination.

Just because the initial analysis is negative does not mean that the proposal does not have merit. 

Sometimes limitations or flaws in the proposal can be corrected.

Pre-Feasibility Study

A pre-feasibility study may be conducted first to help sort out relevant scenarios.

Before proceeding with a full-blown feasibility study, you may want to do some pre-feasibility analysis of your own.

If you find out early-on that the proposed business idea is not feasible, it will save you time and money.

If the findings lead you to proceed with the feasibility study, your work may have resolved some basic issues.

A consultant may help you with the pre-feasibility study, but you should be involved.  This is an opportunity for you to understand the issues of business development.

Market Assessment

a market assessment may be conducted that will help determine the viability of a proposed product in the marketplace.

The market assessment will help to identify opportunities in a market or market segment.

If no opportunities are found, there may be no reason to proceed with a feasibility study.

If opportunities are found, the market assessment can give focus and direction to the construction of business scenarios to investigate in the feasibility study.

A market assessment will provide much of the information for the marketing feasibility section of the feasibility study.

Results and Conclusions

The conclusions of the feasibility study should outline in depth the various scenarios examined and the implications, strengths and weaknesses of each. The project leaders need to study the feasibility study and challenge its underlying assumptions. This is the time to be skeptical.

Don’t expect one alternative to “jump off the page” as being the best scenario. Feasibility studies do not suddenly become positive or negative. As you accumulate information and investigate alternatives, neither a positive nor negative outcome may emerge.  The decision of whether to proceed is often not clear cut. Major stumbling blocks may emerge that negate the project. Sometimes these weaknesses can be overcome. Rarely does the analysis come out overwhelmingly positive. The study will help you assess the tradeoff between the risks and rewards of moving forward with the business project.

Remember, it is not the purpose of the feasibility study or the role of the consultant to decide whether or not to proceed with a business idea. It is the role of the project leaders to make this decision, using information from the feasibility study and input from consultants.

WHICH MODEL DO YOU WANT?

AMAZING PAINTINGS..

Go/No-Go Decision

The go/no-go decision is one of the most critical in business development. 

It is the point of no return.  Once you have definitely decided to pursue

a business scenario, there is usually no turning back.

The feasibility study will be a major information source in making this decision.

This indicates the importance of a properly developed feasibility study.

Feasibility Study vs. Business Plan A feasibility study is not a business

plan. The separate roles of the feasibility

study and the business plan are frequently misunderstood.

The feasibility study provides an investigating function.

It addresses the question of “Is this a viable business venture?”

Feasibility Study vs. Business Plan

The business plan provides a planning function.

The business plan outlines the actions needed to take the proposal from “idea” to “reality.”

The feasibility study outlines and analyzes several alternatives or methods of achieving business success.

The feasibility study helps to narrow the scope of the project to identify the best business scenario(s).

Feasibility Study vs. Business Plan

The business plan deals with only one alternative or scenario.

The feasibility study helps to narrow the scope of the project to identify and define two or three scenarios or alternatives.

The person or business conducting the feasibility study may work with the group to identify the “best” alternative for their situation. This becomes the basis for the business plan.

The feasibility study is conducted before the business plan.

Feasibility Study vs. Business Plan

A business plan is prepared only after the business venture has been deemed to be feasible.

If a proposed business venture is considered to be feasible, a business plan is usually constructed next that provides a “roadmap” of how the business will be created and developed.

The business plan provides the “blueprint” for project implementation.

If the venture is deemed not to be feasible, efforts may be made to correct its deficiencies, other alternatives may be explored, or the idea is dropped.

Reasons Given Not to Do a Feasibility Study

Project leaders may find themselves under pressure to skip the “feasibility analysis” step and go directly to building a business. Individuals from within and outside of the project may push to skip this step. Reasons given for not doing a feasibility analysis include:

We know it’s feasible.  An existing business is already doing it.

Why do another feasibility study when one was done just a few years ago?

Reasons Not to…

Feasibility studies are just a way for consultants to make money.

The market analysis has already been done by the business that is going to sell us the equipment.

Why not just hire a general manager who can do the study?

Reasons not to…

Feasibility studies are a waste of time.  We need to buy the building, tie up the site and bid on the equipment.

The reasons given above should not dissuade you from conducting a meaningful and accurate feasibility study. Once decisions have been made about proceeding with a proposed business, they are often very difficult to change. You may need to live with these decisions for a long time.

Reasons to Do a Feasibility Study

Conducting a feasibility study is a good business practice. If you examine successful businesses, you will find that they did not go into a new business venture without first thoroughly examining all of the issues and assessing the probability of business success.

Below are other reasons to conduct a feasibility study: Gives focus to the project and outline alternatives. Narrows business alternatives

Reasons to Do..

Identifies new opportunities through the investigative process.

Identifies reasons not to proceed. Enhances the probability of success by

addressing and mitigating factors early on that could affect the project. 

Provides quality information for decision making.

Provides documentation that the business venture was thoroughly investigated.

Reasons to Do..

Helps in securing funding from lending institutions and other monetary sources.

Helps to attract equity investment.

NOTE THAT The feasibility study is a critical step in the business assessment process. If properly conducted, it may be the best investment you ever made.

Reasons to Do..

If you are considering conducting a feasibility analysis to investigate the viability of a potential business venture, answering the following six questions will help guide you through the process. By using these as a guide, it will help you move through the process efficiently while helping you get the most out of the analysis.

When to do a study?

The decision to conduct a feasibility study should not be taken lightly. It is an expensive and time consuming process. However, not doing a feasibility analysis can be even more expensive in terms of the poor decisions you may make from not conducting the proper analysis.

When to do..

You need to be far enough along in the deliberation process of your business idea to make the best use of a feasibility study. So you need to have a clearly defined outline of one or more alternative business models or scenarios that you want to explore. And you want to have conducted sufficient initial investigation of these alternatives to determine if they have the potential of being viable. You don’t want to spend your feasibility money investigating ideas that you can determine are not feasible by just making a few phone calls.

When to do..

This means that you will need to have already done much of the early investigation and exploration of your business idea before you schedule a full blown study. This early investigation or pre-feasibility analysis can be done by members of your committee or with the help of a consultant. You may start by doing a marketing study to determine if the business idea has market viability. If it does not, you have saved time and money by not commissioning a comprehensive feasibility study. If the idea has market viability, you can move forward with the feasibility analysis and use the market analysis in the feasibility study.

How to accept or reject the study?

At the end of the study, provide the committee with a draft of a final report. Before you start discussing the conclusions of the study and what impact they have on the viability of your project, you must first review the study to determine if it is accurate, relevant and complete. It is not uncommon for the project committee to reject the draft of the report and ask for further clarification and analysis.

How to accept or reject..?

The study is only as strong as its weakest part. It takes a mistake in only one part of the study to sink the business venture. So, before you accept the study you should determine that it: Is understandable and easy to read Addresses all of the relevant issues and questions Lists and discusses all of the underlying assumptions of the project

analysis Meets the expectations of the project committee Is logically consistent within sections and among sections Is thoroughly researched using good research techniques Contains all of the relevant information Meets the conditions of the consulting contract It is important that you meet this “due diligence” requirement because

investors and others may question your procedures and decisions during this period if the business venture eventually fails. You may want to discuss this with your attorney to make sure the proper safeguards are in place.

How to use the study results?

The purpose of the feasibility study is to provide you with the information needed to determine if the proposed business venture is viable. However, it will probably not provide you with a magic answer. So you will need to carefully assess the conclusions of the study and decide if the proposed business venture has sufficient merit to move forward.

How to use the..?

If ever there is a time for unemotional, rational and logical thinking, it is now. Mistakes at this time may be with you for a long time.

Common mistakes made by groups at this stage are:

1. The committee members have already made up their minds and rationalize the study results to fit their decision.

Common mistakes..:

2. Because project committee members tend to be action oriented rather than deliberators, they become restless to move forward with the project and gloss over important aspects of the study.

Common mistakes..:

3. Because of the importance of the decision and the lack of clear direction from the feasibility analysis, committee members find they cannot bring themselves to make a decision. Rather, they continually seek more information.

Common mistakes..:

4. The committee members become confused by the array of information presented to them and pressure their consultants and others to give definitive answers of whether to move forward with the project. When committee members respond to questions pertaining to why they moved forward with a project by replying, “our consultants said it would work,” are abdicating their decision making responsibility.

THANK YOU!!!

"He who asks is a fool for five minutes, but he who does not ask is a fool forever." (traditional Chinese proverb)

the five stages of innovation

People deny that the innovation is required. People deny that the innovation is effective. People deny that the innovation is

important. People deny that the innovation will justify

the effort required to adopt it. People accept and adopt the innovation,

enjoy its benefits, attribute it to people other than the innovator, and deny the existence of stages 1 to 4.▪ ©AC 2005. Inspired by Alexander von Humboldt's 'Three

Stages Of Scientific Discovery', as referenced by Bill Bryson in his book, 'A Short History Of Nearly Everything'.