Feasibility AnalysisFeasibility Analysis

Presented by: Julie MessingPresented by: Julie Messing

Kent State UniversityKent State Universityjmessing@kent.edu

Except where specified, the slides are Except where specified, the slides are from:from:

Launching New VenturesLaunching New Ventures

Kathleen AllenKathleen Allen

Houghton-MifflinHoughton-Mifflin

20062006

What Is A Feasibility Analysis?What Is A Feasibility Analysis? Preliminary evaluation of idea to determine if it is Preliminary evaluation of idea to determine if it is

worth pursuingworth pursuing Provides more secure notion that a business idea Provides more secure notion that a business idea

is viableis viable– Is there a customer base and a market of Is there a customer base and a market of

sufficient size to make the concept viable?sufficient size to make the concept viable?– Do the capital requirements to start, based on Do the capital requirements to start, based on

estimates of sales and expenses, make sense?estimates of sales and expenses, make sense?– Can an appropriate start-up or genesis team be Can an appropriate start-up or genesis team be

put together to execute the concept?put together to execute the concept?

Barringer & Ireland (2006)Barringer & Ireland (2006)

Benefits of a Feasibility Benefits of a Feasibility AnalysisAnalysis

Identify viable concepts, including Identify viable concepts, including complementary products/servicescomplementary products/services

Get it right the first time; avoid Get it right the first time; avoid obvious pitfallsobvious pitfalls

Save valuable time and moneySave valuable time and money Validate it is what the customer Validate it is what the customer

needs, wants and will purchaseneeds, wants and will purchase

When To Conduct a Feasibility When To Conduct a Feasibility AnalysisAnalysis

Timing of Feasibility AnalysisTiming of Feasibility Analysis– After concept statement evaluationAfter concept statement evaluation

– After opportunity recognition, before business After opportunity recognition, before business planplan

– Before a lot of resources are investedBefore a lot of resources are invested

Four Components of Full Feasibility AnalysisFour Components of Full Feasibility Analysis– Product/Service FeasibilityProduct/Service Feasibility

– Industry/Market FeasibilityIndustry/Market Feasibility

– Organizational FeasibilityOrganizational Feasibility

– Financial Feasibility Financial Feasibility Barringer & Ireland (2006)Barringer & Ireland (2006)

Feasibility Analysis (Barringer Feasibility Analysis (Barringer & Ireland, 2006)& Ireland, 2006)

Role of feasibility analysis in developing successful business ideas

Feasibility Analysis ProcessFeasibility Analysis Process

Feasibility Analysis Feasibility Analysis OutlineOutline CoverCover Executive Executive

SummarySummary Title PageTitle Page The Business The Business

ConceptConcept Industry/Market Industry/Market

AnalysisAnalysis Founding TeamFounding Team

Product/Service Product/Service Development Development PlanPlan

Financial PlanFinancial Plan TimelineTimeline BibliographyBibliography Appendices Appendices

Developing a Business Developing a Business ConceptConcept A business concept is a concise A business concept is a concise

description of an opportunity that description of an opportunity that contains four essential elements:contains four essential elements:

1.1. The customer definitionThe customer definition

2.2. The value proposition and The value proposition and compelling storycompelling story

3.3. The product/serviceThe product/service

4.4. The distribution channelThe distribution channel

Business Concept: The Business Concept: The Customer DefinitionCustomer Definition

– The customer is the one who pays.The customer is the one who pays.– The end use customer is as The end use customer is as

important as the intermediary important as the intermediary customer.customer.

Business Concept: The Business Concept: The Value PropositionValue Proposition The compelling story is the The compelling story is the

benefit that the customer derives benefit that the customer derives from the product or servicefrom the product or service– It is often intangible.It is often intangible.

The compelling story answers the The compelling story answers the questions:questions:– Why the interest? Why the interest? – What problem does this solve?What problem does this solve?

Business ConceptBusiness Concept

The Product/ServiceThe Product/Service– What does the customer need?What does the customer need?– What is the team’s core What is the team’s core

competency?competency? The Distribution ChannelThe Distribution Channel

– How will the benefit be delivered to How will the benefit be delivered to the customer?the customer?

The Concept The Concept StatementStatement Who is being helped: the primary Who is being helped: the primary

customer?customer? What is the market’s burning What is the market’s burning

problem/pain?problem/pain? What emotions does the pain What emotions does the pain

evoke?evoke? What is the company’s tag line?What is the company’s tag line?

Questions to Answer:Questions to Answer:ConceptConcept What is the product/service What is the product/service

being offered? 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 How will the customer get

access to your product/service?access to your product/service? Are there ways to innovate the Are there ways to innovate the

distribution channel?distribution channel?

Questions to Answer:Questions to Answer:Industry, Industry, Market/Customer Market/Customer What are the demographics and What are the demographics and

trends in the industry?trends in the industry? Are there any barriers to entry? If Are there any barriers to entry? If

yes, how will you overcome them?yes, how will you overcome them? What are the typical profit What are the typical profit

margins in the industry?margins in the industry? Who are your competitors?Who are your competitors? Who is your perfect customer and Who is your perfect customer and

are there enough of them?are there enough of them?

Questions to Answer:Questions to Answer:Founding Team Founding Team What specific skills or What specific skills or

expertise will you need to expertise will you need to start this business?start this business?

What are your team gaps and What are your team gaps and how willhow will you fill them?you fill them?

Questions to Answer:Questions to Answer:Product/Service Product/Service What are the results of concept What are the results of concept

testing?testing? What are results of usability What are results of usability

testing?testing? What are the features & benefits?What are the features & benefits? Are there opportunities for Are there opportunities for

intellectual property?intellectual property? How is your product/service How is your product/service

differentiated from others in the differentiated from others in the market?market?

Questions to Answer:Questions to Answer:Financial Assessment Financial Assessment What are your start-up capital What are your start-up capital

requirements?requirements? What are the amounts and What are the amounts and

sources of expected sources of expected revenues?revenues?

What are your anticipated What are your anticipated expenses?expenses?

Questions to Answer:Questions to Answer:Financial Assessment Financial Assessment How long will it take to How long will it take to

achieve a positive cash flow achieve a positive cash flow from the revenues generated?from the revenues generated?

What is the break even point What is the break even point for the business?for the business?

Provide an initial pro forma Provide an initial pro forma cash flow statementcash flow statement

Once Completed, You Once Completed, You Can Answer:Can Answer: Is there a customer base and a Is there a customer base and a

market of sufficient size to make market of sufficient size to make the concept viable?the concept viable?

Do the capital requirements to Do the capital requirements to start, based on estimates of sales start, based on estimates of sales and expenses, make sense?and expenses, make sense?

Can an appropriate start-up or Can an appropriate start-up or genesis team be put together to genesis team be put together to execute the concept?execute the concept?

Feasibility Analysis (Barringer Feasibility Analysis (Barringer & Ireland, 2006)& Ireland, 2006)

Role of feasibility analysis in developing successful business ideas

Questions?Questions?

Feasibility AnalysisFeasibility Analysis

Presented by: Julie MessingPresented by: Julie Messing

Kent State UniversityKent State Universityjmessing@kent.edu