FEASIBILITY STUDY

FEASIBILITY STUDYFeasibility StudyA feasibility study determines the commercial viability of any given project

To start your Feasibility Study - start with your "business idea" on paper. Discuss it with others and adjust it as you obtain more information and ideas.

COMPONENTS OF A FEASIBILITY STUDYPlan Cost source of fundingManpowerPersonnel requirementsMarket Profitability

The PlanThe project and its objectives should be described in detail.A sketch plan should accompany the description.The plan answers the questions what, why, and how about the project.It includes the duration or approximate time to complete the project.The CostCost of equipment and facilities needed should be determined.Proponents must canvass at least two or three suppliers.Particulars as to the models and capacities of the equipment, their availability, and where these could be purchased should be determined early on. The source of fundingProject approval is 50% assured if there is a prior provision for it in the companys budget.If there is no allocation or insufficient, a bank loan may be considered.In this case, the loan amount and its interest must be factored into the financial documents of the study.Realistic income targets from the venture must be projected.WORKING CAPITALWhen calculating how much working capital you need it may be necessary to allow for up to six months funds. This may be due to no sales or low sales, having to extend credit, buying too much or overheads being higher than expected.

Manpower or PersonnelThe size and particulars of manpower needed for the project should be noted.The personnels job descriptions, job titles, and credential standards should be determined.These should be properly set out in any appropriate organizational chart.Salary rates and allowances, if any, should also be drawn up.Ask the following questions:1. Who will they be?2. What will be the cost?3. What are their duties?4. What training will be required?5. What alternatives are there?

The marketThe stability of the market determines the viability of projects.A survey should be conducted to find out whom the commercial venture will cater and if there would be enough customers or clients.

Customers: You cannot sell to everyone. So, who are your potential customers? Make a List. Why will they buy from you? Identify your Market Segments or groups: What knowledge do you have of your market segments or groups? How many are there? What will they buy? How often will they buy? What will be their average purchase?

Products & Services: Create a list showing the products / services you will be offering to each segment. Also look at how long it will take you to produce or procure them. Determine how much it will cost to buy or produce them and how much you can sell them for.

Suppliers: Identify preferred and alternative suppliers on a list and show products /services / prices on this list. Collect catalogues and brochures to assist this study.

Competition: List your competitors and show their perceived strengths and weaknesses. For each main competitor, list two good points and two bad points. You need to understand why they are competition to your proposed business.Ask the Question: How can you attract their customers from them? Price is not the only answer.

Map: Obtain a map and on it define your market boundaries, your location, your competitors, your suppliers, and any demographic information on your market.

Profitability / BenefitA 10-20 percent return of investment (ROI) is usually regarded as profitable enough.For socially-oriented undertakings, there is a need to discuss how a project will benefit a specific group of people or community.The FS ProcessDetermine purpose and scope of the study.Establish sources of data.Gather and verify information.Undertake data analysis.Formulate conclusions and recommendations.The FS ReportThis reflects the findings and conclusion.It defines the study in terms of its objectives and identifies the factors that determine whether a project is feasible or not.Pertinent data are presented, interpreted, and summarized.The feasibility report provides options: GO or NO GO.Elements of a FRTitle pageAbstractIntroductionData Presentation and DiscussionAnalysisSummaryConclusionRecommendationsReferencesAppendix - List of Tables / Figures

Modern-day report writers present FR in this format:Executive summaryIntroductionDiscussion and AnalysisConclusionRecommendationAppendix

a) Executive Summary - the main purpose is to gain the reader's attention. Give a brief and clear overview of the key points of each section of your plan. While it is the first section, it is the last to be written. Two pages is more than enough!

b) Introduction of Product/Service (description) - describe the benefits of your product or service from the customer's point of view.

What is your product or service? How is it different from what's already available? If a product, will you manufacture it and how? Who are your suppliers? What are your distribution channels? Describe patents, trade secrets, or other information. You must determine if the concept is a working and tested product or service.

c) The Market - is there a market for your idea? Can this be proven? Describe the size of your market (both in terms of customers and finances). This requires research and is perhaps the most difficult section, but also most important. What is your target market? What is your estimated market share percentage? Describe seasonal fluctuations, the potential annual growth of the total market for your product or service, and factors affecting that growth.

d) Price and Profitability - how will you price your product or service; at a discount, at a premium or somewhere in between? The gross margin must be high enough to at least cover your expenses. Community businesses do make profit, but its what they do with the surplus that differentiates them.

e) Plan for Further Action - the future! Does the feasibility plan show that the idea is worthwhile? If so then it is time to proceed to the business plan What can help me get started? Try thinking about the following and make some notes

Source:http://www.togetherworks.org.uk/index.php?q=node/61Research and Technical Writing by Portillo et al.