The goal of a feasibility analysis is to determine the viability of a new enterprise and to identify both needed resources and important difficulties that exist now, so that they may be addressed early in the start-up process (Scarborough, 2012). In general, the feasibility analysis technique, content, and focus are well established (Berry, 2017). Product/service feasibility, industry/market feasibility, financial feasibility, and organizational feasibility are the four different but interrelated components of the new-venture start-up that are covered by feasibility study. Prior to producing the business plan, feasibility analysis sits in the center of recognizing opportunities and developing a business model. If the feasibility analysis is done thoroughly and honestly, the new venture’s chances of success increase. What is frequently overlooked, however, is a recognition of the new venture’s longer-term viability and sustainability concerns, indicating a lack of awareness of required resources both before and after launch (Coad et al., 2016).
While feasibility analyses are widely used and acknowledged as a way to improve the chances of a new venture’s success, the failure rate of new businesses remains high. In the United States, over one-third of all new businesses, both for-profit and non-profit, fail during the first two years of operation, with another considerable number failing within four years (Barringer and Gresock, 2008). Many variables can contribute to the failure of a new enterprise, including the lack of a feasibility analysis in the first place. However, flaws that should have been recognized during the feasibility research may be included among the other variables, particularly in terms of the firm’s long-term viability. The longevity of a new endeavor is predicated on having exceptional opportunity recognition in the first place, followed by a thorough and honest feasibility analysis, business model design, and finally, a business plan.
We emphasize the importance of maintaining a strategic lens, or an over-reaching perspective, throughout the typical four-part feasibility analysis in this work. We also propose that such an analysis focus on items generated by considering the context of the organization to be created, particularly those aspects relating to the organization’s core competencies (Barney, 1991), competitive advantage (Porter, 1996), fit with its environment (Fahey and Narayanan, 1986; Venkatraman, 1989), and the new venture’s overall growth and survival plan. This strategic lens provides a longer-term focused perspective/analysis, which is vital in addition to the conventional new venture’s immediate and urgent issues or needs as explored in the standard feasibility investigation.
By matching the feasibility analysis with strategic management theory, our proposed strategic lens improves its effectiveness. The strategic management literature asserts that organizational success depends on emphasizing differences between the organization and its competitors by relying on valuable, rare, costly to imitate, and non-substitutable resources and capabilities to create superior fit between the organization and its environment (Barney, 1991). (Venkatraman, 1989). The enhanced five-part feasibility analysis is tailored to include a longer-term view, which more effectively assesses the overall feasibility of the new venture after the doors are opened, rather than the traditional what-do-we-need-to-do-to-open-the-doors approach of the traditional four-part analysis.
The strategic lens gives the short-term focused feasibility analysis a long-term framework. The success of a business enterprise is determined not only by its capacity to take off and prosper at first, but also by its ability to maintain that success over time. If a business is to succeed in the long run, considerations such as the sustainability of a competitive advantage, substitutability, and imitability of the business product and procedures must be considered. Such attention ensures that the internal and external environments of the company are in sync.
The paper is divided into four parts. The first section provides an introduction of the standard four-part feasibility analysis, while the second section summarizes entrepreneurship and strategic management concepts. The benefits of the expanded feasibility analysis approach are presented in the third part. The fourth section discusses the model’s contributions and shortcomings, as well as making recommendations for further research.
Traditional Feasibility Analysis
Product/service feasibility, industry/market feasibility, organizational feasibility, and financial feasibility are the four aspects of a feasibility analysis for a new venture start-up (Barringer and Gresock, 2008). The overall appeal of the proposed product or service is evaluated in the product/service feasibility analysis (Klink and Athaide, 2006). The industry/market feasibility analysis assesses the overall attractiveness of the industry as well as the availability of niche markets that the new business may successfully access and serve (Allen, 2016). Managerial prowess, talent, expertise with entrepreneurial and business initiatives, and total resource sufficiency are all factors in determining organizational feasibility (Berry, 2017). Financial feasibility analysis focuses on determining how finance will be given not only for the beginning phase but also for ongoing business operations until break-even is achieved. The four-part feasibility study’ goal is to thoroughly and honestly evaluate a business idea’s potential merits, finding difficulties before they become important, and resolving these issues as early as possible in the start-up process (Scarborough, 2012). It also enables and provides as a basis for completing a variety of other tasks in the start-up process, such as budgeting, capital search, key hires and key hire scheduling, and locating essential professional support.
The feasibility analysis is the next step after recognizing the opportunity (Linder et al., 2019). The first phase in the entrepreneurial process is opportunity recognition (Baron, 2006), and it is usually associated with three factors: active search, personal attentiveness, and prior entrepreneur expertise, including life experience (Ardichvili et al., 2003; Shane, 2000). Social capital, cognitive and personality qualities, and a general knowledge of environmental conditions have all lately been recognized as crucial elements (George et al., 2016). Opportunity recognition (Ardichvili et al., 2003) is described as the discovery of a new way of creating value in the market, which then mixes and extends into feasibility studies. Following the feasibility investigation, the business model depicts the interconnected organizational activities that the firm engages in to produce value (Zott et al., 2011), demonstrating both a positive value proposition and a plan to support it (Zott et al., 2011). (McDonald and Eisenhardt, 2020). The feasibility analysis and the business model both contribute to a company’s long-term survival and growth, which is a fundamental concept (Massa et al., 2017).
Conducting a feasibility analysis, like other planning tasks, improves the odds of a new venture’s success (Delmar and Shane, 2003). Planning include determining what the company hopes to achieve, as well as establishing schedules for how and when activities to achieve these objectives will be implemented. Business founders benefit from planning because it improves their ability to make decisions more effectively than trial-and-error experimentation, by assisting them in locating and managing scarce resources, minimizing time-consuming bottlenecks, and more efficiently translating abstract goals into concrete operational activities (Delmar and Shane, 2003). A feasibility analysis can assist detect and avoid many of the usual problems that new venture entrepreneurs face, as well as solve many of the more general challenges that come with starting a business. The classic feasibility study focuses on the immediate demands of starting a firm, attempting to address the questions “what do we need” and “how can we do this” that were raised during the opportunity recognition process.
The planning that emerges from the feasibility analysis extends well beyond the more cursory examinations carried out in the early stages of the startup process, such as the initial recognition or screening of a new business idea. The feasibility study research methodologies examine the viability of the new enterprise with a higher level of specificity (Delmar and Shane, 2003). Importantly, the feasibility analysis also considers implementation, with a focus on organizational and managerial capability to realistically fulfill the tasks (Berry, 2017). Because this data-driven research gives objective answers to crucial problems, the depth and quality of study throughout the feasibility analysis is critical. In this analysis, a high level of objectivity and realistic assumptions are required to reduce the risk of finding favorable results due to overly optimistic convictions, such as whether there is a market for the product or service in the first place, or whether the entrepreneurial team has the ability to successfully open and manage the business given the resources available. Moving on with the startup process requires positive findings in all four areas of the feasibility analysis (Berry, 2017), and displaying positive outcomes in only two or three of the four categories indicates long-term failure, inviting disappointment, frustration, and wasted resources.
Product/service feasibility analysis (Klink and Athaide, 2006) evaluates the overall appeal of the product or service being proposed in the marketplace, based on a basic understanding of the financial, marketing, and organizational resources required to bring the product/service to market. The product/service feasibility stage pushes the new business idea beyond the wishful thinking, everyone-will-love-this stage, by employing research-driven data to indicate whether a market not only exists for the product/service, but is also accessible given the new company’s resources. Trend lines or prospective long-term changes to the product or service are frequently neglected. Even if the data for the product/service feasibility analysis is 100% right today, possible problems may be overlooked or neglected without some degree of future emphasis.
An industry/market feasibility analysis assesses the overall attractiveness of the industry, its scale, and the availability of niche markets that the new business may successfully access and serve (Allen, 2016). Given the potential scale advantages or entrenched market control of known competitors, industry/market feasibility analysis looks at existing competitors and substitute products or services, and forces attention on questions of competitive advantage, geographic and demographic market forces, and cost/profit considerations. The information presented thus far is mostly current and historical; nonetheless, rivals are not static and may react fiercely to new entrants into the business. Established players often have built-in cost advantages, giving them a lot of leeway in the market to decrease prices to battle incoming competition. Markets may be expanding, contracting, or saturated with products that are very similar to what the new business proposes to offer, and the new venture must be aware of these market pressures. Because market dynamics are rarely stable, what is true now may not be true tomorrow, as the entry of a new business is a market disruption in and of itself. A degree of future focus is essential, just as it was with the product/service feasibility investigation.
Financial feasibility research focuses on the resources required for startup expenditures, evaluating costs and possible revenues, and establishing the necessary financial reserves to cover losses until break-even, which could take several years. This examination looks at how finance will be provided not only for the startup phase, but also for ongoing business operations, with the goal of assisting entrepreneurs in avoiding the typical problem of running out of cash before they can bring in customers or generate enough sales revenue. Financial feasibility research helps entrepreneurs understand how much money they’ll need, when they’ll need it, and what kind of money they’ll need. These are all elements that are usually misunderstood or underestimated by business owners (Katila and Shane, 2005). Because gross income, total and ongoing expenses, and net revenue streams are difficult to estimate properly, the early stages of financial analysis are generally plagued with more problems than answers. The break-even point is frequently a mystery. The financial feasibility section of a typical feasibility analysis is the most forward-looking of the four parts.
Because proformas are founded on both previous and future assumptions, the new venture is automatically at a disadvantage due to the lack of historical data. Future assumptions are only as good as the entrepreneur’s knowledge while making them, and given the uncertainty of the firm-specific economy, these assumptions may be off the mark if made without a future-oriented eye.
Organizational feasibility analysis aids in the identification of managerial skills required for the start-up and subsequent management of a new enterprise. Even if the market, industry, and financial feasibility analyses are all good, the business will most likely fail if the entrepreneurial start-up team has the competence or expertise to implement the plan and make the many elements function together. The two fundamental concerns of organizational feasibility study are management expertise/prowess and resource sufficiency. Attention to both areas is vital, because management success without resource success, and vice versa, will almost certainly lead to failure. This is a challenging subject to study because many entrepreneurs prefer to exaggerate their own talents in terms of talent and skill while underestimating their competitors’ capacity to adapt and compete (Shane and Venkataraman, 2000).
The entrepreneur’s ability to grasp the markets the new firm aims to service, entrepreneurial and managerial expertise, and the depth of professional and social networks are all common features when evaluating management prowess (Barringer, 2009). According to some research, essential human attributes of the entrepreneurial team, such as love for the new enterprise, motivation and tenacity, integrity and reliability, should also be considered when evaluating management prowess (Kurato and Hornsby, 2009). Tolerance for ambiguity, as well as the ability to deal with uncertainty and risk, is also valued (Teoh and Foo, 1997).
Entrepreneurs frequently have substantial difficulties in determining their resource requirements and determining how to meet them, as well as attracting and locating resources to assist their fledgling firm (Yusuf, 2010). The ability of a company to locate nonfinancial resources, such as important personnel and others such as consultants, lawyers, and accountants, is also considered during the organizational feasibility analysis (Barringer, 2009). Entrepreneurial time availability and energy, as well as intellectual property and knowledge unique to the new firm, are all considered here. An understanding of the human resources and talent required for business expansion as the new venture scales up is sometimes overlooked in the organizational feasibility analysis. A future view is desperately needed in this situation.
The similarities between opportunity recognition, feasibility study, and business model are generally the result of necessary research aimed at reducing ambiguity and uncovering beneficial insights. Research also necessitates a thorough examination of assumptions, all of which leads to increased confidence in decision-making and a reduction in risk (Raffaelli et al., 2019).
The Needed Strategic Management And Entrepreneurship Link
This section gives an overview of the frameworks for entrepreneurship and strategic management. Following a brief overview of the nature of organizations, a review of the general entrepreneurship process is provided. The key ideas of strategic management are then discussed, providing context for the feasibility analysis process, as well as identifying points of congruence and inconsistency between the feasibility analysis process and its environmental and competitive context. As a result of this link, early creation of tactics to take advantage of points of congruence and minimize points of incongruence is possible.
The nature of organizations
Organizations are defined as goal-driven socioeconomic organizations populated by congeries with diverse interests that interact with the environment in a variety of ways (Scott, 2003). Closed-ended goals serve as benchmarks in the pursuit of open-ended goals, giving the criteria against which organizational performance and health are measured, whereas open-ended goals provide direction, purpose, and mission to the company (Hofer and Schendel, 1978). The strategic objectives of the organizations are instances of closed-ended aims (Drucker et al., 2006; Kaplan and Norton, 1992).
Organizations are open systems (Bertalanffy, 1968), and their existence and growth are ultimately dependent on their surroundings. The company has problems as it interacts with its external environment, ranging from favorable opportunities and collaboration to negative threats and resistance. The activities of the organization are primarily orchestrated to meet the problems posed by the environment (Fahey and Narayanan, 1986). The organization obtains required resources from the outside world (Pfeffer and Salancik, 1978) and then exports its product or service to the same environment or the entire world. Inbound logistics, operations, outbound logistics, and service are among the major value chain activities used by the business to generate and deliver its products or services to the external environment (Porter, 1985). Procurement, technology development, human resource management, and firm infrastructure activities are all examples of value chain support activities. For most new ventures, systemic evaluation of these value chains is difficult, and the feasibility analysis barely touches on these value chain activities because the alternatives’ possibilities are relatively unknown, and this uncertainty is compounded because the new venture does not yet know enough about its suppliers or customers.
Entrepreneurship And Entrepreneurs
Entrepreneurship is widely characterized as the process of forming new businesses in a context-dependent, resource-constrained, innovative, social, and economic environment (Aldrich, 2005). The ability of these new companies to connect available resources with available possibilities, as defined by the entrepreneur, creates value (Garnsey, 1998). By its very nature, the entrepreneurial process is accompanied with a high amount of uncertainty, tempered assumptions, and the entrepreneur’s essential willingness to bear some risk.
Because entrepreneurship is the process of forming a new company that offers an innovative product or service, or at the very least a “new” product or service in a different geographic location, there is no one-size-fits-all solution for any specific enterprise. The discovery of a legitimate opportunity and a suitable arrangement of resources to capture it are critical to the success of an entrepreneurial endeavour. In practical terms, an opportunity does not exist if resources are insufficient to allow it to be taken (Hulhert et al., 1997). A new venture’s failure is frequently caused by misidentification or excessively optimistic interpretation of opportunities, as well as underestimating of required resources or competitors. The feasibility analysis tries to create a realistic analysis of both the opportunity and the needed and/or available resources, but with the limits that have already been mentioned, resulting in data-driven estimations. The feasibility analysis is a useful tool, but it is incomplete without a strategic focus on sustainability, survival, and future change/growth.
Strategic Management In The Context Of The New Venture Start Up
At all levels of the organization, strategy is a collection of activities that establish a pattern while continually changing and adapting to diverse conditions and environments. Strategic management acts as a method for aligning an organization with its environment (Miles and Snow, 1984), with alignment achieved through internal activity coordination and outward adaptation to environmental conditions. Strategic decisions and commitments are made by identifying the firm’s and the environment’s strengths, weaknesses, opportunities, and dangers (Weihrich, 1982). These choices are “action-oriented” (Rumelt, 2010, p. 87) and address the issue “what are we going to do now?” (p. 4 in Spender, 2014). Strategic decisions differ from other types of decisions in that they are “critical in regard to the enterprise’s overarching business objective… [and] are complementary with one another” (Grant and Baden-Fuller, 2018, p. 324).
The strategy of the new enterprise is solely based on assumption-based analysis, but the strategy of the established firm is based on assumptions moderated by data-based operational practice and experience. The established firms’ future operations are predicated on prior performance, which is then modified with data-driven future expectations.
A successful strategy is founded on the organization’s core competencies, which are firm-specific and valuable, rare, expensive to copy, and non-substitutable (Barney, 1991), as well as the fit of these core competences with the competitive industry and broader societal environment. Environmental opportunities and dangers are discovered through meticulous study, and strategic implementation engages with them (Fahey and Narayanan, 1986). When opportunities are viewed through the prism of the organization’s core capabilities, a strategy emerges that highlights the organization’s uniqueness and differentiates it from its competitors (Porter, 1996). Competitors find it difficult to duplicate or match this specific use of core competencies since it creates a fit between the firm and its environment (Venkatraman, 1989). However, due to a lack of exact information about their own performance, as well as a lack of an experience-based reading of the competitive landscape, which is further compounded by the competitive response to the new venture’s introduction into that environment, the new venture is at a disadvantage.
Managers must have a strategic management competency in order to establish and execute a successful strategy. This capability necessitates managers to excel not just in the application of analytical techniques, but also in “judgment, insight, intuition, creativity, and social and communicative skills” (Grant and Baden-Fuller, 2018, p. 322).
In a strategic and market competitive sense, the typical four-part feasibility analysis ignores much of the context or originality of the organization to be built. Rather, it is created in isolation from the strategic management framework of resources and competencies, on which the organization’s success is predicated. According to the improved feasibility analysis described in this study, organization-specific and unique things should be recognized first as the foundation for the classic feasibility analysis’ four components. A perspective/focus that is related to the environment is required; otherwise, the longer-term strategic, sustainability, and survival advantage is overlooked or lost entirely. Because the venture’s success is based on its strategy’s effectiveness, these things would be identified with a focus on internal coordination and external adaptability, as well as how they relate to the strategy’s components: resources, scope, synergy, and competitive advantage (Hofer and Schendel, 1978). This not only clarifies the emphasis of the feasibility research, but it also warns of side-bar pathways that may divert attention away from the core.
Strategy focused organizational feasibility analysis
Context Dependency: Presence And Sufficiency
The standard four-part feasibility study already includes a lesser level of strategic awareness, as well as a degree of alignment between the feasibility analysis and the entrepreneurial process, which includes opportunity recognition, business model, and business plan. For example, during an assessment of an entrepreneur’s/entrepreneurial team’s managerial prowess, the assessment aims to guarantee that the team not only has the skill set required to operate the new enterprise, but also to find and obtain the resources required for its success. Entrepreneurs with a short track record, limited company development experience, and narrow expertise are less likely to be able to run the firm and quickly identify and fill resource shortfalls (Carayannopoulos, 2009). Still, the standard four-part feasibility analysis focuses on the near-term and on getting the new company off the ground. Planning for long-term profitability or the sequence of expansion, product/service development, and survival receives less attention, time, and energy.
Based on a very rigorous and detailed analysis of that environment, an organization’s strategy should focus on the distinctive features of the organization that allow it to achieve fit with its environment (Porter, 1996; Venkatraman, 1989). (Fahey and Narayanan, 1986). Because these criteria highlight originality, feasibility analysis success attributes must also look for distinctive aspects. This is a difficult task because the macro environment is continually changing, and thus organizational fit with the environment is also changing.
A feasibility analysis evaluates a potential organization’s chances of success. The feasibility of a prospective organization’s ability to achieve internal integration and external adaptation, as well as create a fit (Venkatraman, 1989) between the organization’s internal and external environments, is defined in strategic management terms. As a result, a feasibility analysis should be conducted based on a thorough understanding of the organization’s environment as well as the strategic fit and competitive advantage that the plan wants to achieve. This match is not just for the near future, but also for the long term (Figure 1).
When the feasibility analysis is combined with the strategic management framework, it will be more effective (see Figure 1). Prior to the previous four-step study, the new enhanced feasibility analysis focuses on the organization’s and its environment’s unique characteristics. This initial stage is more than generic; it must be investigated, developed, and built specifically for each individual company. Figure 2 depicts a four-phase methodology for conducting a sustainability and strategy feasibility examination. The organizational context’s specific attributes are defined in the first step. These features refer to the competitive marketplace, industry life-cycle stage, specific direct competitors, and ease of entry for new competitors in the unique organizational environment in which the organization intends to operate (Fahey and Narayanan, 1986). This approach looks beyond the here and now to the near future, highlighting that what “works” today may not function in the future.
Adding a strategic framework to the feasibility analysis improves the new venture’s capacity to discover “new discoveries and possibilities in the direction of corporate goals and targets [italics added].” Guven et al., 2020). Continuity must be maintained throughout the venture’s lifespan. The feasibility analysis, which is concerned with opening the doors to a new enterprise, cannot be carried out independently of the venture’s long-term strategy; it must be carried out in the framework of the long-term strategy.
Organization-specific success competencies are discovered in the second phase. This phase concentrates on the organization’s internal strengths and weaknesses. Core competencies are defined as “capabilities and resources that are valuable, scarce, expensive to imitate, and non-substitutable” (Barney, 1991), and comprise both material and human resources, as well as skill, experience, and ability. The essential four-part feasibility analysis is conducted in the third step, based on the outcomes of the first two phases. These skills should be tailored to the specific needs of each company and its environment, both now and in the future. In the fourth phase, the feasibility assessment items are re-examined and further developed, with the goal of discovering future possibilities and risks that may necessitate some strength items being reinforced and specific feasibility weakness items being mitigated. Organizational success is dependent on the ability of the organization to emphasize its uniqueness through a customised strategy, hence feasibility analysis items will differ from one organization to the next and must be defined for different companies and situations.
The approach given in this study shows how a strategic focus can be added to the typical four-part feasibility analysis as an augmented phase. According to the study, a strategic feasibility analysis based on the environmental circumstances of the to-be-created firm, with an emphasis on longer-term and sustainability features, as well as core competency internal qualities, would improve the new venture’s chances of success. The new five-part feasibility analysis will be more contextually relevant the more probable the organization will succeed.
When the study is driven by the context of the organization to be built in the long run and the principles of the strategic management framework, a more effective feasibility analysis is obtained (Barney, 1991; Porter, 1996; Venkatraman, 1989). The feasibility analysis is created for each specific firm and should be directed by the predicted strategic fit and competitive advantage it intends to attain in the coming years, rather than just the hurdles of getting the new endeavor off the ground. Once the new endeavor is started and known competing forces have responded to the new venture’s entry, the feasibility analysis should focus on the new venture’s competitive advantage in the long run.
Because certain aspects are generic, but many others are not, feasibility analysis factors should be generated as well as generically prescribed. The calculation is based on the broader and longer-term organizational environment, the organization’s core competences, the strategic fit that the organization requires and expects to achieve, and the required entrepreneur/entrepreneurial team competencies.
Beginning with opportunity recognition, the improved feasibility analysis conducts research to gather data and information. This study feeds the business model and company plan, which are both important components of the entrepreneurial process. The feasibility analysis is not a stand-alone work, but rather an important part of the entrepreneurial process that leads to organizational success, sustainability, growth potential, and durability.
This work adds to the body of knowledge in the field of entrepreneurship by increasing the feasibility analysis component of the process, which leads to stronger business models and business plans, and hence stronger companies with a better chance of surviving and thriving. The relationship between opportunity recognition, feasibility analysis, the business model, and the business plan, which are generally taught as independent entities with their own specific areas of specialty, is a critical learning for business students. It is necessary to place entrepreneurial scholarship more firmly into the research and learning streams common to business school students by focusing on long-term sustainability and survival through the addition of a longer-term strategic viewpoint.
Course Manual 1: Feasibility Importance
The Value of a Feasibility Study to a Business Owner
The dynamic nature of today’s business world has increased the risks and uncertainties that firms must deal with. Customers’ increasing awareness has resulted in a huge increase in competition, as more and more businesses try to meet their requirements. It has become critical for businesses to outperform their competitors when it comes to providing value to their customers. Surviving in the marketplace has gotten challenging, but getting into it is a completely different story. The failure of entrants is due to a lack of sufficient planning and thinking. As a result, conducting some form of analysis before entering the market becomes necessary to secure profitability. The feasibility study is a good example of this type of examination.
Why Should You, As A Company, Not Overlook The Value Of A Feasibility Study?
A feasibility study is a research method used to evaluate a prospective business’s potential, viability, and practicability. Feasibility studies have a few key characteristics:
• It is a good tool for predicting the possibility of a new company venture’s success or failure, and it may also be used to include new items or ideas into the business mix.
• A feasibility study entails all of the steps necessary to determine whether a business idea has a good chance of succeeding.
• It is a step-by-step procedure that aids in weighing the benefits and drawbacks of each phase before moving forward with the process;
• It delivers outcomes for crucial decisions such as moving forward with the idea, improving it, or abandoning it completely.
The feasibility study is the foundation of the business plan. A feasibility study also identifies alternatives and solutions that would otherwise go unnoticed. As a result, conducting this study before to committing business resources, time, and money to a business idea that may not work out as intended is crucial, as this just leads to additional investment to fix previous mistakes. The gathering of this information aids in making educated decisions about which path is the most profitable. This document examines all of the many aspects of the business’s incorporation and execution.
Course Manual 2: How It Works
How a Feasibility Study can ensure your business will be on track
• A well-executed feasibility study aids the company in gaining a broad image as well as a detailed examination of its potential business viability.
• It can learn more about a project before committing money, time, or other resources to it. • The feasibility study ensures that all decisions are taken before entering the business and discovering the flaws afterwards. Various business conduct choices are developed, and the most optimal one is chosen.
• This research gives essential information and a thorough examination of the complete business picture.
• It improves the success rate by evaluating a variety of parameters; it is also a good source of information for future business investors. They will be able to get a thorough picture of the venture’s many aspects.
• Feasibility studies are used in a variety of businesses, including the hotel, hospitality, restaurant, real estate, medical, office, and industrial sectors. To ensure that the business gets off to a good start, detailed instructions are supplied. This research aids in the smooth operation of the company and prepares the way for efficient operations.
• It allows the company to concentrate on both immediate and long-term objectives. The importance of this document cannot be overstated, since it determines whether the company succeeds or fails.
Prepare A Risk Assessment Strategy
Stumbling hurdles are unavoidable in the early stages of a business. On the contrary, if you are aware of the blocks ahead of time, your chances of falling are greatly reduced.
A risk assessment strategy will assist you in identifying all of the important risk variables that may develop during the course of your company’s operations.
You’ll then devise a strategy to mitigate those threats, ensuring that your company is spared any substantial damage.
Course Manual 3: Financial Feasibility
A feasibility study is used to determine the financial attractiveness of a company proposal. Any action cannot be carried out without financial resources. This includes estimating all costs that will be important from the start of the project to the operational costs in the later phases of its existence. The initial money is one of the most crucial charges. The goal of the research is to figure out how much money you’ll need to establish a business. After these have been determined, the potential sources of capital generation are presented. The return on investment is another crucial metric (ROI). The degree to which a particular activity generates monetary gains is developed. The future prospective cash flows are calculated. It also brings up the payback period, which is the amount of time it takes for an investment to break even.
Track Your financial Feasibility
Finance is the backbone of any company. As a result, it is a critical component of a feasibility study. Consider your start-up costs, cash flow, and ongoing expenses when evaluating the economic viability of your business plan.
Payroll proved to be the most expensive start-up cost, costing approximately $ 300,500 for five employees across the United States, according to a smart asset survey.
Financial feasibility research will assist you in determining the commercial success of your company by allowing you to analyze areas such as sales volume, price structure, return on investment, and profitability.
Course Manual 4: Economic Feasibility
Under any economic environment, starting a new firm, developing a new product line, or expanding into a new market is risky. An economic feasibility analysis, also known as an economic feasibility study or economic viability analysis, is a crucial stage in determining the costs, benefits, risks, and rewards of a new business initiative. Feasibility studies assist companies in planning operations, identifying opportunities and risks, and attracting investors. A feasibility analysis does not have to be complex or costly, but it must be comprehensive, taking into account all potential challenges and concerns.
A feasibility study determines the financial benefits that the company will receive. It aids in determining the extent to which the idea’s economic benefits outweigh the idea’s economic costs. An accurate comparison of all of the expenditures to be incurred and the benefits to be received is carried out. This not only assesses the project’s viability, but also steers the company toward avoiding an insufficient resource allocation. The idea’s believability is evaluated, and management obtains a detailed summary of all the costs it will incur from project inception to completion. When these costs are balanced against the potential benefits, the project’s overall economic viability is determined.
It’s time to determine business feasibility when the technical feasibility and market investigations are completed. The initial goal of this project is to develop a financial model for the business potential and conduct a break-even analysis. In other words, how much income earned from units sold is required to break-even, and over what period of time, depending on expenses of products sold, capital costs, and management and administration?
Following the development of a break-even analysis, the entrepreneurs can create accurate financial estimates for best and worst case situations. Strategic planning, milestone development, and venture valuation research will all benefit from these scenarios. The simple goal is to figure out how much revenue is needed to meet the founder’s and/or investors’ expectations for a return on investment.
The economic feasibility stage of business development is the time when a break-even financial model of the business endeavor is produced based on all costs connected with bringing a product from concept to market and producing sales sufficient to meet loan or investment requirements.
The goal of the economic feasibility study is to create a financial model for the business enterprise. This step’s output is a thorough integration of technical product information and market research into one or more break-even financial models.
This step includes all of the business activities required to establish a conceptual plan for a new endeavor based on one or more financial scenarios.
The following tasks must be done at the economic feasibility stage:
• Create a financial study to determine break-even scenarios based on unit prices, sales volume, and costs.
• Determine whether the profit margins on the business potential are sufficient to justify a venture.
• Examine the benefits of licensing the opportunity versus going it alone.
Milestones: A financial model that accurately represents the business possibility is a milestone.
Funding Sources:Personal funds, as well as friends and family, are sources of funding.
Business Information: The completion of the economic feasibility step usually results in a yes/no decision on the business endeavor, and if the decision is affirmative, identification of seed capital sources and uses for the development phase.
Course Manual 5: Market Feasibility
The market feasibility is an important aspect of the feasibility research. This section contains all of the relevant industry information. Important information is acquired, such as the industry’s size, retail value, and trends. The specific market is also examined, as well as the market’s future potential. To ensure the business’s success, a thorough assessment is essential. The competitive environment has also been prepared. As a result, the company chooses the best strategy for positioning itself against the competition.
The product/service description is also determined. All of the possibilities are reviewed and analyzed in order to select the most profitable option. A profile of possible customers is created, as well as an assessment of the market’s size in terms of potential buyers. Sales estimates can be estimated with the help of previous data. The target audience’s various places are investigated, and the most beneficial audience and location may be chosen. The suggested target audience’s level of acceptability of the delivery can be determined. It guarantees that the correct product is created for the correct customers. Pricing decisions and tactics are made. It guides decision-makers toward finding the most advantageous possibilities.