ga) 18) a BUSINESS FEASIBILITY STUDY OUTLINE ort BUSINESS FEASIBILITY STUDY AND DIMENSIONS OF BUSINESS VIABILITY The Business Foasibilly Study findings will be assossed by potential investors and stakeholders regarding their eracibilty ond depth of argument. The Business Feasibility Study places the findings df the Dimensions of Business Viebilily Medel assessment into a formal business vapor. It algo cligns the findinge with functional processes af an enterprise which an audience can easily understond [Thompson 20030). The Dimensions of Business Viability Model « diceussed in more datail in Appendix H tillad ‘Dimensions fof Business Viability”. Far the purposes of understanding the siructure of a Business feasibility Study the following represents the framework of the Dimensions of Business Viability (Thampeon 2003¢; Thompson 20039}: + Market Viability + Technical Viebilty + Business Model Viability EER nl} + Management Model Viability * Economic and Financial Model Viability + xi Strategy Viobilily Business and market anolysis will contribute considerably fo the Business Feasibility Study . Coneideration ehould be given to using treditional business cnalyis techniques such at SWOT, Parters Five Forces and PEST Although hey may not provide information which '5 a perfec fit to the proposed business model, they will provide a rong starting point for furure analysis. BUSINESS FEASIBILITY STUDY OUTLINE Because putting together a Business Plon is a significant investment of fime and money, the entrepreneur should make ure that there are ne major roadblocks on their road to business success, The Business Feasibility Study will assist in identifying such obstacles and determine the true viability of the Business Concept ENTREPRENEURSHIP AND BUSINESS INNOVATION ENTREPRENEURSHIP AND BUSINESSEada BUSINESS FEASIBILITY STUDY OUTLINE ©2005 The following represents © structural outline for a Business Feasibility Study: Cover Sheet PvE Ro) Executive Summary Table of Contents Intreduetion Product oF Service Technology Marke! Environment Competition Industry Business Modal Marketing ond Soles Strategy Production/Operaling Requiremenis ‘Management and Personnel Requicemonts Intellectual Property Rogulations/Envirormental Issues Critical Risk Factors 7S Financial Projections Balance Sheet Projections Income Statement Projections Cosh Flow Projections Break-even Analysis Copital Requirements & Strategy Recommendations & Findings Conclusion i ENTREPRENEURSHIP AND BUSINESS INNOVATION RI: ENTREPRENEURSHIP AND BUSINESSNg 12) BUSINESS FEASIBILITY STUDY OUTLINE EXECUTIVE SUMMARY oie ‘The Executive Summary is o summary of all key sections of the Business Feosibiliy Study and should work os © separate, stand- alone document. Interested parties will read thie eection firet in conjunction with @ glance at the financial section when deciding whether or not they read the rest of the plan. Key points to remember include: ER ro) + Write this document ailer the content section of Business Feasibility Study ie completed, + Although the Executive Summary is writen last tis presented first + The Executive Summary should be no more than ‘one poge long, PRODUCT/SERVICE + Describe the enterprises, product or service in simple language. Give product mix if the enterprise vill initially be focusing on more than one product. Describe how customers would use and buy the product or service. Give enough dete fo help the reader judge the eHectiveness at your marketing ‘ond positioning plans, Describe key components or row materials that will be used in the product, how the enterprise will source these end how available they are Describe plans to test the product fo ensure it works 3 planned and is sufficiently durable, rugged, secure, ele. leg. consumer produc! test, beta tes! with major company, etc) Describe plans to upgrade product or expand product line TECHNOLOGY + As necessary, provide further technical infermotion bout the produel or sorvico, * Describe additional or ongoing reseorch ond development need:. z Q = By i} es a a a a a ES 2 a 4 & 4 z FA 2 FA rs 4 & a is F ENTREPRENEURSHIP AND BUSINESSAPPENDIX | BUSINESS FEASIBILITY STUDY OUTLINE 2005 + Keep the description in lay terms and/or explain technical terms enough lo be understood ky business-sowy but not necesserily technology expert readers, OR Eh] INTENDED MARKET ENVIRONMENT Target Mork + Define and describe the target market(s). Distinguigh between end usere and customer. * Be clear how end users and customers benefit How end why would they buy the produc! or senice? + What is the projected need(s) your product or services fulfill so beautifully? How big is the ‘opportunity? Whot level of acival marke! demand can be mectured versus projected? For business-to-business markels, include: + What industry is the target market in, who ore the key players, frequeney of produe! purchase, replacement needs versus expansion, purchasing process + Estimates of market size, intioltorgeted geographic crea, enterprise's targeted market share. For businass-to-consumer mares, include: + Demegraphie factors, such as income level, age ronge, gender, educational level, ethnicity + Peychographic factors + Relevant behavioural factors such es frequency oF produel purchase and shopping behaviour. = eS Ei 5 ro = = a ey = Fa Fs F FI = Ei = = FA 2 2 = & & Fe = Fr ENTREPRENEURSHIP AND BUSINESSEgg 312) a LUNI gl a0s)|s] HUA Med Le] POLONIA) SIs eine COMPETITION + Describe direct and indirect competition (as it pertains to the target markets only) For key competitars, give markat share, resources, product and markel focus, goals srotegies, slrengths ‘and wooknesees, OR on List all key borriers to entry. Describe whot is unique about the enterprise’s produc/service compared tothe competition. Make ure thie is consistent with the unmet need of the forget markets) State how difficult will be for competitors to copy the enterprise's product/service. Describe how competitors will mest likely rece! to the enierprise’s product launch and the enterprise's response strategy. Include estimates of the fime it might toke © competitor to copy your product or INDUSTRY + Cleotly define and describe the industry in which the enlerprise operates. Include the size, growth rate, ‘and outlook. Define key indusity segments ond state where enterprise fits in + Describe demand and supply factors and trends. + Desctibe the lorger forces that drive the market -e.g innovation, cultural change, regulation, whatever. BUSINESS MODEL + Describe the proposed enterprise's business model. How will he business generate revenue ((.e. sell the product; charge licensing, retoil soles)? Will here be recurring revenue? + Describe the model in enough deiail 1o support financial projections presented later. eae sie a Ie ra Coy Ure] ENTREPRENEURSHIP AND BUSINESSy Nga) 12a BUSINESS FEASIBILITY STUDY OUTLINE oir MARKETING AND SALES STRATEGY + Loy out the bosie marketing end sales slrategies. Discuss any strategie partnership the enterprise has or is planning to form. Do thay provide ertical market access or other resources? What care their rights and responsibilities? OR] Describe the dictribution strategy (cell direct to customers through soles force, direct mal or Internet; sell through manufacturers’ representatives, wholesolers, distributors, or retailers). Provide projected profit margin or mark-up expectations, commissions, and other expected compensation (co-op advertising, slotting fees, ete.| Describe the pricing strategy ond justification. Include the expected grote profit mergine Describe intendad ypical payment terme tor Other issues and their impact - e.9., warranties Quontity the marketing budget for at leost the first year (ideally three! PRODUCTION/OPERATING REQUIREMENTS + Describe enough of how and where the enterprise will manufacture, source or creato and doliver the final product or service to he able ta estimate costs. What physicol premises ore required? Give locotion, size, age, condition, and capacity of planned production and warehouse fecilities and number of shifts planned, Will spoce be ovmned or leased? Will rnovations be required? Ai what cost? How complex is the manufacturing process? Describe equipment needed ond costs. aye oi a CTA See oo ated | ENTREPRENEURSHIP AND BUSINESSClg) La BUSINESS FEASIBILITY STUDY OUTLINE Corr If enierprise will outsource production or disiribute others’ materials: Deteribe supply sources. ra tources of supply recdily vailablee ero) Cutline the relevant contact terms, manufacturer's capacity, minimum order and tooling requirements, reputation, size or financial condition. Describe the enterprise's plon o proled its propristory processes ond rade secrels and qualily control. enterprise it providing a serviee *+ How will he service be designed, delivered, measured and improved? What stakeholders exst, who will be trading partners with the business? What will be the terms of the contract? Are there substitute pariners? MANAGEMENT AND PERSONNEL a + Listthe proposed key managers, ills, esponsibilties, relevanl background, experience, skills, costs r + Sketch personnel requirements: what people will be needed now, in a year, inthe lang term? What sills ‘and qualifications are raquired and what financial implications cesult® Yi INTELLECTUAL PROPERTY + Briotly deceribe patente, copyrights, and trademarks dobteined and in process. Give all names that ore fn istued patents; summarise results of patent searches, lfenterprise is operating undo a licencing egreement oF potent assignment, give nome of licenser/assignor, describe key terms (e.g. exclusivity, rights ond responsibiliies), and give termination ar renewal date, 2 a Ei S ro a s a FA a FA S Fy Pe FA E} 4 = Fi 2 Fy = 2 a] Fy = Fe ENTREPRENEURSHIP AND BUSINESSED APPENDIX | BUSINESS FEASIBILITY STUDY OUTLINE 2005 + Ifthe business concept is @ science (research orientated) business, the intellectual property is exiremely imporiant. The protocols in managing them, portieulorly atthe intial plonning stage are atical. For exemple, if¢ researchor hos published their research findings in an industry journal or fon the internet prior to ensuring intellectucl ‘ownership through copyrigh’ or patent, then the knowledge is considered in he open domain and therefore cannol be considered restricted. eR oat) (Oten business plonning arzeciated withintellecuel property must occur prior to a business (science ~ research & development) concep! being developed and validated so that the sirengih and ownership ofthe findings can be ossured. REGULATIONS/ENVIRONMENTAL ISSUES Outline non-economic forces that might affeci the prospects of the frm 193 + Key government regulations and the enterprise's plane for compliance. ‘Any environmentel problems on property, plons to address the probleme, ond their cost Enviromental faciors ie. waste disposol plans, if needed. eer Political stability, if opplicable. Any othor regulatory or politcal issues. This may deol with proposed industry regulatory changes, stoble versus unstable environments. PaO DED oe Cola) Se emo sc seca} ENTREPRENEURSHIP AND BUSINESSrae La BUSINESS FEASIBILITY STUDY OUTLINE or CRITICAL RISK FACTORS. Describe citcal risks faced by the enterprise [curently or in the future). Much of these components will arise from the SWOT, Porters Five Forces and PEST analysis. Examples include internal characteristics, uniqueness, investment, economic forecasts, change in regulations and technical obsolescence, etc. Be sure lo describe how you will mitigate each risk POE START-UP SCHEDULE Sketch the major events in the life of the venture by listing the ‘imetable/dendlines for completion of phases of venture star-up Be sure fo demonstrate the relaionship of events ond to keep the milestones, Financial requirements, personnel requirements, ele consistent. establish @ formal project schedule for the startup process FINANCIAL PROJECTIONS. Include o narrative highlighting key underlying ossumptions and the logic governing your projections. Indude financial history, if tony (e.g. equily and debi), ond likely financing stages including inlormetion about funding sources and uses. Provide e page or Mo of footnotes for each financial spreadsheet attached explaining the ‘ossumations behind each major ine item. Some core components of thie port of the report are listed below. + Balance Sheet Projection¢ - Three Yeors & Highlight Inflows of Copital, Income Projections - Year 1: Monthly or quotterly, years 2 ond 3: Annuclly, Cosh Flow Projections - Year 1: Manthly or quarter; Yeors 2 and 3: Annually, Break-Even Analysis - When will the firm begin to tum a profit, and Cos! Benefit Analysis - Will the business provide 0 Viable return on invesiment for the owner ondior the ENTREPRENEURSHIP AND BUSINESS INNOVATION ENTREPRENEURSHIP AND BUSINESS.2:18 PM APPENDIX | BUSINESS FEASIBILITY STUDY OUTLINE CAPITAL REQUIREMENTS & STRATEGY + How much funding (equity wil the firm need, anc when? errs What projected revenue or assets does the proposed business have to secure the financing? PORE ec) Whot sources will provide the funding, i. investors, lending institutions etc? What ratio of debt to equity financing will ‘When will investors begin to see a eetucn? What is the expected retuin on investmont (ROI)? HOW TO CONDUCT A BREAK EVEN ANALYSIS The entreareneur will need! to understand the following terms in order fo understand and communicate the break-even onalysis: + Selling Price (SP) - Represents the price that each unit will sll or reall for, The SP is generally expressed os revenue in dollars per unit Variable Costs (VC) - Consis! of cos's tho! vory in proportion to sales levels. They include direct material and labour costs, the voridale part of manufacturing operating cos, tranzacrtation and sales expenses. The VC is usualy expressed aso cost in dollars per unit Contribution Margin (CM) - Equal to sales revanuee less variable costs oF SP - VC. area Fixed Costs (FC) - Thoso costs are considored those thet remain constant within the projected range of soles levels. These can include fects costs, general end administrative costs, cacital inlerest ond depreciation expenses. The FC is Usually expressed as a lump-sum cost in dellars, Units (X) - Represents the number of ilems sold fF produced, For the purpose of © break-even calculation, itis assumed that the number of unis sold during a period iz equal to the number of Units produced during the same period, RT OF SUCCESSF Na PM EDU a, ENTREPRENEURSHIP AND BUSINESSENaa ab La BUSINESS FEASIBILITY STUDY OUTLINE ar To calculate break-even, the entrepreneur should determine the variables: FC, SP and VC. The process of separating the selling price and variable costs is not alays straight forward and aliematively @ contribution margin is given. The CM can sill be Used in the break-even calculation, replacing the SP and VC. PONE eS) To colculote the number of units sold ( or produced } ot breaks SP(X) = VEO) + FC Allewnatively the formula to solve for X, the number of units of break-even wil give you: X= FC/(SP-VC) or = FCM The formula to colculate the break-even revenue in S is os Fallows: Breok-even revenue (8) = Break-even unils x Selling Price FINAL FINDINGS & RECOMMENDATIONS Recommendations from the feasibility study regarding the viability cof putting the business idea into practice should be honest, short cand direct. When moking the findings or recommendations arising from the Business Feasibility Study discussing the viability of the proposed business venture in terms of: + Markt Viability + Technical Viability + Business Medel Viebilty + Management Model Viability + Economic and Financial Medel Viobilty + But Strotegy Viability A significant component of the findings should related to the likelinoed of success, projected return on investment and how any identifies rick should be mitigated ‘The purpose of the feesibily study is to consolidate an argument based on foctual evideneo and analysis to help justify your decision in relation to tho core question of whether the business venture in PNP a Ula] ENTREPRENEURSHIP AND BUSINESSPda) Lat BUSINESS FEASIBILITY STUDY OUTLINE questions is actually viable SOURCES OF HELP To writ the Feesibilty Study, you need to go to othors tor help ‘and information. Look at recent history fo demonstrate the best ‘approach or business model. Suggested sources ore: POE + Business Enterprise Centres - Information, business counselling, training workshops, research fociliies, hack uo and support feces, networking and publications. cone iceoal fancies ty say egal srucure suggests, std ISTopaing ean soul ond appl con, heck bouke buying an ening buries Solicitor - Contracts, leases, legal ‘opresontation, Bank Finance, information ond support, leasing, ‘advies on contracts, specialist sores. Business Advisers/Consullants - Someone folk specialist advice, mentoring, negotiations, ‘raining, back-up Trade Astocations - Membership and support, group deals, laining, advice, research, industrial ‘oletions expertise, and networking, Potential Suppliers - Information, back up, promotional suppor, training, ee Sources of Information - Own research, government departments, information and Dubliations availble from many departments Including the Australian Buroau of Statistics. Loeal eaunci demographic reports, publicctions, sudies ond future plans for development Competitors - Check the competion, their location, layout, advertising and service. University Libraries and Online Entrepreneurship Reroureet Remember 9 Busine: Feceiblty Shug suppade the decision making frocers os fo whcther the Business Concept iin lad wale: A No Sibi onsner is sil 9 postin est st saves He erreprereve ‘wating fran resouree and valuable ne The Bsmec oasty $iidyouline andthe Susines Pan oulire re very sina in male and ote normaly dested fo dovetail In pursul of eliindes oh PN ee eo ENTREPRENEURSHIP AND BUSINESS.