Chapter 5 conducting a feasibility analysis and crafting a winning business plan


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Chapter 5 conducting a feasibility analysis and crafting a winning business plan

  1. 1. Chapter 5 Conducting a Feasibility Analysis and Crafting a Winning Business Plan planning is bringing the future into the present so that you can do something about it now- Alan Lakein if u wait until all the lights are “green”before you leave home, you’ll never get started on your trip to the top. Zig Ziglar
  2. 2. Conducting a Feasibility AnalysisDefinition of feasibility studyThe process of determining whether or notentrepreneur’s idea is a viable foundation forcreating a successful business.Elements of a Feasibility Analysis1) Industry and market feasibility2) Product or service feasibility3) Financial feasibility
  3. 3. Conducting a Feasibility Analysis 1) Industry and market feasibility Good starting point- A basic analysis of the industry and targeted market segments- The focus-- 1) To determine how attractive an industry is overall as a “home” for a new business- 2) To identify possible niches a small business can occupy profitably.
  4. 4. Conducting a Feasibility AnalysisThe Five Forces Modela model that recognizes the power of fiveforces-rivalry among competing firms,bargaining power of suppliers, bargainingpower of buyers, threats of new entrants, andthreat of substitute products or services-on anindustry. Michael E. Porter.
  5. 5. Conducting a Feasibility Analysis2) Product or Service Feasibility Analysis an analysis that determines the degree to which a product or service idea appeals ot potential customers and identifies the resources necessary to produce the product or provide the service. Two methods that can be used:a) Primary research Information that an entrepreneur collect firsthand and analyzeb) Secondary research Information that has already been compiled and is available for use, often at a very reasonable cost or sometimes even free.EG: customer surveys and questionnaires, focus group, market research, articles, local data and www
  6. 6. Conducting a Feasibility AnalysisPrototypesan original, functional model of a new productthat entrepreneurs can put into the hands ofpotential customers so they can see it, test itand use it.In home trialsa research technique that involves sendingresearchers into customers’ home to observethem as they use the company’s product orservice.
  7. 7. Conducting a Feasibility Analysis3) Financial Feasibility Analysis-the major elements tobe included in a financial feasibility analysis include theinitial capital management, estimated earnings andresulting return on investment. a) Capital requirements-estimated start up capital. b) Estimated earnings-an entrepreneur should forecast the earning potential of the proposed business. c) Return on investment-the final aspect of the financial feasibility analysis combines the estimated earnings and the capital requirements to determine the rate of return the venture is expected to produce.
  8. 8. Crafting a Winning Business Plan Why Develop a Business Plan? Business plan A written summary of an entrepreneur’sproposed business venture, its operational and financial details, its marketing opportunities and strategy, and its managers’ skills and abilities.
  9. 9. Crafting a Winning Business Plan The elements of a Business Plan 1) Title page and table of contents 2) Executive summary 3) Vision and mission statement 4) Company history 5) Business and industry profile 6) Business strategy7) Description of the company’s product or service 8) Marketing strategy 9) Documenting market claims 10) Competitor analysis 11) Description of the management team 12) Pro forma (projected) financial statements 13) The loan or investment proposal
  10. 10. Crafting a Winning Business PlanWhat Lenders and Investors Look For in a Business Plan Five C’s of credit Criteria lenders and investors use to evaluate the creditworthiness ofentrepreneurs seeking financing capital, capacity, collateral, character and conditions.