Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Introduction to feasibility_studies_97


Published on

Published in: Business, News & Politics

Introduction to feasibility_studies_97

  1. 1. feasibility study...prepared by:mohammadmarwan al ashi(section1-2)1Feasibility Studyfirst term 08/09prepared by :Mohammad MarwanAl ashi
  2. 2. feasibility study...prepared by:mohammadmarwan al ashi(section1-2)2Section 1: introduction tofeasibility study• Learning objectives :1. Determine the economical meaning offeasibility study.2. Important of Feasibility Studies.3. The Components of a Feasibility Study4. Reasons Given Not to Do a Feasibility Study5. Reasons to Do a Feasibility Study6. Pre-Feasibility Study
  3. 3. feasibility study...prepared by:mohammadmarwan al ashi(section1-2)3Definition of Feasibility Studies:• As the name implies, a feasibility study is ananalysis of the viability of an idea. Thefeasibility study focuses on helping answer theessential question of “should we proceed withthe proposed project idea?” All activities ofthe study are directed toward helping answerthis question.
  4. 4. feasibility study...prepared by:mohammadmarwan al ashi(section1-2)4Definition…• Before you begin writing your business plan youneed to identify how, where, and to whom youintend to sell a service or product. You also needto assess your competition and figure out howmuch money you need to start your business andkeep it running until it is established.• Feasibility studies address things like where andhow the business will operate. They provide in-depth details about the business to determine ifand how it can succeed, and serve as a valuabletool for developing a winning business plan.
  5. 5. feasibility study...prepared by:mohammadmarwan al ashi(section1-2)5Important of Feasibility Studies• List in detail all the things you need to makethe business work;• Identify logistical and other business-relatedproblems and solutions;• Develop marketing strategies to convince abank or investor that your business is worthconsidering as an investment; and• Serve as a solid foundation for developingyour business plan.
  6. 6. feasibility study...prepared by:mohammadmarwan al ashi(section1-2)6Importance ….• Even if you have a great business idea you stillhave to find a cost-effective way to marketand sell your products and services. This isespecially important for store-front retailbusinesses where location could make orbreak your business.
  7. 7. feasibility study...prepared by:mohammadmarwan al ashi(section1-2)7Importance….• For example, most commercial space leasesplace restrictions on businesses that can havea dramatic impact on income. A lease maylimit business hours/days, parking spaces,restrict the product or service you can offer,and in some cases, even limit the number ofcustomers a business can receive each day.
  8. 8. feasibility study...prepared by:mohammadmarwan al ashi(section1-2)8Importance….• If the results show that the project is not asound business idea, then the project shouldnot be pursued. Although it is difficult toaccept a feasibility study that shows theseresults, it is much better to find this outsooner rather than later, when more time andmoney would have been invested and lost.
  9. 9. feasibility study...prepared by:mohammadmarwan al ashi(section1-2)9The Components of a FeasibilityStudy• Market Feasibility:• Technical Feasibility:• Financial Feasibility:• Organizational Feasibility:• Conclusions:
  10. 10. feasibility study...prepared by:mohammadmarwan al ashi(section1-2)10Part 1 : The Components of a Feasibility Study• Market Feasibility: Includes a description ofthe industry, current market, anticipatedfuture market potential, competition, salesprojections, potential buyers, etc.
  11. 11. feasibility study...prepared by:mohammadmarwan al ashi(section1-2)11Market feasibility …• The primary area that the feasibility studyneeds to address is potential marketopportunities for the cooperative. If anadequate level of demand does not exist forthe product and the decision maker does notknow how to differentiate its product so thatit can compete with established industryplayers, then the proposed venture should notbe pursued.
  12. 12. feasibility study...prepared by:mohammadmarwan al ashi(section1-2)12Questions of Market feasibility …• What type of industry is the decision makerplanning to enter? What are its primary features?• What are the possible target markets for thedecision maker ’s product? What demographiccharacteristics do they possess? How large arethese markets? Where are they located? Is themarket expected to grow in the future?• Will the decision maker be competing in amature industry or a growth industry?
  13. 13. feasibility study...prepared by:mohammadmarwan al ashi(section1-2)13Continue :Questions of Market feasibility …• Who are the decision maker ’s competitors in this market?How large are these competitors? How established arethey? How do they price their goods? How will thesecompetitors react to the entrance of the decision maker ?• How will the decision maker differentiate its product fromthose of its competitors? What are the competitors’strengths and weaknesses, and how would the decisionmaker compare against them? How does the decisionmaker plan on gaining market share?• What is the projected market share for the decision maker?
  14. 14. feasibility study...prepared by:mohammadmarwan al ashi(section1-2)14Data of Market feasibility …• Data that can help to answer these questions may be found inalready-published information or through primary researchactivities such as market surveys conducted on behalf of thedecision maker . Relevant information may be found throughvarious sources such as government statistical publications, tradejournals, industry reports, or companies . The Internet has alsoopened up new routes to obtaining information.• The answers to market-related questions should help the decisionmaker develop realistic estimates of the projected demand for thedecision maker ’s product for the first several years of operation.Based on this projected demand, the decision maker candetermine its anticipated level of business volume, which is neededin order to design the processing facilities. If the projected businessvolume is not large enough to justify a processing facility, then theproject is not feasible.
  15. 15. feasibility study...prepared by:mohammadmarwan al ashi(section1-2)15Part 2 : The Components of a Feasibility Study• Technical Feasibility: Details how you willdeliver a product or service (i.e., materials,labor, transportation, where your business willbe located, technology needed, etc.).
  16. 16. feasibility study...prepared by:mohammadmarwan al ashi(section1-2)16Importance of technical feasibility• What type of equipment and technology will the businessneed to produce its product? What are the costs involved?This includes both the initial purchase and installation costsof the equipment as well as the operational costs ofrunning the equipment.• Who are the potential suppliers of this equipment? Whereare they located? What sort of service and warranties dothey provide? How long will it take to acquire theequipment and begin operations?• Based on its projected business volume, how much rawproduct will be required by the decision maker ? What arethe quality specifications? Will the decision maker have asufficient membership base that can provide the rawmaterials?
  17. 17. feasibility study...prepared by:mohammadmarwan al ashi(section1-2)17questions of technical feasibility…• What are the possible locations for the decision maker’s facility? What size of facility is needed? What are thecosts of the building? Does the proposed location haveadequate access to infrastructures and services such asmajor highways, railways, and utilities? Will thedecision maker build its own facility, or purchase anexisting location?• Where will the facility be located relative to thedecision maker ’s customers? Who will be responsiblefor the transportation of goods between the facilityand the market? What are the transportation costsinvolved?
  18. 18. feasibility study...prepared by:mohammadmarwan al ashi(section1-2)18Part 3 :The Components of a Feasibility Study• Financial Feasibility: Projects how much start-up capital is needed, sources of capital,returns on investment, etc.
  19. 19. feasibility study...prepared by:mohammadmarwan al ashi(section1-2)19Questions of financial feasibility:• What are the total start-up costs required inorder to begin operations? For instance, what arethe capital costs of the land, plant andequipment, and other start-up costs such as legaland accounting costs?• What are the operating costs involved? Theseinclude the daily costs involved in running thebusiness, such as wages, rent, utilities, andinterest payments on outstanding debt. Thesewill determine the cash flow requirements of thedecision maker .
  20. 20. feasibility study...prepared by:mohammadmarwan al ashi(section1-2)20Continue : Questions of financial feasibility…• Based on the estimated demand, what are thedecision maker ’s revenue projections? How willthe decision maker determine its pricingarrangements?• What are the possible sources of financing for thedecision maker ? Who are potential lenders?What will be their required terms and limitationsof borrowing?• Based on the estimated revenues and costs, whatis the projected profit(loss) of the decision maker? What is the break-even point?
  21. 21. feasibility study...prepared by:mohammadmarwan al ashi(section1-2)21Part 4 : The Components of a Feasibility Study• Organizational Feasibility: Defines the legaland corporate structure of the business (mayalso include professional backgroundinformation about the founders and whatskills they can contribute to the business).
  22. 22. feasibility study...prepared by:mohammadmarwan al ashi(section1-2)22Part 5 : The Components of a Feasibility Study• Conclusions: Discusses how the business cansucceed. Be honest in your assessmentbecause investors won’t just look at yourconclusions they will also look at the data andwill question your conclusions if they areunrealistic.
  23. 23. feasibility study...prepared by:mohammadmarwan al ashi(section1-2)23Conclusions…• The conclusions of the feasibility study shouldoutline in depth the various alternativesexamined and the implications and strengthsand weaknesses of each. The project leadersneed to study the feasibility study andchallenge its underlying assumptions. This isthe time to be skeptical.
  24. 24. feasibility study...prepared by:mohammadmarwan al ashi(section1-2)24Conclusions…• Don’t expect one alternative to “jump off the page” asbeing the best one. Feasibility studies do not suddenlybecome positive or negative. As you accumulateinformation and investigate alternatives, neither apositive nor negative outcome may emerge. Thedecision of whether to proceed often is not clear cut.Major stumbling blocks may emerge that negate theproject. Sometimes these weaknesses can beovercome. Rarely does the analysis come outoverwhelmingly positive. The study will help you assessthe tradeoff between the risks and rewards of movingforward with the business project.
  25. 25. feasibility study...prepared by:mohammadmarwan al ashi(section1-2)25Conclusions…• Remember, it is not the purpose of thefeasibility study or the role of the consultantto decide whether or not to proceed with abusiness idea, it is the role of the projectleaders.
  26. 26. feasibility study...prepared by:mohammadmarwan al ashi(section1-2)26Summary:• Feasibility studies contain comprehensive,detailed information about your businessstructure, your products and services, themarket, logistics of how you will actuallydeliver a product or service, the resources youneed to make the business run efficiently, aswell as other information about the business.
  27. 27. feasibility study...prepared by:mohammadmarwan al ashi(section1-2)27Reasons Given Not to Do aFeasibility Study• Project leaders may find themselves underpressure to skip the “feasibility analysis” stepand go directly to building a business.Individuals from within and outside of theproject may push to skip this step.
  28. 28. feasibility study...prepared by:mohammadmarwan al ashi(section1-2)28Continue : Reasons Given Not to Do aFeasibility Study…• We know it’s feasible. An existing business is alreadydoing it.• Why do another feasibility study when one was donejust a few years ago?• Feasibility studies are just a way for consultants tomake money.• The feasibility analysis has already been done by thebusiness that is going to sell us the equipment.• Why not just hire a general manager who can do thestudy?• Feasibility studies are a waste of time. We need to buythe building, tie up the site and bid on the equipment.
  29. 29. feasibility study...prepared by:mohammadmarwan al ashi(section1-2)29Continue : Reasons Given Not to Do aFeasibility Study…• The reasons given above should not dissuadeyou from conducting a meaningful andaccurate feasibility study. Once decisions havebeen made about proceeding with a proposedbusiness, they are often very difficult tochange. You may need to live with thesedecisions for a long time.
  30. 30. feasibility study...prepared by:mohammadmarwan al ashi(section1-2)30Reasons to Do a Feasibility Study• Conducting a feasibility study is a goodbusiness practice. If you examine successfulbusinesses, you will find that they did not gointo a new business venture without firstthoroughly examining all of the issues andassessing the probability of business success.
  31. 31. feasibility study...prepared by:mohammadmarwan al ashi(section1-2)31Continue : Reasons to Do a FeasibilityStudy• Gives focus to the project and outline alternatives• Narrows business alternatives• Surfaces new opportunities through the investigative process• Identifies reasons not to proceed• Enhances the probability of success by addressing and mitigatingfactors early on that could affect the project• Provides quality information for decision making• Helps to increase investment in the company• Provides documentation that the business venture was thoroughlyinvestigated• Helps in securing funding from lending institutions and othersources
  32. 32. feasibility study...prepared by:mohammadmarwan al ashi(section1-2)32Continue : Reasons to Do a FeasibilityStudy• The feasibility study is a critical step in thebusiness assessment process. If properlyconducted, it may be the best investment youever made.