This chapter discusses conducting a feasibility analysis for a new business concept. It covers preparing for the analysis by drafting an initial business description and examining the industry. The analysis involves assessing the business concept, industry and market, product or service, and founding team. Financial needs are also evaluated, including startup costs, working capital requirements, and break-even point. The chapter provides examples of areas and questions to consider in each part of the analysis and outlines a format for a written feasibility report.

1. Chapter 5
Conducting a
Feasibility
Analysis

2. Copyright © Houghton Mifflin Company. All rights reserved. 5 | 2
Learning Objectives
• Prepare to conduct a feasibility analysis
• Understand the feasibility tests
• Draw conclusions from the analysis

3. Copyright © Houghton Mifflin Company. All rights reserved. 5 | 3
Preparing for Feasibility Analysis
• Is there a customer and a market of sufficient
size to make the concept viable?
• Do the capital requirements to start, based on
estimates of sales and expenses, make
sense?
• Can an appropriate start-up or founding
team be assembled to effectively execute the
concept?

4. Copyright © Houghton Mifflin Company. All rights reserved. 5 | 4
Preparing for Feasibility Analysis
(continued)
• Pre-Feasibility Quick Look Assessment
– draft description of the business
– examine the industry
– identify the product’s customer benefit
– examine the capabilities and experience of
management team

5. Copyright © Houghton Mifflin Company. All rights reserved. 5 | 5
Figure 5.1: The Process
of Feasibility Analysis

6. Copyright © Houghton Mifflin Company. All rights reserved. 5 | 6
Areas To Be Analyzed
And Questions To Ask
• Business Concept
– Who is the customer?
– What is the value proposition?
– What is the product/service being offered?
– What does the value chain look like?
– Which distribution channel alternatives are available,
and which customers will be served by them?
– Are there ways to innovate in the distribution
channel?

7. Copyright © Houghton Mifflin Company. All rights reserved. 5 | 7
Areas To Be Analyzed And Questions
To Ask (continued)
• Industry And Market/Customer
– What are the demographics, life cycle stage, patterns of
change, and trends in this industry?
– Are there any barriers to entry? If so, what are they?
– What is the status of technology and R&D expenditures?
– What are typical profit margins in the industry?
– Who are the opinion leaders in the industry and how do they
affect the industry?
– What are distributors, competitors, retailers, and others
saying about the industry?
– What are the demographics of the target market?
– What is the profile of the first customer? Are there other
potential customers?
– Have you talked with customers?
– Who are your competitors, and how are you differentiated
from them?

8. Copyright © Houghton Mifflin Company. All rights reserved. 5 | 8
Areas To Be Analyzed And Questions
To Ask (continued)
• Product/Service
– What are the features and benefits of the product or
service you plan to offer?
– What product development tasks must be
undertaken, and what is the timeline for completion?
– Is there potential for intellectual property rights?
– How is the product or service differentiated from
others in the market?

9. Copyright © Houghton Mifflin Company. All rights reserved. 5 | 9
Areas To Be Analyzed And Questions
To Ask (continued)
• Founding Team
– What experience and expertise does each
team member have?
– Where are the gaps and how will you fill
them?

10. Copyright © Houghton Mifflin Company. All rights reserved. 5 | 10
Areas To Be Analyzed And Questions
To Ask (continued)
• Financial Needs Assessment
– What are your start-up costs (…capital and noncapital)?
– What are your working capital requirements?
– What are your fixed costs?
– How long will it take to achieve a positive
cash flow from the revenues generated?
– What is the break-even point for the
business?

11. Copyright © Houghton Mifflin Company. All rights reserved. 5 | 11
Feasibility Analysis Outline
for a Written Report
• Cover page
• Executive summary
• Title page
• Table of contents
• Feasibility decision
• Business concept

12. Copyright © Houghton Mifflin Company. All rights reserved. 5 | 12
Feasibility Analysis Outline for a
Written Report (contd)
• Industry/Market Analysis
• Founding team
• Product/Service development plan
• Financial plan
• Timeline
• Bibliography
• Appendix

13. Copyright © Houghton Mifflin Company. All rights reserved. 5 | 13
New Venture Checklist
Have you…
• identified an opportunity that you would like
to pursue?
• conducted a quick look assessment to see if
a feasibility study is warranted?
• undertaken a feasibility analysis to
understand the risks?
• drawn a conclusion as to whether to move
forward with this opportunity?