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? So Ask Yourself… So What, Who Cares and Why You…?

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 “The One Page Business Plan”

5. Copyright © Houghton Mifflin Company. All rights reserved.5 | 5 “The One Page Business Plan” 1 Page, 5 Points, 5 Paragraphs… Executive Summary Value Proposition Markets and Customers Business Model Financial Summary

6. Copyright © Houghton Mifflin Company. All rights reserved.5 | 6 Figure 5.1: The Process of Feasibility Analysis

7. Copyright © Houghton Mifflin Company. All rights reserved.5 | 7 Areas To Analyze 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?

8. Copyright © Houghton Mifflin Company. All rights reserved.5 | 8 Areas To Analyze Questions To Ask (continued) Industry And Market/Customer –What are the demographics, trends, patterns of change, and life cycle stage of the 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?

9. Copyright © Houghton Mifflin Company. All rights reserved.5 | 9 Areas To Analyze Questions To Ask (continued) Product/Service –What are the features and benefits of the product or service? –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?

10. Copyright © Houghton Mifflin Company. All rights reserved.5 | 10 Areas To Analyze Questions To Ask (continued) Founding Team –What experience and expertise does the team have? –What are the gaps and how will you fill them?

11. Copyright © Houghton Mifflin Company. All rights reserved.5 | 11 Areas To Analyze Questions To Ask (continued) Financial Needs Assessment –What are your start-up capital requirements? –What are your working capital requirements? –What are your fixed cost requirements? –How long will it take to achieve a positive cash flow from the revenues generated? –What is the break-even point for the business?

12. Copyright © Houghton Mifflin Company. All rights reserved.5 | 12 Feasibility Analysis Outline for a Written Report Cover page Executive summary Title page Table of contents Feasibility decision Business concept

13. Copyright © Houghton Mifflin Company. All rights reserved.5 | 13 Feasibility Analysis Outline for a Written Report (continued) Industry/Market Analysis Founding team Product/Service development plan Financial plan Timeline Bibliography Appendix

14. Copyright © Houghton Mifflin Company. All rights reserved.5 | 14 Feasibility Report “The One Page Feasibility Plan” …maybe two pages? Your team can do it…? Right…?

15. Copyright © Houghton Mifflin Company. All rights reserved.5 | 15 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?