1. Launching New Ventures

2. Objectives Explain feasibility study and it’s importance
Types of Feasibility studies
Explain feasibility analysis and it’s important.
Discuss the proper time to complete a feasibility analysis when developing a business venture.
Describe the purpose of a product/service feasibility analysis
Explain the term concept statement and its contents.

3. Objectives Define the term usability testing and it's importance.
Describe the purpose of industry/market feasibility analysis.
Explain the difference between primary research and secondary research.
Describe the purpose of organizational feasibility analysis.

4. Feasibility Study

5. Feasibility Study
Feasibility studies are preliminary investigations into the potential benefits associated with a specific activity or project. The main purpose of the feasibility study is to consider all factors associated with the project, and determine if the investment of resource into that project will yield the desirable result
A business feasibility study is a process used to to assess the economic viability of the proposed business project or an opportunity.

6. Why feasibility study? Objectives:
To find out if a project can be done
… is it possible?
… is it justified?
To suggest possible alternative solutions
To provide management with enough information to know
Whether the project can be done
Whether the final product will benefit its intended users
What the alternatives are
Whether there is a preferred alternative

7. Exploring Feasibility
The PIECES framework
Useful for identifying operational problems to be solved and their urgency
Performance
Is current throughput and response time adequate?
Information
Do end users and managers get timely, pertinent, accurate, and useful information?
Economy
Are services provided by the current system cost-effective?
Could there be a reduction in costs and/or an increase in benefits?
Control
Are the effective controls to protect against fraud and to guarantee information accuracy and security?
Efficiency
Does current system make good use of resources: people, time, flow of forms,…?
Services
Are current services reliable? Are they flexible and expandable?
The PIECES Framework

8. Four Types of Feasibility
Technical Feasibility
Is the project possible with current technology?
What technical risk is there?
Availability of the technology:
Is it available locally?
Can it be obtained?
Will it be compatible with other system?
Economic Feasibility
Is the project possible, given resource constraints?
What are the benefits?
Both tangible and intangible
What are the development and operational costs?
Are the benefits worth the costs?

9. Four Types of Feasibility
Schedule Feasibility
Is it possible to build a solution in time to be useful?
What are the consequences of delay?
Any constraints on the schedule?
Can these constraints be met?
Operational Feasibility
If the system is developed, will it be used?
Human and social issues…
Potential labor objectives?
Manager resistance?
Organizational conflicts and policies?
Social acceptability?
Legal aspects and government regulations?

10. Economic Feasibility Can the bottom line be quantified yet?
A judgment of whether solving the problem is worthwhile
Once specific requirements and solutions have been identified…
The costs and benefits of each alternative can be calculated
Cost-benefit analysis
Purpose- answer questions such as:
Is the project justified (i.e. will benefits outweigh costs?
What is the minimal cost to attain a certain system?
How soon will the benefits occur?
Which alternative differs the best return on investment?

11. Analyzing Costs vs. Benefits
Identify costs and benefits
Tangible and intangible, one-time, and recurring
Assign values to costs and benefits
Determine Cash Flow
Project the costs and benefits over time, e.g years
Calculate Net Present Value for all future costs/benefits
Determines future costs/benefits of the project in terms of today’s monetary values
A monetary value earned today is worth more than a (potential) monetary value earned next year

12. Calculating Present Value
The discount rate
Measures opportunity cost
Money invested in this project means money not available for other things
Benefits expected in future years are more prone to risk
Present Value
The “current year” monetary value for costs/benefits in n years into the future, for a given discount rate i
Present Value (n) = 1/(1 + i)n
E.g. if the discount rate is 12%, then
Present Value (1) = 1/( )1 = 0.893
Present Value (2) = 1/( )2 = 0.797

13. Computing the Payback Period
Can compute the break-even point:
When does lifetime benefits overtake lifetime costs?
Determine the fraction of a year when payback actually occurs
The length of time required to recover the cost of an investment
Payback Period = Total Cost of Project/Investment
Annual Cash Inflows

14. Return on Investment (ROI) Analysis
For comparing overall profitability
Calculate Return on Investment
ROI is calculated as follows:
ROI = Estimated lifetime benefits – Estimated lifetime costs
Estimated lifetime costs Or
ROI = Net Present Value/Estimated lifetime costs
Solution with the highest ROI is the best alternative
However, a lower ROI with earlier payback may be preferable in some circumstances.

15. Contents of a feasibility study
Things to be studied in the feasibility study
The present organizational system/new system
Stakeholders, users, policies, functions,
Problems with the present system/new system
Inconsistencies, inadequacies in functionality, performance…
Goals and other requirements for the new system
Which problem(s) need to be solved?
What would the stakeholders like to achieve?
Constraints
Including nonfunctional requirements on the system (preliminary pass)
Possible alternatives
“sticking with the current system” is always an alternative
Different business process for solving the problems
Different levels/types of computerization for the solutions
Things to conclude:
Feasibility of the project
The preferred alternative stated in feasibility report

16. What Is Feasibility Analysis?
Feasibility analysis is the process of determining whether a business idea is viable.
It is the preliminary evaluation of a business idea, conducted for the purpose of determining whether the idea is worth pursuing.
Feasibility analysis takes the guesswork (to a certain degree) out of a business launch, and provides an entrepreneur with a more secure notion that a business idea is feasible or viable.

17. When To Conduct a Feasibility Analysis
Timing of Feasibility Analysis
The proper time to conduct a feasibility analysis is early in thinking through the prospects for a new business.
The thought is to screen ideas before a lot of resources are spent on them.
Components of a Properly Conducted Feasibility Analysis
A properly conducted feasibility analysis includes four separate components, as shown in the figure on the next slide.

18. Role of feasibility analysis in developing successful business ideas

19. Four Forms of Feasibility Analysis
Product/Service Feasibility
Analysis
Industry/Market Feasibility
Analysis
Organizational Feasibility
Analysis
Financial / Economic
Feasibility
Analysis

20. Product/Service Feasibility Analysis
Is an assessment of the overall appeal of the product or service being proposed.
Questions to answer:
If the system is developed, will it ever be used?
Human and social issues…
Potential labour objectives?
Management resistance (change mgt)?
Organizational conflicts and policies?
Social acceptability?
Legal aspects and government regulations?

21. Product/Service Feasibility Analysis
The idea is that before a prospective firm rushes a product or service into development, it should be confident that the product or service is what its prospective customers want.
The two components of a product/service feasibility analysis are:
Concept testing.
Usability testing.

22. Preparing a Concept Statement
Before a company undertakes product/service feasibility analysis, a concept statement should be developed.
A concept statement is a one page description of a business that is distributed by a startup entrepreneur to people to provide feedback on the potential of the business idea.
The feedback will hopefully provide the entrepreneur;
(1) a sense of the viability of the business idea, and
(2) suggestions for how the idea can be strengthened or “tweaked” before proceeding further.

23. Preparing a Concept Statement
Information to Include
A description of the product or service being offered.
The intended target market/users.
The benefits of the product or service.
A description of how the product will be positioned relative to similar ones in the market.
A description of how the product or service will be sold and distributed.
Information about the founder or founders of the firm.

24. Preparing a Concept Statement
New Venture Fitness Drink’s Concept Statement

25. Usability Test Usability Testing
Is the method by which users of a product are asked to perform certain tasks in order to measure the product’s ease-of-use and the user’s perception of the experience.
Usability tests are sometimes called user tests, beta tests, or field trials, depending on the circumstances involved.
While it is tempting to rush a new product or service to the market, conducting a usability test is a good investment of an entrepreneur’s or firm’s resources.
Many products that consumers find frustrating to work with probably might have been brought to the market too quickly.

26. Usability Test Usability Testing (continued) Prototype
Conducting a usability test typically requires the development of a prototype.
A prototype is the first physical depiction of a new product, which is usually still in a rough or tentative mode.
Virtual Prototype
A virtual prototype is a computer-generated 3D image of an idea. It displays an invention as a 3D model that can be viewed from all sides and rotated 360 degrees.

27. Industry/Market Feasibility Analysis
Is an assessment of the overall appeal of the market for the product or service being proposed.
For industry/market feasibility analysis, there are three primary issues that a proposed business should consider:
Industry attractiveness, market timeliness, and the identification of a niche market.
Industry Attractiveness
A primary determinant of a new venture’s feasibility is the attractiveness of the industry it chooses.

28. Industry/Market Feasibility Analysis
Characteristics of attractive industries for new ventures
Are large and growing (with growth being more important than size).
Are important to the customer.
Are fairly young rather than older and more mature.
Have high rather than low operating margins.
Are not crowded/saturated.

29. Industry/Market Feasibility Analysis
Industry Attractiveness
In addition to evaluating an industry’s growth potential, a new venture will want to know more about the industry it plans to enter.
This can be accomplished through both primary and secondary research, as explained in the next slide.

30. Industry/Market Feasibility Analysis
Role of Primary and Secondary Research in Investigating Industry Attractiveness
Type of Research
How It Is Conducted
This is research that is original and is collected by the entrepreneur. In assessing the attractiveness of a new market, this typically involves an entrepreneur talking to potential customers and key industry participants.
Primary research
Secondary research
This is research that probes data that are already collected. Examples of where this data might come from are: industry-related publications, government statistics, competitor’s Web sites, and industry reports from research firms like Forrester Research.

31. Industry/Market Feasibility Analysis
Market Timeliness Considerations
Nature of Product or Service Introduction
Major Considerations
Is the window of opportunity open or closed?
Is now a good time for a new market entrant (i.e., are customers buying, are industry incumbents making money?)
Improvement on something already available in the marketplace
Should we try to capture a first-mover advantage?
Breakthrough new product or service, which should establish a new market segment

32. Industry/Market Feasibility Analysis
Identification of a Niche Market
A niche market is a place within a larger market segment that represents a narrower (smaller) group of customers with similar interests.
For a new firm, selling to a niche market makes sense for at least two reasons.
It allows a firm to establish itself within an industry without competing against major competitors head on.
A niche strategy allows a firm to focus on serving a specialized market very well instead of trying to be everything to everybody in a broad market, which is nearly impossible for a new entrant.

33. Organizational Feasibility Analysis
Is concerned with determining whether the business itself has sufficient skills and resources to bring a particular product or service idea to market successfully.
There are two primary issues to consider in this area:
Management prowess (expertise).
Resource sufficiency.

34. Organizational Feasibility Analysis
Management Prowess
A firm should candidly evaluate the prowess, or ability, of its management team to satisfy itself that management has the requisite passion and expertise to launch the venture.
Two of the most important factors in this area are:
The passion that the solo entrepreneur or the founding team has for the business idea.
The extent to which the solo entrepreneur or the founding team understands the markets in which the firm will participate.
Solo entrepreneurs or founding teams with established social and professional networks.

35. Organizational Feasibility Analysis
Resource Sufficiency
This pertains to an assessment of whether an entrepreneur has sufficient resources to launch the proposed venture.
The focus here should be on nonfinancial resources in that financial feasibility is considered separately.
To test resource sufficiency, a firm should list the 6 to 12 most critical nonfinancial resources that will be needed to move the business idea forward successfully.
If critical resources are not available in certain areas, it may be impractical to proceed with the business idea.

36. Organizational Feasibility Analysis
Examples of nonfinancial resources that may be critical to the successful launch of a new business
Availability of affordable office or lab space.
Likelihood of local and state government support of the business.
Availability of a pool of quality labour force.
Proximity to key suppliers and customers.
Willingness of high quality employees to join the firm.
Likelihood of establishing favorable strategic partnerships.
Proximity to similar firms for the purpose of sharing knowledge.
Possibility of obtaining intellectual property protection in key areas.

37. Financial Feasibility Analysis
For feasibility analysis, a quick financial assessment is usually sufficient.
The most important issues to consider at this stage are:
Total start-up cash needed.
Financial performance of similar businesses.
Overall attractiveness of the proposed venture.

38. Financial Feasibility Analysis
Total Start-Up Cash Needed
This refers to the total cash needed to prepare the business to make its first sale.
An actual budget should be prepared that lists all the anticipated capital purchases and operating expenses needed to generate the first GH¢ in revenues.
When projecting start-up expenses, it is better to overestimate rather than underestimate the costs involved.

39. Financial Feasibility Analysis
Financial Performance of Similar Businesses
Estimate the proposed start-up’s financial performance by comparing it to similar, already established businesses.
There are several ways to doing this, all of which involve a little ethical detective work.
First, there are many reports available, some for free and some that require a fee, offering detailed industry trend analysis and reports on thousands of individual firms.
Second, simple observational research may be needed. For example, the owners of New Venture Fitness Drinks could estimate their sales by tracking the number of people who patronize similar restaurants and estimating the average amount each customer spends.

40. Financial Feasibility Analysis
Overall Attractiveness of the Investment
A number of other financial factors are associated with promising business startups.
In the feasibility analysis stage, the extent to which a business opportunity is positive relative to each factor is based on an estimate rather than actual performance.

41. Financial Feasibility Analysis
Financial Factors Associated With Promising Business Opportunities
Steady and rapid growth in sales during the first 5 to 7 years in a clearly defined market niche.
High percentage of recurring revenue—meaning that once a firm wins a client, the client will provide recurring sources of revenue.
Ability to forecast income and expenses with a reasonable degree of certainty.
Internally generated funds to finance and sustain growth.

42. Financial Feasibility Analysis
Financial Factors Associated With Promising Business Opportunities
Availability of an exit opportunity for investors to convert equity to cash.
Availability of venture capital
Governmental policy direction and support