1. ENTREPRENEURIAL SKILLS
LECTURE #3 & 4
FEASIBILITY STUDY

2. AREAS TO COVER The importance of a Feasibility Study
The Feasibility Study Procedure
Elements of a Feasibility Study
Conducting a feasibility Study

3. WHAT IS A FEASIBILITY STUDY
An in-depth analysis of situational factors faced by a prospective business entity, the success of which will depend on an appropriate plan of action in order to deal with those factors.

4. WHAT IS A FEASIBILITY STUDY
The Study enables the entrepreneur to minimize the level of risk or uncertainty in the prospective business, thus ensuring that the business will succeed as a going concern.

5. THE IMPORTANCE OF THE FEASIBILITY STUDY
A feasibility study will:
help you to decide whether or not there is a real need for your product or service

6. THE IMPORTANCE OF THE FEASIBILITY STUDY
A feasibility study will:
identify your segment of the market

7. THE IMPORTANCE OF THE FEASIBILITY STUDY
A feasibility study will:
force you to look at the different aspects of running a business.

8. THE IMPORTANCE OF THE FEASIBILITY STUDY
The results of the study will answer the following questions:
Are people in general interested in the product/service that the business will offer?

9. THE IMPORTANCE OF THE FEASIBILITY STUDY
Have any large companies or organizations agreed to carry the product or use the service once it is available?

10. THE IMPORTANCE OF THE FEASIBILITY STUDY
Which people will be most interested in buying your product/service?

11. THE IMPORTANCE OF THE FEASIBILITY STUDY
Is it possible to earn a living from the business?

12. THE IMPORTANCE OF THE FEASIBILITY STUDY
What sort of production schedule is needed to satisfy market needs?

13. THE IMPORTANCE OF THE FEASIBILITY STUDY
What similar product/services are already on the market?

14. THE IMPORTANCE OF THE FEASIBILITY STUDY
How much are people prepared to pay for your product/service?

15. THE IMPORTANCE OF THE FEASIBILITY STUDY
How much advertising and promotion will you need to launch your product/service on the market?

16. RESEARCHING THE VENTURE’S FEASIBILITY
Once you have thought of a business idea, you must answer the following questions through conducting of a feasibility study.
Why should I start this business?

17. RESEARCHING THE VENTURE’S FEASIBILITY
Is this a good business idea or is this merely an interesting hobby?

18. RESEARCHING THE VENTURE’S FEASIBILITY
Is the market ready for this type of product/service?

19. THE FEASIBILITY STUDY PROCEDURE
The quest for information on the potentials of a prospective business should not be hindered by it being overwhelming or by sheer oversight.
The study should be carried out on a timely and objective basis, with appropriate skills or expertise.

20. THE FEASIBILITY STUDY PROCEDURE
The approach to the Feasibility Study involves:
The Goal: What you wish to find out?
Is the business idea a viable one?
What plan of action, or strategy will be required to make it work?

21. ELEMENTS OF THE FEASIBILITY STUDY
Market Feasibility
Technical Feasibility
Operational Feasibility
Financial Feasibility

22. ELEMENTS OF THE FEASIBILITY STUDY
Market Feasibility

23. Market Feasibility Analysis of the market in terms of: Size
Composition

24. Market Feasibility Analysis of the market in terms of: Taste Attitudes
Preferences

25. Market Feasibility Analysis of the market in terms of: Demand
Consumer income

26. Market Feasibility
Look at factors that influences market response, viz:-
The Product or Service

27. Market Feasibility
Look at factors that influences market response, viz:-
Price

28. Market Feasibility
Look at factors that influences market response, viz:-
Promotional efforts

29. Market Feasibility
Look at factors that influences market response, viz:-
Product quality

30. Market Feasibility
Look at factors that influences market response, viz:-
Distribution outlets

31. Competitor Analysis Who are the new venture’s current competitors?
What resources do they control?
What are their strengths and weaknesses?
How will they respond to the new venture’s decision to enter the industry?

32. Competitor Analysis How can the new venture respond?
Who else might be able to observe and exploit the same opportunity?
Are there ways to co-opt potential or actual competitors by forming alliances?

33. Strategies that Capture Opportunities
Peter Drucker’s Generic Competitive Strategies

34. Strategies that Capture Opportunities
Peter Drucker’s Generic Competitive Strategies
Seek an advantage in cost or competition.
Cost-Advantage Strategy and Options
Requires the firm to be the lowest-cost producer.
Marketing-Advantage Strategy
Emphasizing the uniqueness of the firm’s product or service

35. Laying the Foundation to Competitive Advantage
To establish competitive advantage, the owner needs to understand the nature of the environment within which he or she will be operating.
A benefit that exists when a firm has a product or service that is seen by its target market as better than those of competitors.

36. Competitive Advantage
Unique Service
Features
Price/Value
Competitive
Advantage
Notable Product
Attributes
Accessibility
Customer
Service

37. Technical Feasibility

38. Technical Feasibility
Allows for an analysis of the skills and abilities that will be required to carry out the business

39. Technical Feasibility
Special equipment, machinery, and technical know-how.

40. Technical Feasibility
Sources by which the equipment will be obtained.

41. Operational Feasibility

42. Operational Feasibility
Special consideration should be given to how the business will operate i.e. the prospects for:
securing supplies

43. Operational Feasibility
Sourcing adequate staff

44. Operational Feasibility
Ensuring that quality and cost control will be maintained.

45. Financial Feasibility

46. Financial Feasibility
An analysis of the financial needs of the business and how the needs will be met.
Options for obtaining financing include attracting equity contributors, and securing loans.

47. Financial Feasibility
The analysis should consider targeted return on investment and expected levels of profitability.

48. Sources of Funds

49. Sources of Funds Equity Debt Personal Savings Friends and Relatives
Other Individual Investors
Business Suppliers
Asset-Based Lenders
Commercial Banks
Government-Sponsored Programs
Community-Based Financial Institutions
Large Corporations
Venture Capital Firms
Sale of Stock
Friends and Relatives

50. What Is a Small Business?
Criteria for Defining Smallness in Business
Financing supplied by one person or small group
Localized business operations (except marketing)
Business’ size small relative to larger competitors
Fewer than 100 employees

51. THE BUSINESS IDEA METHODS FOR GENERATING IDEAS
Look at trends in the economy
Look at the needs of the community

52. THE BUSINESS IDEA METHODS FOR GENERATING IDEAS
Look at changes which are causing people difficulty
Listen to the comments of people

53. THE BUSINESS IDEA METHODS FOR GENERATING IDEAS
Read the newspapers and listen to the radio and watch the TV
Look at how people spend their time, their fashion, eating habits, etc.

54. METHODS FOR GENERATING IDEAS
Focus Groups

55. METHODS FOR GENERATING IDEAS
Brainstorming

56. METHODS FOR GENERATING IDEAS
Problem Inventory Analysis

57. METHODS FOR GENERATING IDEAS
Reverse Brainstorming

58. METHODS FOR GENERATING IDEAS
Gordon Method
Checklist Method
Free Association
Collective Notebook Method

59. THE FEASIBILITY STUDY PROCEDURE
The Methods: How will the study be carried out?
These methods allow for both primary and secondary data.
Primary Data: Those obtained first hand, according to the researcher’s own design

60. THE FEASIBILITY STUDY PROCEDURE
Secondary Data: Those previously obtained that may be accessed for use in a present study.

61. Primary Data Methods for obtaining primary data:
Observation: looking at the natural flow of activities
Experiment: a controlled method of testing cause and effect
Survey: test of knowledge, beliefs, preferences, by interviewing a sample representative
Focus groups: interactive chat with a small group of representatives.

62. Secondary Data Sources of Secondary Data Government publications
Periodicals, books, magazines
Commercial data such as previous research
Company reports, brochures, handboks.

63. QUESTIONNAIRE DESIGN
Much attention should be given to the designing of a questionnaire or related interview tool.
The questionnaire consist of a set of questions presented to the respondents
It should be carefully developed and tested prior to it being administered.

64. QUESTIONNAIRE DESIGN
Careful attention should be given to the questions in terms of
Forms
Wording, and
Sequencing.
Irrelevant questions should not be included and important ones should not be omitted.

65. QUESTIONNAIRE DESIGN The are two main forms of questions: CLOSED-ENDED
Questions accompanied by pre-specified responses for which the respondents may choose one or more responses.
OPENED-ENDED
Questions that allow respondents to give a response in their own words.

66. THE RESULTS How will you respond to the findings?
What actions will you take?

67. THE RESULTS Use Statistical Methods to tabulate your findings, viz:
Pie Charts
Simple Multiple Bar Graphs
Pictograms
Tables
Line graphs
bar charts

68. THE RESULTS
The findings must be analyzed based on the goals of the study.
The analysis
allows for appropriate conclusions to be drawn.
provides the framework for specific recommendations.

69. CONDUCTING A MARKET RESEARCH- THE ELEMENTS
Target Population
Selection of Sample
Objectives
Methodology
Findings
Analysis
Conclusions & Recommendations
Appendices.