Etrep Chap 3 Feasibility Analysis Flashcards
What is feasibility analysis?
The process of determining whether a business idea is viable
When is the proper time to conduct a feasibility analysis?
Early in thinking through the prospects for a new business
What are the four components of a properly conducted feasibility analysis?
- Product/Service Feasibility
- Organizational Feasibility
- Industry/Target Market Feasibility
- Financial Feasibility
What is the purpose of product/service feasibility analysis?
To assess the overall appeal of the product or service being proposed
What are the two primary issues to consider in product/service feasibility analysis?
- Product/Service Desirability
- Product/Service Demand
What questions should be asked to determine product/service desirability?
- Does it make sense?
- Is it reasonable?
- Will consumers get excited about it?
- Does it solve a problem or fill a gap?
- Are there any fatal flaws?
What is a concept statement?
A one-page description of a business distributed for feedback on the business idea
What is a buying intentions survey?
An instrument used to gauge customer interest in a product or service
What are the two steps to assess product/service demand?
- Administer a Buying Intentions Survey
- Conduct library, Internet, and Gumshoe research
What is gumshoe research?
Investigative research where one scrounges for information and feedback from potential customers
What is the purpose of industry/target market feasibility analysis?
To assess the overall appeal of the industry and the target market for the proposed business
What are the two components of industry/target market feasibility analysis?
- Industry Attractiveness
- Target Market Attractiveness
What factors indicate industry attractiveness?
- Degree to which environmental and business trends favor the industry
What is the challenge in identifying an attractive target market?
Finding a market that is large enough but small enough to avoid larger competitors
What is the purpose of organizational feasibility analysis?
To determine if a proposed business has sufficient management expertise and resources
What are the two components of organizational feasibility analysis?
- Management Prowess
- Resource Sufficiency
What does management prowess refer to?
The ability of the management team to effectively launch the venture
What should be assessed under resource sufficiency?
Whether the entrepreneur has sufficient resources to launch the business
What are examples of critical nonfinancial resources?
- Availability of office space
- Local government support
- Quality of labor pool
- Proximity to suppliers
- Willingness of employees to join
- Possibility of strategic partnerships
What is the purpose of financial feasibility analysis?
To assess the financial aspects of the business idea
What are the components of financial feasibility analysis?
- Total Start-Up Cash Needed
- Financial Performance of Similar Businesses
- Overall Financial Attractiveness of the Proposed Venture
What is meant by total start-up cash needed?
The total cash required to prepare the business for its first sale
What should be estimated in the financial performance of similar businesses?
The proposed start-up’s financial performance compared to established businesses
What factors indicate overall financial attractiveness of a proposed venture?
- Steady growth in sales
- High recurring revenue
- Ability to forecast income and expenses
- Internally generated funds
- Exit opportunities for investors
What is the purpose of the ‘First Screen’ template?
To serve as a tool for the initial assessment of a business idea’s feasibility
