Feasibility Analysis (Lec 03) Flashcards
What is feasibility analysis?
The process of determining whether a business idea is viable and worth pursuing.
When should you conduct a feasibility analysis?
The analysis should be conducted early on and before a lot of resources are spent on ideas.
What are the forms of feasibility analysis?
&
Briefly describe each.
Product/Service Feasibility:
Assessment of the overall appeal of the product/service being proposed.
Industry/Target Market Feasibility:
Assessment of the overall appeal of the industry/target market for the proposed business.
Operational Feasibility:
Assessment of whether or not sufficient management expertise, organizational competence and resources to launch.
Financial Feasibility:
The final component of a complete feasibility analysis.
What are the components of the first form of feasibility analysis?
&
Briefly describe each.
Product/Service Desirability:
The basic appeal of the product/service.
Product/Service Demand:
The basic appeal of the product/service to the proposed customer.
What are the components of the second form of feasibility analysis?
&
Briefly describe each.
Industry Attractiveness:
The degree to which environmental and business trends are in favor of the industry.
Target Market Attractiveness:
An assessment of the attractiveness of the limited portion of the proposed industry.
What are the components of the third form of feasibility analysis?
&
Briefly describe each.
Management Prowess:
An assessment of the business’ management team and their competence and passion.
Resource Sufficiency:
An assessment of whether an entrepreneur has sufficient (non-financial) resources to launch the venture.
What are the components of the forth form of feasibility analysis?
&
Briefly describe each.
Total Start-Up Cash Needed:
- An assessment of whether the
proposed venture is realistic
given the total start-up cash
needed. - A budget for the first
dollar gained should be prepared.
Financial Performance of Similar Businesses:
- An (ethical, legal) investigation
into other similar
businesses to gauge the start-
up financial performance.
Overall Financial Attractiveness of the Proposed Venture:
- An assessment of whether a
proposed business venture is
likely to generate sufficient
financial returns compared to
its risks and investment.
What questions are asked in the product desirability component?
&
Briefly describe a concept statement.
- Is it reasonable? Something consumers will get excited about?
- Does it take advantage of a trend or gap?
- Is this a good time to introduce this to the market?
- What are the fatal flaws?
Concept Statement:
A one-page document distributes to people that describes the business idea to take in feedback.
What are some online tools used to gauge product desirability?
Business Idea Feedback:
Foundersuite, Quirky
Market Research:
CrowdPicker, Google Trends
Online Surveys:
Survey Monkey, Google Consumer Surveys
Q&A Sites:
Quora, Stack Overflow
What are the techniques used to determine product demand?
- Face-To-Face Interviews
- Questionnaires
- Online Tools (Records and Stats)
What are five characteristics of an attractive industry?
- Younger rather than old.
- In the early stages of their life
cycle - Fragmented; not concentrated
- Are not crowded
- Growing rather then shrinking
- The product/service must be a
“must have” - High operating margins
- Are not dependent on the
historically low prices of raw
materials
What is the challenge associated with identifying an attractive target market?
Find a market that’s not too large, but not too small. Considerable ingenuity must be employed to find information to assess the attractiveness of a specific target market.
What are the two most important factors when assessing management prowess?
1) The passion of the
management team for the
idea.
2) The expertise and
understanding of the market.
What are three things that should be considered in when assessing resource sufficiency?
Hint: You may be thinking “people” but what are their roles?
- Office space
- Management Employees
- Support personnel
- Manufacturing space
- Manufacturers
- Business partnerships
What are three characteristics of an attractive proposed venture?
- Steady and rapid growth in
sales during the first 5 to 7
years in a clearly defined
market niche. - High percentage of recurring
revenue. - Ability to forecast income and
expenses with a reasonable
degree of certainty. - Internally generated funds to
finance and sustain growth. - Availability of an exit
opportunity for investors to
convert equity to cash.
