Feasibility Study (Proof Of Business Concept) Cont.
Market Environment
Target Market:
• Define and describe the target market(s). Distinguish between end users and customers.
• Be clear how end users and customers benefit, and how and why they would buy the product or service.
• What is the unmet need(s) your product or services fulfill so beautifully? And how big is the opportunity?
For business-to-business markets, include:
• The industry the target market is in, key players, frequency of product purchase, replacement needs vs. expansion, purchasing process (i.e. solicits bids, uses preferred vendor lists, goes through
committee or multi-level approval process, etc.), likely length of the sales cycle.
• Estimates of market size, initial targeted geographic area, company’s targeted market share.
For business-to-consumer markets, include:
• Demographic factors, such as income level, age range, gender, educational level, ethnicity.
• Psychographic factors.
• Relevant behavioral factors such as frequency of product purchase and shopping behaviour.
Competition
• Describe direct and indirect competition (as it pertains to the target markets only).
• For key competitors, give market share, resources, product and market focus, goals, strategies, strengths and weaknesses.
• List all key barriers to entry.
• Describe what is unique about the company’s product/service compared to the competition. Make sure this is consistent with the unmet need of the target market(s).
• State how difficult it will be for competitors to copy the company’s product/service.
• Describe how competitors will most likely react to the company’s product launch and the company’s response strategy. Include estimates of the time it might take a competitor to copy your product or service.
Industry
• Clearly define and describe the industry in which the company operates. Include the size, growth rate, and outlook. Define key industry segments and state where company fits in.
• Describe demand and supply factors and trends.
• Describe the larger forces that drive the market – innovation, cultural change, regulation, whatever.
Feasibility Study (Proof Of Business Concept) Outline
• Executive Summary
• Product or Service
• Technology
• Market Environment
• Competition
• Industry
• Business Model
• Marketing and Sales Strategy
• Production/Operating Requirements
• Management and Personnel Requirements
• Intellectual Property
• Regulations/Environmental Issues
• Critical Risk Factors
• Timing Considerations
• Financial Projections
- Balance Sheet Projections
- Income Statement Projections
- Cash Flow Projections
- Break-even Analysis
- Cost Benefit Analysis
• Capital Requirements & Strategy
• Final Recommendation
Executive Summary
The Executive Summary is a summary of all key sections of the feasibility plan and should work as a separate, stand-alone document. Interested parties will read this section first, and often use this in conjunction with a glance at the financial section when deciding whether or not they read the rest of the plan.
Key points to remember include:
• Write this document after the feasibility plan is completed.
• While the executive summary is written last, it is presented first.
• The executive summary should be no more than one page long.
Product/Service
• Describe the company’s product or service in lay terms. Give product mix if the company will initially be focusing on more than one product.
• Describe how customers would use and buy the product or service. Give enough detail to help the reader judge the effectiveness of your marketing and positioning plans.
• Describe key components or raw materials that will be used in the product, how the company will source these and how available they are.
• Describe plans to test the product to ensure it works as planned and is sufficiently durable, rugged, secure, etc.(i.e. consumer product test, beta test with major company, etc.).
• Describe plans to upgrade product or expand product line.
Function Of A Feasibility Plan – Proof Of Business Concept
Feasibility plans help entrepreneurs – and their investors – judge whether a business concept is credible.
The process of preparing a feasibility plan is a testing process – a validation process to determine what could go wrong and what needs to go right for an enterprise to root and grow. Preparing a feasibility plan requires a tremendous amount of research and thinking, which often lead to significant changes in the original idea.
The good news is that the stronger the feasibility plan the easier the business plan is to write and the more likely it is that your business will receive financial support and succeed.
Feasibility Plan Narrative
The feasibility plan is not a formal document but it can be considered a structured formal commercial report. It is your first reality check. (The marketplace will be the real check.) As such, the plan should be very carefully thought through, extraordinarily well documented and clearly written.
A feasibility study (proof of business concept) can exist in its own right or be in part of whole a supporting document (appendix) for the formal business plan. With in a formal business plan many decisions or business models will be used and the justification for those actions must be clearly demonstrated and this is often achieved by being able to reference to findings of the original business concept feasibility study
A feasibility plan should at least touch on most issues included in the final business plan. The feasibility plan the focus is on getting the design right and testing its coherence, rather than on convincing investors and other partners to extend their support. Often the feasibility study’s validity is
demonstrated through a cost benefit analysis.
A cost – benefit analysis is a relatively simple and widely used technique for deciding whether a
business model or decision is financially viable. As its name suggests, to use the technique simply add up the value of the benefits of a course of action, and subtract the costs associated with it.
Clarity and factual evidence are more important for the feasibility plan than a convincing business presentation.
Developing A Feasibility Study
A Feasibility Study (proof of business concept) is a formalized, written approach to evaluating your business idea.
It should;
• Show you what facts and figures are needed to aid decision making.
• Show whether or not your idea is viable.
• Allow you to discover and look at alternative approaches and solutions to putting your idea into practice.
The Study should be written by you, for you, in language and in terms you can relate to about your business idea. It should include the following content.
The Business Idea
How would you describe your business idea? What is it? Will it work? How is it different from existing businesses? Who will buy from you? Can you put your idea on paper?
It is not enough simply to say “A Service business” or “A coffee shop”. Paint a picture of your business idea in words so that anyone reading this description knows exactly what you are talking about. To start your Feasibility Study – start with your business idea, on paper. Discuss it with others and adjust it as you obtain more information and ideas.
Profiles – Key People
It is not enough to have a good idea – you need people who can implement it. Who are they? Are they you, your partners, your family or any one else? Once you have identified these people you need to
determine your/their skills and strengths and whether they help or hinder in the proposed venture?
Create a one-page resume of each key person. This is not merely a job history, but a picture of each key person, showing pertinent strengths, skills, experience, training and qualifications. It will reveal to you and any potential lender, supplier, partners or agent, the operational/management strengths (and weaknesses) of you and your team. It will also show you the need to acquire any missing skills you can identify.
Personal Objectives
Why do you want to go into business? Answer – To create wealth!
Remember: business is principally a means of allowing people to achieve the things they want in their private life, like a home, cars, holidays and a good lifestyle. You need to set personal objectives. Do you know what you want in your private life? Consider Short Term – say up to one year; Medium Term – one to three years; Long term – greater than three years.
You need to sort out life objectives and ensure that the business will not only assist you in generating wealth but also facilitate your life style.
The Market
Customers: You cannot sell to everyone. So, who are your potential customers? Make a List. Why will they buy from you?
Identify your Market Segments or groups: What knowledge do you have of your market segments or groups? How many are there? What will they buy? How often will they buy? What will be their average
purchase?
Products & Services: Create a list showing the products / services you will be offering to each segment. Also look at how long it will take you to produce or procure them. Determine how much it will cost to buy or produce them and how much you can sell them for. Suppliers: Identify preferred and alternative suppliers on a list and show products /services / prices on this list. Collect catalogues and brochures to assist this study.
Competition: List your competitors and show their perceived strengths and weaknesses. For each main competitor, list two good points and two bad points. You need to understand why they are competition to your proposed business. Ask the Question: How can you attract their customers from them? Price is not the only answer.
Map: Obtain a map and on it define your market boundaries, location, competitors, suppliers, and demographic information on your market.
Your Business Overview
Location – Your site, is it rented, owned, or at home? Why locate there? What are the advantages and disadvantages?
Business Plans
A business plan is a detailed road map for building a given company.
A business plan contains all that the feasibility study has plus specific timelines, detailed budgets with forecasts, letters of intent, resumes of staff, background, competition, strengths and weaknesses, work sheets (with full supporting references and notations) and appendices. Appendices should include copies of all documentation in relation to key analyses as well as plans that together represent the road map for company development.
A well-written business plan will show exactly what revenues can be expected and when to expect them, what overheads and expenses will need to be paid and exactly when they will be due. It will also show staffing levels and salaries along with costs of employment, sales levels with monthly and seasonal trends, setup costs, building/office costs, utility and telephone costs, legal, insurance and accounting costs, office
furniture and supplies costs and a myriad of other costs and projections.
However, while these costs and revenues form an important part of the required picture, a business plan will also need to demonstrate that all required plans are completed. As such a business plan will feature information central to establishing a high degree of certainty in effective operation. Sections on demographics, sales and sales methods, objectives, expansion plans, contingency exercises, product/services market introductions, regulatory requirements, laws of City, State and Federal governments relating to the business or project and much more should be included.
A well-written business plan can help maximize potential and minimize overheads, liabilities and risk associated with any project.
People never plan to fail, they only fail to plan!
A feasibility study (proof of business concept) and a business plan are totally separate documents and each does a very specific job. The costs associated with each are also completely different. However a business plan may be developed that has as a component which includes key features and evidence supporting proof of the business concept.