MBA SEMISTER 3: NEW VENTURE FEASIBILITY:
FACILITATOR: DR AHMED KATO
FACULTY OF MANAGEMENT
ISBAT UNIVERSITY
COURSE DESCRIPTION:
This course unit provides the students the knowledge and skills to develop their feasibility plan
into a business plan for a new venture, which culminates in a business plan group competition.
LEARNING OBJECTIVES
The principal objective of this course unit is to offer an understanding of a new venture
management process and the integration of functional area materials as they apply to business
planning.
By the end of this course unit, students are expected to have acquired knowledge to:
•
Describe the purpose of a new venture feasibility analysis
•
Describe and develop the components of a new venture feasibility analysis
•
Understand how to apply new venture feasibility outcomes to a new venture.
•
Develop a comprehensive business plan that accommodates the appropriate
components of a new venture feasibility
TEACHING METHODS AND ASSIGNMENTS FOR ACHIEVING LEARNING
OUTCOMES:
Specifically, the students will:

Students will required to prepare a feasibility analysis report for a new proposed
venture creation as a part of a group project assignment within a team.

Students will assume different roles within an entrepreneurial context and write up a
feasibility analysis report including the appropriate components of a new feasibility
venture, as well as analyse various business entry strategies and examine the effects on
their business concepts

Students will identify markets, analyse potential competition, and build customer
profiles for the proposed new venture creation.

Students will have to prepare a business plan of a new venture as a part of a group
project assignment reflecting on the feasibility analysis report within a team. Students
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will assume different roles within an entrepreneurial team and write-up the appropriate
sections of the business plan.

The recommended length of the business plan should not be more than 12 pages for its
basic parts. The Financial projections, graphs and other material should be included as
appendices.
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New Venture Feasibility
Introduction
Definition of New venture feasibility.
New venture feasibility analysis is the process of determining whether a business idea is viable.
It is premised on the preliminary evaluation of a business idea conducted for the purpose of
determining whether the idea is worth pursuing to provide an entrepreneur with a more secure
notion that a business idea is feasible or viable.
Feasibility of a business means the likelihood it will be a success, whether it will grow and be
profitable. Entrepreneurs eager to get started sometimes don't take the time to thoroughly
research the feasibility of the venture. There are times when, after doing their homework
regarding feasibility, entrepreneurs reluctantly decide not to proceed. This can be a wise
decision. Poorly thought-out ventures have greater risk and lower probability of success.
Overview of new venture Feasibility
One of the principal functions of the feasibility study is the decision of moving forward with
the business. Since all the factors related to the business are taken into account, a clear picture
of the different aspects is produced. Owing to the limited nature of resources, it is essential to
ensure that they are being utilized in the most appropriate manner. The most advantageous path
needs to be taken as important resources are not only saved from being wasted on the wrong
projects, but also invested into relatively profitable ones in the future. A firm saves itself from
facing losses, as consideration of the new project becomes dependent on how the return is
analysed against the investment. Other than that, a feasibility study also generates concrete
reasons for avoidance of the forethought business. The study is an exploratory process, as it
helps assess various options and their implications. The go/no-go decision is one of the most
vital in business development as decisions cannot be reversed and it is always better to take
calculated ones instead of fixing wrong ones in the future
Components of new venture Feasibility analysis,
1) Financial Feasibility
The financial attractiveness of a particular business idea is established through a feasibility
study. The conduct of any activity is not possible without monetary resources. This includes
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the estimation of all the costs that will play a vital part from the inception of the project to the
operational costs during the later stages of its lifecycle. One of the most important costs is the
start-up capital. The study involves the determination of the funds required to start a business.
Once these are deduced, the potential sources of generating this capital are also listed. Another
important aspect to estimate sales revenue, profitability and return on investment (ROI). The
degree to which an activity yields financial gains is developed. The potential cash flows of the
future are calculated. It also brings fourth the payback period, which puts forward the amount
of time the investment takes to break-even. All these figures are, thus, summarized into annual
cashflows for at least five years.
The ultimate test of feasibility of a venture is its forecast profit and loss statement, and the
management team's confidence that the forecast is attainable. Companies create a business
model that shows the factors that will lead to the company being extremely profitable. These
success factors include being able to operate with low corporate overhead, a low cost of
production resulting in high gross margins, or operating in a market that is fragmented with no
really strong, entrenched competitors. A feasible venture is one in which everyone involved
agrees that the financial opportunity is outstanding and the risk of failure is relatively low.
2) Organizational and Operational Feasibility
Start-up entrepreneurs have to assess whether the team they have assembled has the skills and
experience required for this type of venture to succeed. If there are gaps in the team, the
founders must put together a plan that shows what individuals they need to add and how they
intend to find them. Starting a venture with an incomplete management team, or one lacking
sufficient prior entrepreneurial experience, reduces the chances the venture will succeed. It's
not enough to have a great product or a superior business plan. The management team must be
capable of efficiently and precisely executing the plan. The requirement of the human resource
is also scrutinized. The skills required by the professionals and an estimation of the firm’s
capacity falls under this category. The required background of the professionals and any
shortcoming being faced by the current human resource of the new business or project are
analysed. In case of absence of an effective team, hiring decisions may be made on the basis
of the feasibility study. The entire legal and corporate organizational structure is planned
accordingly. Similarly, this study also helps ensure that the firm has adequate resources for the
running of smooth operations.
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3) Market and Marketing Feasibility
An essential part of the feasibility study is the market feasibility. All the details of the respective
industry are presented in this section. Important details including the size, retail value and
trends of the industry are gathered. The particular market is also analysed along with the future
market potential. A detailed evaluation is required to ensure the success of the business. The
competitive landscape is also prepared. The firm, thus, adopts the most appropriate strategy of
positioning itself relative to the competition.
Market
It is easier to succeed in a market that has numerous potential customers than one with a
relatively small number. Entrepreneurs may develop a new technology that from their point of
view is an amazing innovation, but they later find out that few potential customers share their
view. The innovation may be a solution to a customer need, but the customers don't view the
need as important relative to other purchases they are considering. The cost of production can
also limit the market -- if the price is too high, it limits the number of customers who can afford
it.
Product/Service Feasibility Analysis
Product/Service Feasibility Analysis refers to an assessment of the overall appeal of the product
or service being proposed. 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:
Product/Service Desirability Product/Service Demand.
To get the attention of customers, you must bring products and services to the marketplace that
have clear, easily articulated superiority over the products or services you will be competing
against. Unless your products or services have this "wow factor," it is difficult to get customers'
attention, given the many other products and services presented to them through advertising
and other marketing methods. The benefits could be improving the customers' quality of life,
saving them time and frustration, saving them money or helping them make money
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The description of the product/service is also determined. All the variations are considered and
analysed so the most profitable one may be adopted. A profile of the potential customers is
prepared and the size of the market in terms of prospective buyers is also estimated. Through
the use of historical data, sales projections may be estimated. Different locations of the target
audience are explored and the most beneficial audience and location may be selected. The
degree of acceptability of the deliverable exhibited by the proposed target audience may be
generated. It ensures that the right product is produced for the right clients. Pricing strategies
and decisions are taken. It directs the decision makers to the discovery of the most beneficial
opportunities.
4) Technical feasibility
Technical feasibility is fundamental to support the smooth operations of the business.
Variations in options related to logistics may be discovered. At this level the business
entrepreneurial managers are to identify the potential resources avail in terms of the required
human capital, materials, equipment and relevant technologies. The potential of the technical
resources available to the firm is estimated. An assessment of the skills of the technical team
is conducted. Any shortcomings and the ways of meeting them are looked into. It also involves
the evaluation of essential systems including hardware, software and technological
requirements of the overall business system.
5) Economic Feasibility
The economic benefits to be reaped by the business are ascertained by a feasibility study. It
helps provide the degree to which the economic advantages of the idea are greater than
the economic costs. An accurate analysis of the comparison of the all the costs to be incurred
and the benefits to be received is conducted. This not only determines the viability of the
project, but also directs the business towards saving itself from an inadequate allocation of
resources. The credibility of the idea is assessed, and the management achieves a distinct
breakdown of all the various costs it will have to incur from the initiation to the execution of
the entire project. These costs, when weighed against the benefits that may be generated, result
into the overall economic feasibility of the project.
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6) Legal Feasibility
Every country has its own respective legal implications. Any legal requirements that may
hinder business activity need to be considered. This analysis explores all the legal factors that
may conflict with the proposed business. All the relevant laws or protection acts are taken into
account. An organization may save considerable time and effort by learning any type of
locational constraints its business may face due to legal requirements. Business entrepreneurial
have to choose the nature of the proposed business i.e. proprietorship, private limited company,
public limited company , partnership or company limited by guarantee. Some countries require
companies to register with accredited national professional bodies for instance URA, URSB,
NGO board etc.
7) Scheduling Feasibility
The different phases of the lifecycle of the business are planned and taken into account. The
essential milestones and the entire schedule for their achievement is outlined. Based on the
future projections, the different stages of business activity are estimated. All the essential
activities and their respective times of fulfilment are enlisted. Critical stages of new venture
creation include:
a) Start up
b) Early stage
c) Later or mature stage/Initial public offering
8) Project durability
A lot of investment and precious resources are taken into a single project. These have to be
utilized to their most optimum capacity. A feasibility study develops the entire path that the
project may follow. It includes vital information like financial projections. It is only wise to
select the business idea or project that will be the most durable on a long term basis and will
endure financial risks of the future.
9) Organisational potential risks/Constraints
As a result of the examination, the feasibility study identifies all the constraints that may be
faced by the business. These may include, but are not limited to, monetary, technical, resourcerelated, technological, financial, marketing, logistical, legal, environmental constraints. An
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estimation of these constraints provides a distinct view of all the problem areas where the
project may face hindrances in the future and their root causes.
In view of the above factors, the entrepreneur is ultimately able to test the viability of a business
idea or a new enterprise. When a new venture feasibility analysis is judiciously done and
conclusive, it typically culminates into a business plan, which outlines the action steps
necessary to take a proposal from a business idea to a reality.
Rationale for conducting a feasibility analysis for a new venture creation
The dynamic nature of today’s business environment has led to an increase in the risks and
uncertainties that are faced by organizations. The growth in the degree of awareness of the
customers has led to a dramatic increase in competition as more and more companies are now
trying to take care of the needs of the customers. It has become crucial for businesses to
outshine competition in terms of provision of value to its clients. Survival in the marketplace
has become difficult, however, entering it is an entire different story. An absence of proper
planning and forethought leads to the failure of entrants. Thus, to ensure profitability, it
becomes essential to conduct a feasibility analysis before plunging into the market.
The feasibility study acts as an investigative tool to assess the potential, viability or
practicability of a new business. Some important characteristics of Feasibility study:

It is an excellent instrument for the prediction of the likelihood of success or failure of
a new business venture. It may also be adopted in the case of incorporation of new
products or ideas into the business mix.

A feasibility study includes all the actions that are needed to be taken to determine
whether a business idea is likely to succeed. It is a stepwise process that helps weigh
the pros and cons of each step prior to getting into the actual process.

It provides results for key decisions that may be, moving forward with the idea, refining
it or leaving it altogether.

A thoroughly executed feasibility study helps the firm in attaining a broad picture as
well as a detailed analysis of the profitability of its future business. Conducting a
feasibility analysis assists to entrepreneurs to gain knowledge about the project before
investing budget, time or other resources into it. Sometimes, the scope of the project
may be drastically changed.
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
The feasibility study ensures that all determinations are made prior to jumping into the
business and learning about the shortcomings later. Various alternatives of the conduct
of business are generated and the most optimum one is adopted.

It is also an excellent source of provision of information to the future investors of the
business. They can receive a complete snapshot of the various factors related to the
venture.

Feasibility studies are prevalent in countless industries as a measure to provide a
thorough guidance to ensure that the business starts off on the right foot.

It enables the organization to focus on both short and long term goals. The significance
of a new venture feasibility can never be underestimated as the success or failure of the
business is dependent on it.
Conclusion
Conducting a new venture feasibility analysis is fundamental for the business entrepreneurs to
determine whether to proceed with the new venture opportunity. One underlying technique that
is frequently used in project management is identified as a go-or-no-go decision. This tool
allows a team to decide if the criteria have been met to move forward on a project. Criteria on
which to base a decision are established and tracked over time. You can develop criteria for
each section of the feasibility analysis to determine whether to proceed and evaluate those
criteria as either “go” or “no go,” using that assessment to make a final determination of the
overall concept feasibility. Determine whether you are comfortable proceeding with the present
management team, whether you can “go” forward with existing nonfinancial resources,
whether the projected financial outlook is worth proceeding, and make a determination on the
market and industry. If satisfied that enough “go” criteria are met, you would likely then
proceed to developing your strategy in the form of a business plan.
Group Assignment
Discuss the various entrepreneurial opportunities that you would want to pursue in your group,
assess the sales turnover, profitability, originality, investment returns and feasibility of your
proposed new venture creation. Please limit your opportunity to a specific business sector, for
instance agro processing, manufacturing, service sectors etc. want to pursue in class.
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