BUSINESS FEASIBILITY STUDY
A Business Feasibility Study is a controlled process for identifying problems and opportunities,
determining objectives, describing situations, defining successful outcomes and assessing the range of
costs and benefits associated with several alternatives for solving a problem. The feasibility study is
conducted during the deliberation phase of the business development cycle prior to commencement of
a formal Business Plan. It is an analytical tool that includes recommendations and limitations, which
are utilized to assist the decision-makers when determining if the business concept is viable.
A thorough viability analysis provides an abundance of information that is also necessary for the
Business Plan. The research and information uncovered in the feasibility study will support the
business planning stage and reduce the research time. A feasibility study should contain clear
supporting evidence for its recommendations. The strength of the recommendations can be weighed
against the study’s ability to demonstrate the continuity between the research analysis and the
proposed business model. Recommendations will rely on a mix of numerical data with qualitative,
experience-based documentation. A Business Feasibility Study is heavily dependent on the market
research and analysis. It also provides stakeholders with varying degrees of evidence that the business
concept will indeed be viable.
The dimensions of Business Viability include:
• Market viability
• Technical viability
• Business model viability
• Management model viability
• Economic and financial model viability
• Exit strategy viability
Business and market analysis will contribute considerably to the Feasibility Study. Traditional
business analysis techniques, such as SWOT, Porters Five Forces, and PESTEL may be used and will
provide information to the viability of the proposed business model.
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Business Feasibility Study: Table of Contents
Executive Summary
The Executive Summary is a summary of all key sections of the Business Feasibility Study and should
work as a separate, stand-alone document. Interested parties will read this section first in conjunction
with a glance at the financial section when deciding whether to read the rest of the plan. Key points to
remember include:
• Write this document after the content section of the Business Feasibility Study is
completed.
• Although the Executive Summary is written last, it is read first.
• The Executive Summary should be no more than one page long.
Acknowledgements
1.0
Introduction
1.1 Concept Statement
2.0
Analysis of Feasibility
2.1 Product
2.1.1 Description and Results of Concept Testing
2.1.2 Description and Results of Usability Testing
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Describe the enterprises, product or service in simple language. Give product mix if the
enterprise 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
enterprise 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. (e.g. consumer product test, concept test, beta test)
Describe plans to upgrade product or expand product line.
2.2 Intended 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. How and why would they buy the product
or service?
• What is the projected need(s) your product or services fulfill so beautifully? How big is
the opportunity? What level of actual market demand can be measured versus projected?
For business-to-business markets, include:
• What industry is the target market in, who are the key players, frequency of product
purchase, replacement needs versus expansion, purchasing process
• Estimates of market size, initial targeted geographic area, enterprise's targeted market
share
For business-to-consumer markets, include:
• Demographic factors, such as income level, age range, gender, educational level, ethnicity
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psychographic factors
relevant behavioral factors such as frequency of product purchase and shopping behavior
2.3 Competition
• Describe direct and indirect competition in the target markets.
• 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 enterprise'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 enterprise's product/service.
• Describe how competitors will most likely react to the firm's product launch and how the
firm will respond. Include estimates of the time it might take a competitors to copy your
product or service.
2.4 Industry
• Clearly define and describe the industry in which the enterprise operates. Include the size,
growth rate, and outlook. Define key industry segments and state where your company
fits in.
• Describe demand and supply factors and trends.
• Describe the larger forces that drive the market, e.g. innovation, cultural change,
regulation, technological, etc.
2.5 Business Model
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Describe the proposed venture's business model. How will the business generate revenue
(i.e. sell the product, charge licensing, retail sales)? Will there be recurring revenue?
Describe the model in enough detail to support financial projections presented later.
o Core strategy
ƒ Mission statement
o Strategic Resources
o Partnership Network
o Customer Interface
Strategic Positioning
Sustainable Strategy
2.6 Marketing and Sales Strategy
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Lay out the basic marketing and sales strategies.
discuss any strategic partnership the enterprise has or is planning to form. Do they
provide critical market access or other resources? What are their rights and
responsibilities?
Describe the distribution strategy (sell direct to customers, through sales force, direct mail,
or Internet; sell through manufacturers' representatives, wholesalers, distributors, or
retailers). Provide projected profit margin or mark-up expectations, commissions, and
other expected compensation (co-op advertising, slotting fees, etc.)
Describe the pricing strategy and justification. Include the expected gross profit margins.
Describe intended typical payment terms for customers.
Other issues and their impact, e.g., warranties.
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Quantify the marketing budget for at least the first year to at most three years in the future.
2.7 Production/Operating Requirements
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Describe how and where the venture will manufacture, source, or create and deliver the
final product or service to be able to estimate costs.
What physical premises are required? Give location, size, age, condition, and capacity of
planned production and warehouse facilities and numbers of shifts planned.
Will space be owned or leased? Will renovations be required? At what cost?
How complex is the manufacturing process? Describe equipment needed and costs.
If enterprise will outsource production or distribute others' materials:
o Describe supply sources. Are sources of supply readily available?
o Outline the relevant contract terms, manufacturer's capacity, minimum order and
tooling requirements, reputation, size or financial condition.
o Describe the enterprise's plan to protect its proprietary processes and trade secrets and
quality control.
If enterprise is providing a service:
o How will the service be designed, delivered, measured and improved?
o What stakeholders exist, who will be trading partners with the business? What will be
the terms of the contract? Are there substitute partners?
2.8 Management and Personnel
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List the proposed key managers, titles, responsibilities, relevant background, experience,
skills, costs.
Sketch personnel requirements: what people will be needed now, in a year, in the long
term? What skills and qualifications are required what financial implications result?
Provide an organizational chart.
Provide a timeline of hiring personnel.
2.9 Intellectual Property and Technology
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Provide further technical information about the product or service, as necessary.
Consider the feasibility of a "brick-to-click" enterprise.
Consider the feasibility of a website or access to customers via the Internet.
Describe additional or ongoing research and development needs.
Briefly describe patents, copyrights, and trademarks obtained and in process. Give all
names that are on issued patents; summarize results of patent searches (CIPO - Canadian
Intellectual Property Office).
If enterprise is operating under a licensing agreement or patent assignment, give name of
licensor/assignor, describe key terms (e.g. exclusivity, rights, and responsibilities), and
give termination or renewal dates.
If the business concept is a science (research orientated) business, the IP is extremely
important. The protocols in managing them, particularly at the initial planning stage are
critical. For example, if a researcher has published their research findings in an industry
journal or on the Internet prior to ensuring intellectual ownership through copyright or
patent, then the knowledge is considered in the open domain and therefore cannot be
considered or restricted.
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Often business planning associated with IP must occur prior to a business (science - R&D)
concept being developed and validated so that the strength and ownership of the findings
can be assured.
2.10 Regulations
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Key government regulations and the enterprise's plans for compliance.
Political stability, if applicable.
Any other regulatory or political issues. This may deal with proposed industry regulatory
changes, stable versus unstable environments.
2.11 Environmental Issues
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Any environmental problems on property, plans to address the problems, and their cost.
Environmental factors, i.e. waste disposal plans, if needed.
3.0 Critical Risk Factors
Describe critical risks faced by the venture occurring currently or in the future. Much of these
components will arise from the SWOT, Porters Five Forces, and PESTEL analyses. Be sure to
describe how each risk will be mitigated. Examples include internal characteristics, uniqueness,
investment, economic forecasts, change in regulations and technical obsolescence, etc.
3.1 SWOT Analysis
3.2 PESTEL Analysis
3.3 Porter’s Five Forces Model
3.4 Identification of Major Risks
4.0
Capital Requirements and Strategy
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5.0
Financial Considerations
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How much funding (equity) will the firm need and when?
What projected revenue or assets does the proposed business have to secure the financing?
What sources will provide the funding, i.e. investors, lending institutions, etc.?
What ratio of debt to equity financing will occur?
When will investors begin to see a return? What is the expected return on investments
(ROI)?
Balance sheet projections - three years and highlight inflows of capital
Income projections - year 1: monthly or quarterly; years 2 and 3: annually
Cash flow projections - year 1: monthly or quarterly; years 2 and 3: annually
Break-even analysis - when will the firm begin to turn a profit?
Cost benefit analysis - will the business provide a viable return on investment (ROI) for
the owner and/or the investors?
Start-up Schedule
Lay out the major events in the life of the venture by listing the timetable/deadlines for completion of
phases of venture start-up. Be sure to demonstrate the relationship of events and to keep the
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milestones, financial requirements, personnel requirements, etc. consistent. Establish a formal project
schedule for the start-up process.
7.0
Discussion of Risk Mitigation and Feasibility
Consideration of each area in terms of "red light, yellow light, green light" for mitigation of risks and
viability.
7.1
7.2
7.3
7.4
7.5
7.6
Market Feasibility
Technology Feasibility
Business Model Feasbility
Organizational Feasibility
Economic and Financial Feasibility
Exit Strategy Feasibility
8.0
Final Recommendation
9.0
Conclusion
10.0
References
Please use the following format for references: source the reference in the text and list the details of
the source in your Reference section. Please note that web sources must include the date on which the
information was retrieved.
Example:
According to Smith [1], the trend in the telecommunications industry is outsourcing of customer
support for issues such as account management and online interaction. Statistics show that in the last
5 years, employment in India in the telecommunications industry has increased 10 percent [2].
References
[1] Smith, J.D. “Trends in Telecommunications”, Journal of Business, May 08, pages 72-80.
[2] Global Telecommunications Statistics, www.gts.stats.org [Retrieved January 22, 2008]
[3]
[4]
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