BBUSS 2403 • BUSINESS PLANNING
CHAPTER 3
Feasibility Study
3-1
Feasibility Analysis
Most effective business plans
– Identifying a business idea
– Screening the idea(s) to determine their
preliminary feasibility
– Conducting a feasibility analysis
– Writing the plan
3-2
Figure 3 - 1
Step 1
Identify a business
idea.
Step 2
Screen (or test) the
idea to determine
its preliminary
feasibility.
Favorable
results/proceed
Unfavorable
Results/stop or
reevaluate idea
Step 3
Conduct a full
feasibility
analysis
Favorable
results/proceed
Unfavorable
results/stop or
reevaluate idea
Step 4
Prepare
a written
business
plan
Step 5
Present
the
business
plan to
investors
and others
3-3
Feasibility Analysis
– Primary research
• Original research collected by person
completing the analysis
– Secondary research
• Probes data already collected
3-4
Product/Service Feasibility
• Product desirability
– Is the product desirable
and serve a need in the
marketplace?
– Is it reasonable?
3-5
Concept Test
A concept test is a preliminary description of
a product or service idea to industry experts
to solicit their feedback
3-6
Product/Service Demand
• Buying intentions survey
– Gauge customer interest in a
product or service
How likely would you be to
buy a product like this if we
make it?
–
–
–
–
–
3-7
Definitely would buy
Probably would buy
Might or might not by
Probably would not buy
Definitely would not buy
Industry/Target Market
Feasibility Analysis
Industry
A group of firms producing a
similar product or service
3-8
Industry / Target Market
Feasibility Analysis
Target market
The limited portion of
the industry that the
firm goes after or
tries to appeal to
3-9
Industry/Target Market
Feasibility Analysis
• Industry attractiveness
• Target market attractiveness
• Market timeliness
3-10
Industry Attractiveness
• Large and growing
industries
• Structurally attractive
– Start-ups can enter the
industry and compete
• Favorable
environmental and
business trends
• Importance of product
to its customers
3-11
Target Market Attractiveness
Target market
Should be large
enough for the new
business but small
enough to avoid
attracting larger
competitors
3-12
Market Timeliness
• Window of opportunity
– Time period that a firm can
enter a market
• Economics of the industry
– Determine if the timing is
right for a new entrant
3-13
Organizational
Feasibility Analysis
• Management prowess
• Resource sufficiency
3-14
Financial Feasibility
Total start-up cash
needed
 Financial performance
of similar businesses
 Overall financial
attractiveness of the
proposed venture

3-15