Slide 1: In the name of Allah, the most beneficent & merciful Feasibility Studies and Business Plans : Feasibility Studies and Business Plans Sir Zahoor
Syed Tahir Ali
Syed Goher Ali Points to be Pondered… : Points to be Pondered… What is a Feasibility Study?
Why do a Feasibility Study?
Whar are Goals of Feasibility Study?
What is a Business Plan?
How do they differ? What is a Feasibility Study? : What is a Feasibility Study? A feasibility study is an analysis of the viability of an idea through a disciplined and documented process of thinking through the idea from its logical beginning to its logical end.
The discipline of planning, organizing, and managing resources to bring about the successful completion of specific project goals and objectives.
A feasibility study provides an Investigating function that helps answer “Is the project feasible? Can it be done? Does it make sense? Should we proceed with the proposed project idea?
A feasibility study should be conducted to determine the viability of an idea BEFORE proceeding with the development of a business. Three main areas of the Business Feasibility Study : Three main areas of the Business Feasibility Study MARKET POTENTIAL ASSESSMENT TECHNICAL AND OPERATIONAL ASSESSMENT FINANCIAL
ASSESSMENT Levels of Feasibility Assessment : Levels of Feasibility Assessment A feasibility study of an idea is conducted at three levels
“Will it work?”
“Can it be built?”
“Will it make economic sense if it works and is built?”
“ Will it generate PROFITS?” Why do a Feasibility Study? : Why do a Feasibility Study? Provide a thorough examination of all issues and assessment of probability of business success
Give focus to the project and outline alternatives
Narrow business alternatives
Surface new opportunities through the investigative process
Identify reasons NOT to proceed
Enhance the probability of success by addressing and mitigating factors early on that could affect the project
Provide quality information for decision making
Help to increase investment in the company
Provide documentation that the business venture was thoroughly investigated
Help in securing funding from lending institutions and other monetary sources Goals of the Feasibility Study : Goals of the Feasibility Study Add value to the decision-making process based on the results of agency planning and design efforts.
Introduce the concept of time value of money by incorporating
Net Present Value
Internal Rate of Return
Provide formats for clear and concise cost and benefit rationale to assist in the investment evaluation process. Data Sources for a Feasibility Assessment : Data Sources for a Feasibility Assessment Data required for a feasibility study can come from primary or secondary sources
Primary data can include formal interviews and surveys
Collection of primary data can be expensive and time consuming
Secondary data can include industry and trade publications, statistics of industry associations, and government agency reports Feasibility Study Outline : Feasibility Study Outline Executive Summary
Regional Socio-Economic Situation
Project Implementation Schedule
Market Study and Marketing
Detail Description of Activities
Financial Analysis and Projections
Social Economic Effects / Multiplier effects, related studies
Options Analysis on different hypothesis and scenarios Steps for an Economic Feasibility Study : Steps for an Economic Feasibility Study Identify and Estimate all Capital Expenditures
Identify and Estimate all Variable Costs related to the Proposed Business Venture
Identify People and Skills required to operate
Determine Wages, Salaries, and Benefits
Identify and Estimate Project Related Costs
Infrastructure development or improvements
Advertising and Promotion
Municipal & State Development taxes
Identify and Estimate all Fixed Costs Estimating Total Capital Requirements : Estimating Total Capital Requirements Assess the “seed capital” needs of the business project and how these needs will be met
Estimate capital requirements for facilities, equipment and inventories
Replacement capital requirements and timing for facilities and equipment
Estimate working capital needs
Estimate start-up capital needs until revenues are realized at full capacity
Estimate contingency capital needs (constructions delays, technology malfunction, market access delays, etc.)
Estimate other capital needs Equity and Credit : Equity and Credit Estimate Equity and Credit Needs
Identify alternative equity sources and capital availability
Producers, Local Investors, Angel Investors, Venture Capitalists
Identify and assess alternative credit sources
Banks, Government (direct loans or loan guarantees), Grants, Local and State Economic Development Incentives
Assess expected financing needs and alternative sources
Interest Rates, Terms, Conditions, Covenants, Liens, Etc.
Debt to Equity Levels Cost-Benefit Analysis : Utilize data collected to determine economic feasibility:
Estimate Expected Costs and Revenue
Estimate the Profit Margin and Expected Net Profit
Estimate the sales or usage needed to break-even
Estimate the returns under various production, price and sales levels to create a “sensitivity analysis”
Assess the reliability of the underlying assumptions of the financial analysis
Benchmark against industry averages and/or competitors
Identify limitations or constraints of the economic analysis
Project expected cash flow during the start-up period
Project income statement, balance sheet when reaching full operation Cost-Benefit Analysis What Defines Feasibility? : A feasible business venture is one where
the business will generate adequate cash flow and profits,
the business will withstand the risks it will encounter,
the business will remain viable in the long-term, and
the business will meet the goals of the founders. What Defines Feasibility? What Next? : What Next? After the feasibility study has been completed and presented to the leaders of the project, they should carefully study and analyze the conclusions and underlying assumptions
Next they will decide which course of action to pursue
Potential Courses of action include
Choosing the most viable business model, developing a business plan and proceeding with creating and operating a business
Identifying additional scenarios for further study
Deciding that a viable business opportunity is not available and moving to end the business assessment process
Following another course of action Developing a Business Plan : Developing a Business Plan What is a Business Plan? : What is a Business Plan? A Business Plan summarizes the plan of action after a course of action has been determined through the Feasibility Study
A Business Plan provides a Planning function
A Business Plan outlines the actions needed to take the proposal from “idea” to “reality”
A Business Plan tells How your business will be created and Why it will be successful
A Business Plan provides a road map for strategic planning Why Write a Business Plan? : Why Write a Business Plan? Put the Pieces Together—Do the pieces fit together in a logical manner?
Create a Blueprint for Action
Focus Founders and/or Management Team
Attract Equity Investment
Attract Key Managers and Employees
Create Joint Ventures, Mergers, Acquisitions What is included in a Business Plan? : What is included in a Business Plan? A Business Plan should be brief, concise & straight to the point
Main Requirements May Include
Three years of Financial Projections
Monthly Tracking of First Year Financials
Management Experience and Profile
Personal Statement of Affairs
Other Sources of Cash, if any How Effective Is the Business Plan? : How Effective Is the Business Plan? How effective a Business Plan is depends on how well the following questions are answered:
Who are we?
What do we do?
What do we have to offer?
Why will someone pay for our products/service?
What resources do we have?
Where are we going?
What do we need to get there?
Why will we be successful?
Why should someone participate or invest?
How will we measure performance? The Story a Business Plan Tells… : The Story a Business Plan Tells… Business Plan should be tailored to the stakeholders
Be aware of each potential stakeholder’s priorities
Make sure all priorities are addressed in a balanced manner in the business plan
If more than one version of a business plan is written, make sure each tells the SAME story only with difference emphasis Who is the “Target” of a Business Plan? : Who is the “Target” of a Business Plan? *Portable MBA for Entrepreneurship, William B. Bygrave, John Wiley & Son, Inc., 1994 Feasibility Study vs. Business Plan : Feasibility Study vs. Business Plan Feasibility study answers the bottom line question—Is this venture going to make money?
Feasibility study outlines and analyzes several alternatives or methods of achieving business success
Feasibility study is conducted before a business plan
Business plan is prepared only after the venture has been deemed to be feasible
Business plan deals with only one alternative or scenario that is determined to be the “best” alternative
Business plan considers the management side—goals and objectives of the planned business venture What resources are available to help develop each? : What resources are available to help develop each? Hired Business Consultants
Make sure an accurate assessment is given
Make sure someone is not paid to give the answer the group wants to hear
Can be costly
Third Party Unbiased
Center for Agribusiness & Economic Development
Small Business Development Center Thank you : Thank you Thanks for the cooperation, for listening US for so long. Questions & Answers : Questions & Answers We shall appreciate your logical and related questions
Ask questions one by one.