Feasibility Study Proposal

FEASIBILITY STUDY WORKBOOK

Feasibility Study Proposal Guidelines

The purpose of the feasibility study proposal is to identify an existing project or a new
project to be studied. We suggest the following 5-6-page submission format; please
bear in mind that it needs to address the criteria identified under “Guidelines” below:
1. Company Overview
2. Product/Service Description
3. Industry and Marketplace Analysis
4. Marketing Strategy
5. Distribution and Sales Strategy
6. Operations Plan
7. Development Plan
8. Management Team
9. Exit Strategy
10. Financial Estimates

Guidelines
Feasibility studies will convince the instructors that your idea could work. Instructors
Judgment will consider the following:

Market Opportunity
 Is the value proposition sound? What is your “unique selling proposition”? Is there a
market for your product or service?
 How innovative and well-thought-out is your product or service?
 Is your target market clearly identified and sufficiently large?
 Who are the key market players – competitors, possible partners, suppliers?
 What is the competitive advantage over existing solutions?

Implementation Plan
 Is the business operationally feasible?
 Have the major operational risks been identified, with appropriate contingency plans,
in regards to market entry barriers, intellectual property protection, suppliers,
funding, etc?
 Is the founding team qualified and sufficiently experienced to launch the business?
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Revenue Model
 Is the revenue generation plan reasonable and well-thought-out?
 Are the major financial assumptions reasonable given current market conditions?
 Are the financial projections realistic?

Tips
Use the Feasibility Study Outline as checklist. (But remember, no two studies are ever
alike in content, emphasis or style.)
 Keep the length to 5, but certainly no more than six pages, typed, single-spaced,
12pt Times/Arial font
 Make the study compelling. Feasibility studies must convince readers that the idea
could work.
 Make your case clear and to the point. Consider using numbers, diagrams, models
or pictures to help condense your argument - without sacrificing detail (must be
included in the page limit). Support claims with evidence.
 Use credible sources and methods - and document all quotes, estimates, etc.
Support all numbers with documented sources.

New Venture Feasibility Analysis

Although every feasibility study should reflect the particular combination of opportunity,
concept and team that fits your business, it is important to consider the full range of
issues you might face - before jumping into more detailed study.

Function of a Feasibility Study

Feasibility studies help entrepreneurs, managers - and their supporters - judge whether
an idea is viable. The process of preparing a feasibility study is a testing process - a
thought experiment in what could go wrong and what needs to go right for an enterprise
to take root and grow.

Preparing a feasibility study 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 study the easier the business study is to write - and the more
likely it is that your business will succeed.

Feasibility Plan Narrative

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The feasibility study is not a formal document but it is a very important one. It is your
first reality check. (The marketplace will be the real check, of course.) As such, the
study should be very carefully thought through, extraordinarily well documented, and
clearly written.

A feasibility study should at least touch on most issues included in the final business
plan, but for the feasibility study the focus is on getting the design right and testing its
coherence, rather than on convincing investors and other partners to extend their
support. Thus, clarity and evidence are more important for the feasibility study than
convincing presentation. The first step in creating a feasibility plan is to outline your
concept, begin to define the scope of your business, and to visit each of the principal
parts of your prospective plan:

1. Company Overview 6. Operations Plan

2. Product/Service Description 7. Development Plan
3. Industry and Marketplace Analysis 8. Management Team
4. Marketing Strategy 9. Exit Strategy
5. Distribution and Sales Strategy 10. Financial Estimates

The attached worksheets will help to guide you through this initial look at your business.
In this initial stage, understand that you will have very little of the information needed to
build a solid Feasibility plan. Nonetheless, use your best judgment to answer all of the
questions and complete all of the worksheets. In subsequent steps, you will be
Investigating and developing these issues in depth.

Company Name:
_____________________________________________

Team Members: ____________________________________

____________________________________
____________________________________
____________________________________
____________________________________

1. Company Overview
The Company Overview is a brief description of the company you have founded, exisitng or
want to found. How will it be organized? Will it be a sole proprietorship, partnership, limited
liability company, or corporation? What are your ambitions for the company? Will it always
be a small company, or do you want to grow it into a national or an international giant?
Upon reading this section, the reader should have a good idea of where you are and where
you are going with your company.
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What is the name of our company? Does it company currently exist, or will it be
forming?

How is our company organized (e.g., sole proprietorship, partnership,

corporation…)?

What is our overall strategy and what objectives do we have? What are our goals for
the company (keep it small, grow it big, franchise it…) what is the exit strategy for
ourselves and for our investors (sell to a larger company, go public, merge, buy out
investors…)
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2. Product/Service Description
The Product and Services section is a detailed description of the products and/or services
you will be selling. You should not assume that the reader is familiar with your
product/service, so be sure to explain and describe it carefully.

What exactly is our product or service? What isn't it? Carefully describe.

What is the unique selling proposition (USP) of our product/service? What are its
features and benefits? Do we have any proprietary rights to the product/service (for
example, technology, patents, copyrights, etc.)?

Why is our product/service superior to the competition, and how is it different?

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3. Industry and Marketplace Analysis

The Industry and Marketplace Analysis section dispassionately describes and outlines the
industry and the marketplace in which you will compete. When finished with this section,
you and your readers should understand the dynamics, problems, and opportunities driving
your industry and marketplace.

What is the industry that addresses this market? What trends are important in this
industry? How does this industry segment the market?

What is the market we intend to serve? How large is it? What is its growth potential?

What motivates customer purchase decisions?

Who are the major players/competitors in the market?

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4. Marketing Strategy
The Marketing Strategy section of your plan will make or break the prospects for your
venture. In the Marketing Strategy section, show how you are going to fit into your
marketplace. What are unmet needs in the marketplace and how are you going to fill them?
How will you differentiate your product or service from your competitors? What unique
features, benefits, or capabilities will you bring to the marketplace? Who are your
customers?

Who are our target customers? What problems are we solving for them? What are
their profiles? What motivates their buying decisions?

What are the strengths of our product/service? Weaknesses? Who are our
competitors? How will we differentiate our product or service?

How will our product be priced? What is our cost and profit margin per unit sold?
What are anticipated annual sales (units sold times price per unit)?
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5. Distribution & Sales Strategy

How will you reach your customers? How will you close the sale with your customers?
Remember, "nothing happens until the sale is made" – and the cash is received.

What distribution channels will we use (e.g., direct sales, internet, wholesalers, etc.)?

How will we communicate with our customers (e.g., advertising, promotions, etc.)?

How will our product or service be sold? Who will do the selling (our own sales
people, manufacturing representatives, etc.)?

What are the costs associated with our sales strategy? Which costs are fixed? Which
are variable?
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6. Operations Plan
The Operations section outlines how you will run your business and deliver value to your
customers. Operations is defined as the processes used to deliver your products and
services to the marketplace and can include manufacturing, transportation, logistics, travel,
printing, consulting, after-sales service, and so on. In all likelihood, about 80% of your
expenses will be for operations, 80% of your employees will be working in operations, and
80% of your time will be spent worrying about operating problems and opportunities.

Which operations are critical to the success of our business? Which are secondary?

How will we produce and deliver our product/service? What will we do in-house, and
what will we purchase (make vs. buy)?

What will it cost to produce and deliver our product or service? Estimate fixed costs
(plant, equipment, etc.) and variable costs (labor, materials, etc.)
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7. Development Plan
The Development section is a road map of how you are going to get from where you are
now to where you want to be in the future. These steps can be as routine as securing retail
space, or as critical as applying for and getting a patent on key technology.

What must be done before we can introduce our product or service to the
marketplace? What are the risks?

How long will it take to bring our product or service to market? What is our timeline?

What are the one-time start-up and development costs of our business (equipment,
deposits, fixtures, furniture, …)?

What additional information do we need understand and cost the development of our
product or service?
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8. Management Team
List the names and titles/roles of the individuals involved in our business. What
experience do they have in this industry and product line?

9. Exit Strategy
This refers to your future liquidity event, ie. How are the investors going to get their money
out, and the return on their investment? Usual forms of exit are through the sale of the
company to a larger competitor, initial public offering, or merger of equals.

Which exit strategy do we intend to use? Why? What is our time horizon?
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10. Financial Plan

Your Financial Plan should be frosting on a cake. You have outlined a great business
concept, demonstrated a real need in the marketplace, shown how you will execute your
ideas, and now will show how much money everyone is going to make.

Summarize estimates made in previous sections: $

A. Annual unit sales:
B. Price per unit:
C. Variable cost per unit (production and sales):
D. Fixed costs (admin, production, and sales):
E. One-time start-up costs (eqpmt, mktg, legal, etc.):
F. Working capital rqd (receivables, inventory, etc.):

Calculate estimated annual gross revenues and income:

G. Estimated annual revenues (A*B):
H. Estimated annual variable costs (A*C):
I. Estimated annual contribution margin (G-H-D):

Calculate break-even figures:

J. Contribution margin per unit (B-C):
K. Annual break-even quantity (D/J):
L. Ratio of break-even to expected quantities (K/A):

Estimate the money you will initially need to start your business:
M. Total up-front funds required (E+F):
N. Additional units to cover up-front funds (M/J):
O. Break-even quantity with up-front funds (K+N):

Calculate financial performance figures:

P. Payback period for startup funds (M/I):
Q. Annual return on start-up investment (I/M):
R. Variable cost to price ratio (C/B):
S. Contribution margin ratio (I/G):
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Do these numbers look attractive enough to proceed? How can they be improved?

How much cash will we need to start our business? Where will we get it (personal
savings, friends & family loan, venture capital, an angel…)?

Provide 3-year profit & loss projections of sales, expenses, and operating profit.
Please describe your assumptions in arriving at these numbers.

Year 1 Year 2 Year 3

Sales
Expenses
Operating Profit