Entrepreneurship and

Innovation
Chapter 3: Feasibility Analysis
 1. Feasibility analysis is and why it’s important.
2. Product/service feasibility analysis
3. Industry/market feasibility analysis
Chapter's Learning
4. Organizational feasibility analysis
objectives 5. Financial feasibility analysis
6. Feasibility analysis template
Chapter 3: Feasibility Analysis
Feasibility Analysis Is And Why It’s Important
What is Feasibility Analysis
• Feasibility analysis is the process of determining if a business idea is viable
• A feasibility analysis is an assessment of a potential business rather than a product/service idea
• Feasibility analysis is designed to critique the merits of a proposed business
• Feasibility analysis is different from business planning, which focus more on planning and selling
• This chapter provides a methodology for conducting a feasibility analysis by describing its four
key areas:
• Product/service feasibility,
• Industry/target market feasibility,
• Organizational feasibility, and
• Financial feasibility
When To Conduct a Feasibility Analysis
• Timing of Feasibility Analysis
• The proper time to conduct a feasibility analysis is early in thinking
through the prospects for a new business.
• The thought is to screen ideas before a lot of resources are spent on them.
• A properly conducted feasibility analysis includes four separate components, if
a business idea falls short on one or more of the four components of feasibility analysis, it should
be dropped or rethought
When To Conduct a Feasibility Analysis
• The outline for feasibility analysis is in the
Figure on the right
• The process often requires:
• Primary research: analyze data
collected by the the person who process
feasibility analysis. It normally includes
talking to prospective customers, getting
feedback from industry experts,
conducting focus groups, and
administering surveys
• Secondary research: probes data that
is already collected. The data generally
includes industry studies, Census Bureau
data, analyst forecasts, and other
pertinent information gleaned through
library and Internet research
Chapter 3: Feasibility Analysis
Product/Service Feasibility Analysis
Product/Service Feasibility Analysis
• Product/service feasibility analysis is an assessment of the overall appeal of the product or service
being proposed.
• Although there are many important things to consider when launching a new venture, nothing
else matters if the product or service itself doesn’t sell.
• There are two components to product/service feasibility analysis:
• Product/service desirability
• Product/service demand
Product/Service Desirability
• To affirm that the proposed product or service is desirable and serves a need in the marketplace
• First, as the following questions yourself and others to determine the basic appeal of the product
or service:
 Does it make sense? Is it reasonable? Is it something real customers will buy?
 Does it take advantage of an environmental trend, solve a problem, or fill a gap in the
marketplace?
 Is this a good time to introduce the product or service to the market?
 Are there any fatal flaws in the product or service’s basic design or concept?
• Bring the questions to your potential customers, "get out of the building" and learn about your
customers.
• Conducting interviews with prospective customers is the primary mantra of the Lean Startup
method.
Product/Service Desirability (cont.)
• Second, Administer a Concept Test, which involves showing a preliminary description of a product
or service idea, called a Concept statement, to prospective customers and industry experts to
solicit their feedback
• A concept statement is a one-page description of a business that is distributed to people who are
asked to provide feedback on the potential of the business idea, including:
 A description of the product or service.
 The intended target market.
 The benefits of the product or service.
 A description of how the product or service will be positioned relative to competitors.
 A brief description of the company’s management team.
• The feedback will hopefully provide the entrepreneur:
 A sense of the viability of the product or service idea.
 Suggestions for how the idea can be strengthened or “tweaked”.
 New Business Concept
New Venture Fitness Drinks Inc.

Product

Example New Venture Fitness Drinks will sell delicious, nutrition-filled, all-natural fitness drinks to thirsty sports
enthusiasts. The drinks will be sold through small storefronts (600 sq. ft.) that will be the same size as
popular smoothie restaurants. The drinks were formulatedby Dr. William Peters, a world-renowned
nutritionist, and Dr. Michelle Smith, a sportsmedicine specialist, on behalf of New Venture Fitness
Drinks and its customers.

• The figure beside Target Market

In the first three years of operation, New Venture Fitness Drinks plans to open three or four
illustrate a fictitious New restaurants. They will all be located near large sports complexes that contain soccer fields and softball
diamonds. The target market is sports enthusiasts.

Venture Fitness Drinks' Why New Venture Fitness Drinks?

Concept statement The industry for sports drinks continues to grow. New Venture Fitness Drinks will introduce exciting
new sports drinks that will be priced between $1.50 and $2.50 per 16-ounce serving. Energy bars and
other over-the-counter sports snacks will also be sold. Each restaurant will contain comfortable tables
and chairs (both inside and outside) where sports enthusiasts can congregate after a game. The
atmosphere will be fun, cheerful, and uplifting.

Special Feature—No Other Restaurant Does This

As a special feature, New Venture Fitness Drinks will videotape select sporting events that take place
in the sports complexes nearest its restaurants and will replay highlights of the games on video
monitors in their restaurants. The “highlight” film will be a 30-minute film that will play continuously
from the previous day’s sporting events. This special feature will allow sports enthusiasts, from kids
playing soccer to adults in softball leagues, to drop in and see themselves and their teammates on
television.

Management Team
New Venture Fitness Drinks is led by its cofounders, Jack Petty and Peggy Wills. Jack has 16 years of
experience with a national restaurant chain, and Peggy is a certified public accountant with seven
years of experience at a Big 4 accounting firm
Product/Service Desirability (cont.)
• Some entrepreneurs conduct their initial product/service feasibility analysis by talking through their
ideas with prospective customers or conducting focus groups to solicit feedback.
• There are online tools that support entrepreneurs in doing so (page 87-88 main textbook), including:
 3D printing services: i.materialise.com, shapeways.com
 A/B split test: 3minuteoptimizer.com; optimizely.com
 Feedback on business ideas: growthhackers.com; meetup.com; reddit.com; unassumer.com
 Landing pages: launchrock.com; ubounce.com; wufoo.com
 Market research: aytm.com; crowdpicker.com; google.com/trends; facebook.com/ads;
google.com/adwords
 Online Whiteboard: reatimewhiteboard.com; ziteboard.com
 Prototyping services: protolabs.com; thomasnet.com
 Q&A sites: brightjourney.com; stackoverflow.com; quora.com
 Surveys: Google Forms; survey.io; surveymonkey.com
 Website usability testing: usertesting.com; verifyapp.com
Product/Service Demand
• The second component of product/service feasibility analysis is to determine if there is demand
for the product or service.
• Three commonly utilized methods for doing this are:

Utilizing online tools,

Talking face-to-face such as Google
Library, Internet, and
with potential AdWords and landing
gumshoe research.
customers, pages, to assess
demand
Product/Service Demand (cont.)
Talking Face-to-Face with potential customers

• If you want to understand anyone, talk to them. The idea is to gauge customer reaction to the
general concept of what you want to sell.
• However, many business started without communicate with their customers beforehand. One
study of 120 business founders revealed that more than half fully developed their products
without getting feedback from potential buyers.
• You have to think carefully about who the potential customers are
Example: the potential customers of health-care service might be: Potential users of the service;
Family members of potential users of the service; Physicians; Nurses; Health insurance companies;
Medicare and Medicaid personnel; Pharmaceutical companies; Owners/managers of assisted living
facilities and nursing homes; Hospital and physician office administrators; Founders of other
companies in the home health-care industry
 Build a landing page
regarding your
product/service

Product/Service Demand (cont.)

Utilizing online tools to assess demand
Buying Keywords in
GoogleAds
• Employing online tools to asking for feedback: online surveys, Q&A
sites, marketing research
• Surveys are most effective in validating what you've learned from face-
to-face interview
• Be careful of Confirmation bias, a tendency to search for information When customers looking for
your keywords, they will see
that validates your preconceptions --> Make sure to ask questions that your Landing page in the
result page
allow for a wide range of responses
 Online survey: Using close-ended questions
 Q&A: Using open-ended questions
When they are in your
 Online market research: employing Google trends to explore if a landing page, you can assess
their needs or behaviors
term is trending in Google search queries • Click on follow to received message
 Google Adwords + Landing page (detailed as the process beside) • Click on "Buy now"...
Product/Service Demand (cont.)
Library, Internet, and Gumshoe research

• To collect secondary data

• Provide a more general view from the industry
• Your City Library might be a good starting point
• The Internet is an important information resource, however the credibility of this source should
be considered. There are many report pages that provide ready-to-use information:
https://www.gso.gov.vn/ (Vietnam general statistics office); Statista.com...
• A gumshoe is a detective or an investigator that scrounges around for information or clues
wherever they can be found. They use their interaction with people, observation for analyzing the
demand of the product.

Asking for experts,

Finding documents from Searching for informationon prospective customers,
Lirabry the Internet sellers... for their ideas
Chapter 3: Feasibility Analysis
Industry/Target Market Feasibility Analysis
Industry/Target Market Feasibility Analysis
• Industry/target market feasibility is an assessment of the overall appeal of the industry and the
target market of the product or service being proposed
• An industry is a group of firms producing a similar product or service, such as computers,
children’s toys, airplanes, or social networks.
• A firm’s Target market is the portion of the industry that it goes after or to which it wants to
appeal.
• Most firms, and certainly entrepreneurial start-ups, typically do not try to service an entire
industry. Instead, they select or carve out a specific target market and try to service that group of
customers particularly well
• There are two components to industry/target market feasibility analysis:
 Industry attractiveness
 Target market attractiveness
Industry Attractiveness
• An industry might be attractive in an overall sense. The table below represent the characteristics
of attractive industries
• The three first factors are particularly important
• Although new industries as illustrated in the table are the best. However, old industries that have
not seen much innovation represent opportunities for disruption.
Target Market Attractiveness
• A target market is a segment within a larger market that represents a narrower group of
customers with similar needs
• Most startups simply don’t have the resources needed to participate in a broad market, yet.
• The challenge in identifying an attractive target market is to find a market that’s large enough for
the proposed business but is yet small enough to avoid attracting larger competitors.
• Assessing the attractiveness of a target market is tougher than assessing the attractiveness an
entire industry.
• Often, considerable ingenuity must be employed to find information to assess the attractiveness
of a target market.
Chapter 3: Feasibility Analysis
Organizational Feasibility Analysis
Organizational Feasibility Analysis
• Is conducted to determine whether a proposed business has sufficient management expertise,
organizational competence, and resources to successfully launch a business.
• Focuses on non-financial resources
• There are two primary issues to consider in this area:

Management Resource
prowess sufficiency
Management Prowess
• A proposed business should candidly evaluate the prowess, or ability, of its management team to
satisfy itself that management has the requisite passion and expertise to launch the venture.
• Two of the most important factors in this area are:
 The passion that the sole entrepreneur or the founding team has for the business idea.
 The extent to which the sole entrepreneur or the founding team understands the markets in
which the firm will participate.
• The additional factors:
 Managers with extensive professional and social networks: reach out for helps and earning
knowledge
 A new-venture team is the group of founders, key employees, and advisers that either
manage or help manage a new business in its start-up years.
 The venture could borrow the credibility and capability of the new-venture team's
members to be more attractive
 Partnering for success
Resource Sufficiency
• An assessment of whether an entrepreneur has sufficient resources to launch the proposed
venture.
• To test resource sufficiency, a firm should list the 6 to 12 most critical nonfinancial resources that
will be needed to move the business idea forward successfully.
• If critical resources are not available in certain areas, it may be impractical to proceed with the
business idea.
Example: Nonfinancial resources that may be critical
to the successful launch of a new business
•Affordable office space.
• Lab space, manufacturing space, or space to launch a
service business.
• Availability of contract manufacturers or service providers.
• Key management employees (now and in the future).
• Key support personnel (now and in the future).
• Ability to obtain intellectual property protection.
• Ability to form favorable business partnerships.
Chapter 3: Feasibility Analysis
Financial Feasibility Analysis
Financial Feasibility Analysis
• Is the final component of a comprehensive feasibility analysis.
• A preliminary financial assessment is sufficient.
• The most important issues to consider at this stage are:

Overall financial
Financial
Total start-up cash attractiveness of
performance of
needed the proposed
similar businesses
venture
Total Start-Up Cash Needed
• Total cash needed to prepare the business to make its first sale.
• An actual budget should be prepared that lists all the anticipated capital purchases and operating
expenses needed to generate the first $1 in revenues.
• The point of this exercise is to determine if the proposed venture is realistic given the total start-
up cash needed.
• There are worksheets posted online that help entrepreneurs determine the start-up costs to
launch their respective businesses. Start-up cost worksheets are available via SCORE
(www.score.org) and the U.S. Small Business Administration (www.sba.gov).
• The source of the money should be specific, avoid “I plan to bring investors on board,” or “I’ll
borrow the money.”
• Plan the repay process
Financial Performance of Similar Businesses
• Estimate the proposed start-up’s financial performance by comparing it to similar, already
established businesses.
• There are several ways to doing this, all of which involve a little ethical detective work.
• First, there are many reports that offer detailed industry trend analysis and reports on
thousands of individual firms.
• Second, simple observational research may be needed. For example, the owners of New
Venture Fitness Drinks could estimate their sales by tracking the number of people who
patronize similar restaurants.
Overall Financial Attractiveness of the
Proposed Venture
• To gain perspective, a start-up’s projected rate of return should be weighed against the following
factors to assess whether the venture is financially feasible:
• The amount of capital invested
• The risks assumed in launching the business
• The existing alternatives for the money being invested
• The existing alternatives for the entrepreneur’s time and efforts

Overall Financial Attractiveness

• Steady and rapid growth in sales during the first 5 to 7 years in a clearly defined
market niche.
• High percentage of recurring revenue—meaning that once a firm wins a client,
the client will provide recurring sources of revenue.
• Ability to forecast income and expenses with a reasonable degree of certainty.
• Internally generated funds to finance and sustain growth.
• Availability of an exit opportunity for investors to convert equity to cash.
Chapter 3: Feasibility Analysis
Feasibility Analysis Template
 Feasibility
Analysis
Template
(Page 114 -
115, Main
textbook)
Thank you!