Module – 3

Feasibility Analysis and Crafting Business Plan

Chetan T.R
 Feasibility Study

The Feasibility study is an analytical tool used during

the project planning process, shows how a business
would operate under an explicitly stated set of
assumptions.
The Feasibility study of a project can be ascertained
in terms of technical factors, economic factors or
both.
It is documented with a report showing all the
ramifications of the project viz., inflows, outflows of
fund, technology, market, environment etc.
 Y Feasibility analysis?

Helps in determining profitability of business

Helps to gather broad data for members of management
to take decision.
Helpful for showing out projects which are consistent
with business’s objectives.
Helps analyze the cost benefit approach, as it considers
all the costs of the projects.
Helps identify the SWOT and unforeseen circumstances
that might affect the success and sustainability of the
business
Helps in estimating the financial, human and
technological resources that are required to ensure
successful launching of the business
 Steps in Feasibility study

Identify and recognize the people or firms that will be

involved in preparing the various aspects of the study.
Examine the feasibility factors like., market feasibility,
Technical, Technology and system feasibility, Legal
Feasibility, Operational Feasibility, Economic Feasibility,
Resource feasibility, Cultural feasibility, and Financial
feasibility study
Proceed with Management study
If it is a government project, social desirability has to be
assessed
Prepare the summary of the feasibility study including brief
description and major assumptions made.
 Types of Project Feasibility
Technical

Market Managerial

Types of
Environmental Project
Economical
Feasibility

Political Financial

Social Cultural
 Input
Analysis

Technical Throughput
Feasibility Analysis

Output
Analysis
 Managerial Feasibility Analysis

Management Support
Employee involvement
Commitment
 Economic Feasibility Analysis

Project costs
 Benefit-cost
Fixed and Variable costs
Revenue
 Financial Feasibility

 Expenditures

 Expected Cash Flows

 Rate of return on Investment

 Cultural Feasibility

Deals with the compatibility of the project with the

cultural environment of the project
Laborers/Employees
Customers
Stake holders
Shareholders
 Social Feasibility

Eg., Dye units, in Ahmedabad have mushroomed and

are polluting and generate effluents which are not
acceptable to the society. The government has
ordered closure of all dye units unless suitable
effluent treatment in implemented
 Market Feasibility

Product, scope of the market and competition

USP, quality and pricing
Demand Projections
Export facilities
Adequate marketing infrastructure and principal
customers
Selling arrangements
Trends in price
 Product or service feasibility analysis

Concept test:-
 Description of the Product/Service
 Intended Target market
 Benefits of the product/service
 Description of how the product will be positioned
 Description of how the product will be sold or distributed
 Elements of Technical Feasibility

System Performance
System Interface
Development Processes
Risk assessment
Staff qualification
Failure Immunity
Customer support
Security
 Feasibility Report

Includes the analysis of various factors and viabilityof

the project with the assumptions

FSR – Feasibility Study Report

 Is formally documented output of feasibility study that
summarises results of the analysis and evaluations conducted
to review the proposed solution and investigate project
alternatives for the purpose of identifying if the project is really
feasible, cost-effective and profitable
 Steps to write a FSR

Describe
Write Project possible Evaluation
Description solutions Criteria

Propose the
Write
most feasible
conclusion
Solution
 Importance of Feasibility Report

Helps to list all details that are required for your idea
to work
Identifies the problems and possible solutions
Develop marketing strategies to convince the
investor that your idea is worth considering an
investment
Serves as a solid foundation for developing the
Business plan
 Project Report

The Project report is prepared by the entrepreneur or

by the consultants or associates in order to present
relevant facts before the decision makers to enable
them to decide whether the project is worthwhile the
investment or not
The Project report includes
 Preparation of detailed designs, specs, plant layouts, Process
designs, and time schedules for the execution of the project
 Collection of details or a complete work plan for various
processes or the project to be implemented after the proposal
has been finalized by the entrepreneur
 Objective of a Project report

Facilitates business planning and planning the future

course of action
Enables an entrepreneur to compare different
investment proposals and select the most suitable
project
Provides a SWOT analysis
In case of public sector projects this report would
enable the concerned authorities to take an objective
decision on the project
Facilitates the appraisal of the project in regards to
financial, economic and technical feasibility
 Contents of a Project report

Sources of Finance (Long term and Short term)

Availability of machinery
Technical Know-how
Market potential
Overall profitability
Project schedule
 Advantages of a Project report

Helps entrepreneur in establishing techno-economic

viability
Helps in getting term loans from banks and financial
institutions.
Helps in getting working capital loan
Shows feasibility of the project and possibility of
achieving profits
Problems faced in preparation of a Project Report

Strict conditions of promoter’s contribution may

dampen
Lending institutions demand a lot of documents
Assessment of working capital due to unrealistic
assumption
Time overrun results in cost overrun
Government rules and regulations
 Model project report for a new venture

Sequence of standard format to be followed in

Preparing New Business Project report
I. Background of the Business
II. Customers profile
III. Long and short term corporate Objectives
I. To perform a viability assessment of the proposed new business
ideas in terms of marketability , technical feasibility, financing
and authorities
II. To be able to prepare a relevant business plan
III. To recognize fundamental start-up issues
IV. Market Analysis
I. Brief discussion on the type of market, chief influencers, players
etc.
II. Market description
III. Reasons for starting business in a particular market
IV. Target Clients
V. Advantages of the services offered by the new business
VI. Market consumption patterns
VII. Past and existing supply location
VIII. Production prospects and limitations
IX. Exports and Imports
X. Price structure
XI. Flexibility of demand
XII. Client behaviour, purposes, intentions, impetus, approaches,
inclinations and needs.
XIII. Supply network and marketing rules formulated by the
government
XIV. Government and technical limitations imposed on the
promotion of the product
V. Financial Assessment
I. Investment expenditure and value of the entire project
II. Methods of investment
III. Anticipated productivity
IV. Money flows of the project report
V. Investment value evaluated in context of different points
of merit
VI. Estimated financial ranking
VII. Marketing Assessment
I. Product
II. Price
III. Place
IV. Promotion
VII. Operational Plan
I. Business models
II. Production of goods and services
VIII. Financial Plan
IX. Management Structure
X. Business Structure(Ownership, staff etc)
XI. SWOT Analysis
XII. Appendices
I. Break-even analysis
II. Profit and Loss synopsis
III. Fund flow summary
 Business Plan

A Business Plan is a written statement of what an

entrepreneur hopes to achieve in one’s business and
how is one going to achieve it.
Set of documents prepared by a firm's management
to summarize its operational and financial objectives
for the near future (usually one to three years) and to
show how they will be achieved.
It serves as a blueprint to guide the firm's policies
and strategies, and is continually modified as
conditions change and new opportunities and/or
threats emerge.
 Business plan headings

Owner details
Description of the business
Outline of the market
Evaluation of competition
How the business will be organised
Proposed marketing mix
Premises and equipment
Sources of capital
Cash flow forecast
Future plans
 Significance of a business plan

Used for planning out specific details of business

To define what business is or what the business is or what it intends
to be over time
Clarifying the purpose and direction of business
Helps to plan for changes in the market, growing or slowing trends
and new innovations or directions to take as the company grows
The development of a comprehensive business plan shows whether
or not a business has the potential to make a profit
Act as sales tool to attract partners, secure supplier accounts and
attract executive level employees into the new venture
Conveys the organizational structure of a business, including the
titles of directors or officers and their individual duties.
Also Acts as a management tool that can be referred to regularly to
ensure business is on course with meeting the gals, sales targets or
operational milestones
 Guidelines to prepare a Business Plan

Do understand that the planning process is critical to run

a successful business
Do utilise the business outline to determine what to
include in your plan
Ensure the plan fits you
Be clear in your objectives
Do include market research
Do include a financial plan and projections
Explain both Strengths and weaknesses of business idea
Do reserve and modify your plan as circumstances
change
 Format of a Typical Business Plan

1. The Executive Summary

2. Description of the business
3. Product/Service
4. Management
5. Financial requirements
6. Organisation description
7. Industry
8. Marketing strategy
9. Product/Operations Plan
10. Ownership
11. Key personnel
12. Accounting records
13. Financial information
14. Appendices
 Objectives of Business Plan

To give direction to the vision formulated by the entrepreneur

To Objectively evaluate the prospectus of business
To monitor the progress after implementing business plan
To persuade others to join business
To seek loans from financial institutions
To visualise concept in terms of market availability, organisational,
operational and financial feasibility
To guide entrepreneur in actual implementation of plan
To identify actual strength and weakness of plan
To identify challenges in terms of opportunities and threats from
the external markets
To clarify ideas and identify gaps in management information about
their business, competitors and market
To identify the resources required to implement
 Business Plan Process

Idea Environmental Feasibility Project Report Evaluation,

Generation Scanning Analysis Preparation Control and
Review
 1: Idea Generation

Consumers/Customers
Existing companies
Research and Development
Employees
Dealers and Retailers
 2: Environmental Scanning
External Environmental Factor
 Political
 Economical
 Social
 Technical
 Natural
 Demographical
Internal Environment
 Raw material
 Production/Operation
 Finance
 Market
 Human Resource
 3: Feasibility Analysis

Market Analysis
Technical Analysis
 Material Availability
 Material requirement planning
 Plant location
 Plant capacity
 Machinery and equipment
Marketing Plan
Production Plan/Operation Plan
Organizational Plan
Financial Plan
4: Project Report preparation

5: Evaluation, control and review

Company has to operate in dynamic environment,
it has monitor ad review the strategies and policies
to stay in line with competition existing in market
 Marketing Plan

Refers to plan that describes market condition and

strategy related to how products and services will be
distributed, priced and promoted in market.
Marketing aspects of a Business plan

Well defined
market

Channel
Sales Strategy Strategy

Marketing
Aspects

Communication Positioning
Strategy statement

Pricing
strategy
Characteristics of an Effective Marketing Plan

• Should provide strategy for accomplishing the company mission and goals.
• Should be based on facts and valid assumptions

• Optimum utilization of existing resources

• Should provide for continuity

• Should specify performance criteria that will be monitored and controlled

• Should short and simple
• Should be flexible to adapt for dynamic market
 Production/Operations Plan

A Production Plan is that portion of intermediate

business plan that manufacturing/operations
department is responsible for developing
The plan states in general terms the total amount of
output that the manufacturing department is
responsible to produce for each period in the
planning horizon
Operational aspects of Business Plan

Operations
Strategy

Operational
Aspects
 Organization Plan

Is the process f identifying an organization’s

immediate and long-term objectives, formulating
and monitoring specific strategies to achieve them.
An Organization chart should include:
 Hierarchical structure
 How business is structured
 Legal form of ownership
 The Chain of command
 Four stages of organizing a Business

Establish a list of the tasks using the broadcast of

classifications possible
Organize these tasks into departments that produce
an efficient line of communication between staff and
management
Determine the type of personnel required to perform
each task
Establish the function of each task and how it will
relate to the generation of revenue within the
company
 Financial Plan

Is a comprehensive evaluation of an investor’s

current and future financial state by using currently
known variables t predict future cash flows, asset
values and withdrawal plans.
 Financial aspects of a Business Plan

Expected sales and expense figure for the first three

years at least
Cash flow figures for the first three years
Current balance sheet figures and proforma balance
sheets for the first three years
 Different Financial Projection Techniques
available to an Entrepreneur

Proforma Income statement

Proforma Cash flow
Balance Sheet
 Assets
 Liabilities
 Owner equity
 Break even point
 Proforma sources an applications of funds
 HRM aspects of a Business Plan

Top level management

Middle level management
Operational level management
Supporting staff
Advisors

Below points provide clarity

 No and Type of employees
 Pay Structure
 Training methods
 Job description
 Technical aspects of Business plan

Accounting, taxes and finance

Order taking and tracking
Inventory management
Database management
Presentations
Internet Marketing
 Social Aspects of Business Plan

Consider the society’s welfare

Focus on societal values
Optimise the use of resources
Protect environment, ecology by undertaking anti-
pollution measures
CSR activities like social welfare programmes,
charitable contributions, undertake social forestry
and adopt villages to develop basic infrastructure
Share the profit with stakeholders of the business
Assist in the establishment of domestic social order
Errors in Business Plan formulation

Capacity
utilisation
estimates
Technology Capacity
oriented Computation
products

Project cost Market study

Errors
Location Machinery
selection selection

Project pruning
Selling price and Resource
straining
Cash flow in
initial year
 Assignment

Prepare a Business plan with the above given

parameters included for your own Business of
interest