PART C
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Assignment2B1.docxPART 2B
Feasibility Analysis - Abridged
Adapted From “Preparing Effective Business Plans” by Bruce R. Barringer
Here we take a closer look as to whether this product or service is worth commercializing. You will hand in:
· the abridged version of Barringer’s Abbreviated Full Feasibility Analysis*.
· first draft of the Marketing plan for the Situation Analysis and the Segmentation and Target Market Analysis.
· valid reference sources and market studies.
*Parts 2B adapted from Barringer, B.R. Preparing Effective Business Plans: An Entrepreneurial Approach. Upper Saddle River, NJ., Prentice Hall.
Feasibility Analysis
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Note: |
All fields can be expanded to provide additional space to respond to the questions. A copy of this template, along with each of the assessment tools, is also available in PDF format at the authors’ Web site at www.prenhall.com/entrepreneurship. |
Introduction
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A. |
Name of the proposed business |
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B. |
Name of the founder (or founders) |
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C. |
One paragraph summary of the business |
Part 1 of the full feasibility analysis completed in Assignment 2A
Part 2: Industry/Market Feasibility
Issues Addressed in This Part
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A. |
Industry attractiveness |
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B. |
Target market attractiveness |
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C. |
Timeliness of entry into the target market |
Assessment Tools
Industry Attractiveness
· To the extent possible, assess the industry at the five-digit NAICS code level your potential business will be entering. Use a broader industry category (less NCICS digits) if appropriate (http://www.census.gov/epcd/www/naicstab.htm).
· Assess the attractiveness of the industry the potential business plans to enter on each of the following dimensions.
Industry Attractiveness Assessment Tool
(used to assess the broad industry, rather than the specific target market, you plan to enter)
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Low Potential |
Moderate Potential |
High Potential |
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1. |
Number of competitors |
Many |
Few |
None |
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2. |
Age of industry |
Old |
Middle aged |
Young |
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3. |
Growth rate of industry |
Little or no growth |
Moderate growth |
Strong growth |
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4. |
Average net income for firms in the industry |
Low |
Medium |
High |
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5. |
Degree of industry concentration |
Concentrated |
Neither concentrated nor fragmented
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Fragmented |
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6. |
Stage of industry life cycle |
Maturity phase or decline phase |
Growth phase |
Emergence phase |
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7. |
Importance of industry’s products and/or services to customers |
“Ambivalent” |
“Would like to have” |
“Must have” |
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8. |
Extent to which business and environmental trends are moving in favor of the industry |
Low |
Medium |
High |
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9. |
Number of exciting new product and services emerging from the industry |
Low |
Medium |
High |
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10. |
Long-term prospects |
Weak |
Neutral |
Strong |
Target Market Attractiveness
· Identify the portion or specific market within your broader industry that you plan to target.
· Assess the attractiveness of the target market on each of the following dimensions.
Target Market Attractiveness Assessment Tool
(used to assess the specific target market, rather than the broader industry, you plan to enter)
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Low Potential |
Moderate Potential |
High Potential |
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1. |
Number of competitors in target market |
Many |
Few |
None |
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2. |
Growth rate of firms in the target market |
Little to no growth |
Slow growth |
Rapid growth |
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3. |
Average net income for firms in the target market |
Low |
Medium |
High |
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4. |
Methods for generating revenue in the industry |
Unclear |
Somewhat clear |
Clear |
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5. |
Ability to create “barriers to entry” for potential competitors |
Unable to create |
May or may not be able to create
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Can create |
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6. |
Degree to which customers feel satisfied by the current offerings in the target market |
Satisfied |
Neither satisfied or dissatisfied |
Unsatisfied |
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7. |
Potential to employ low cost guerrilla and/or buzz marketing techniques to promote the firm’s product or services |
Low |
Moderate |
High |
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8. |
Excitement surrounding new product/service offerings in the target market |
Low |
Medium |
High |
Market Timeliness
· Determine the extent to which the “window of opportunity” for the proposed business is open or closed based on the following criteria.
· Determine the timeliness of entering a specific target market based on other criteria.
Market Timeliness Assessment Tool
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Low Potential |
Moderate Potential |
High Potential |
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1. |
Buying mood of customers
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Customers are not in a buying mood |
Customers are in a moderate buying mood |
Customers are in an aggressive buying mood |
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2. |
Momentum of the market |
Stable to losing momentum |
Slowly gaining momentum |
Rapidly gaining momentum |
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3. |
Need for a new firm in the market with your offerings or geographic location |
Low |
Moderate |
High |
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4. |
Extent to which business and environmental trends are moving in favor of the target market |
Low |
Medium |
High |
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5. |
Recent or planned entrance of large firms into the market |
Large firms entering the market |
Rumors that large firms may be entering the market
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No larger firms entered the market or are rumored to be entering the market |
Conclusion (expand fields and report findings, in discussion form, for each area)
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A. |
Industry attractiveness |
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B. |
Target market attractiveness |
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C. |
Market timeliness |
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D. |
Industry/market feasibility (circle the correct response) Not Feasible Unsure Feasible |
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E. |
Suggestions for improving industry/market feasibility. |
Justification of assessment:
Part 4: Financial Feasibility
Issues Addressed in This Part
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A. |
Total startup cash needed |
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B. |
Financial performance of similar businesses |
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C. |
Overall financial attractiveness of the proposed venture |
Assessment Tools
Total Start-Up Cash Needed
· The startup costs (which include capital investments and operating expenses) should include all the costs necessary for the business to make its first sale. New firms typically need money for a host of purposes, including the hiring of personnel, office or manufacturing space, equipment, training, research and development, marketing, and the initial product rollout.
· At the feasibility analysis stage, it is not necessary for the number to be exact. However, the number should be fairly accurate to give an entrepreneur an idea of the dollar amount that will be needed to launch the firm. After the approximate dollar amount is known, the entrepreneur should determine specifically where the money will come from to cover the startup costs.
· The total startup cash needed can be estimate using the following table.
Total Startup Cash Needed (to Make First Sale)
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Capital Investments |
Amount |
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Property |
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Furniture and fixtures |
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Computer equipment |
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Other equipment |
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Vehicles |
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Operating Expenses |
Amount |
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Legal, accounting, and professional services |
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Advertising and promotions |
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Deposits for utilities |
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Licenses and permits |
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Prepaid insurance |
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Lease payments |
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Salary and wages |
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Payroll taxes |
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Travel |
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Signs |
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Tools and supplies |
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Starting inventory |
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Cash (working capital) |
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Other expense 1 |
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Other expense 2 |
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Total Startup Cash Needed = |
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Comparison of the Financial Performance of Proposed Venture to Similar Firms
· Use the following tables to compare the proposed new venture to similar firms in regard to annual sales (Year 1 and Year 2) and profitability (Year 1 and Year 2).
Comparison of the Financial Performance of Proposed Venture to Similar Firms Assessment Tool
Annual Sales
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Estimate of Proposed Venture’s Annual Sales—Year 1 |
Explanation of How the Estimate Was Computed |
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Estimate of Year 1 Sales __________ Summary: How proposed annual sales, on average, compares to similar firms (circle one) Below Average Average Above Average |
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Estimate of Year 2 Sales __________ Summary: How proposed annual sales, on average, compares to similar firms (circle one) Below Average Average Above Average |
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Net Income
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Estimate of Proposed Venture’s Net Income—Year 1 |
Explanation of How the Estimate was Computed |
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Estimate of Year 1 Net Income __________ Summary: How proposed net income, on average, compares to similar firms (circle one) Below Average Average Above Average |
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Estimate of Year 2 Net Income __________ Summary: How proposed net income, on average, compares to similar firms (circle one) Below Average Average Above Average |
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Overall Financial Attractiveness of the Proposed Venture
· The following factors are important in regard to the overall financial attractiveness of the proposed business.
· Assess the strength of each factor in the following table.
Overall Financial Attractiveness of Proposed Venture Assessment Tool
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Low Potential |
Moderate Potential |
High Potential |
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1. |
Steady and rapid growth in sales during the first one to three years in a clearly defined target market |
Unlikely |
Moderately likely |
Highly likely |
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2. |
High percentage of recurring income—meaning that once you win a client, the client will provide recurring sources of revenue |
Low |
Moderate |
Strong |
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3. |
Ability to forecast income and expenses with a reasonable degree of certainty |
Weak |
Moderate |
Strong |
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4. |
Likelihood that internally generated funds will be available within two years to finance growth |
Unlikely |
Moderately likely |
Highly likely |
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5. |
Availability of exit opportunity for investor if applicable |
Unlikely to be unavailable |
May be available |
Likely to be available |
Conclusion (report finding for each area)
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A. |
Total startup cash needed |
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B. |
Financial performance of similar businesses |
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C. |
Financial feasibility (circle the correct response) Not Feasible Unsure Feasible |
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D. |
Suggestions for improving financial feasibility |
Overall Feasibility: Summary and Conclusion
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Overall Feasibility of the Business Idea Based on Each Part |
Suggestions for Improving the Feasibility |
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Product/Market Feasibility
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Industry/Market Feasibility
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Organizational Feasibility
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Financial Feasibility
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Overall Assessment |
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Justification of assessment:
Conclusion—briefly summarize your justification for your overall assessment.
Abbreviated Marketing Plan - Situational Analysis and Target market
Based on Preparing Effective Business Plans – Bruce R. Barringer
There are many examples of marketing plans on the web and in the textbook. You may choose whichever format you like as long as it does contain the following information
1) Product Description - What is the solution this product is providing? What makes it unique (USP) – 1/4 - 1/2 page
2) Situation Analysis -
· Industry Trend Analysis and Environmental Analysis
What environmental factors and trends are happening that affect the success of this product?
Provide a clear description and a statistical analysis of your industry. One section should include how big is the industry? How big is the market for your product? (in this section do not include size of target market)
An important section is on what trends are occurring that affect your product, market and industry? Why? Are sales of this type of product going up or down? Why?
Trends should be relevant to why your product will succeed or what you need to be aware of that can hinder your product. These trends should be about the industry, consumer buying behaviour or cultural changes. Trends also include key environmental factors that are relevant and influence your market in regards to political, legal regulations, economic, social, demographic, cultural and technology? Choose the factors which are most relevant to your product or service, you may not need to include each factor.
· Competitive Analysis
Who are you’re main competitors. What is their market share? What products and services do they offer that directly compete against yours? How do they promote/ distribute/ price these products and services? How are they positioned? How are your competitors likely to react to a new competitor? Your analysis must include competitor prices.
3) Segmentation and Target Market Analysis What one key market segment will you target? Explain why you have selected it and quantify it.
For example, how many people are in this segment? Determine market size (if not in situational analysis) and target market size. What percentage will use/ buy your product or service? Give your target segment a name and develop an in-depth profile of the characteristics of the people in it, including a discussion of their consumer buying behaviour. Ensure you reference your sources.
Evaluation 2B
Student Names:
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Description |
Marks |
Marks Awarded |
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Format – · The assignment is easy to read, flows well, and is concise - little unnecessary information · Correct grammar, spelling, and punctuation · Clear organization and use of headings · Appearance, language, and level of formality appropriate for target audience |
15 |
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Citation and reference list · External sources are fully documented and cited · Appropriate use of quotes · Valid sources |
15 |
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Content - Barringer’s abridged Full Feasible Analysis · Complete – all major sections presented · Relevant material is presented with sufficient depth and breadth · Research was insightful and relevant · Assessments seemed reasonable · Applies critical thinking · Justification of assessments seemed reasonable · Logical progression of arguments · Facts/examples support claims
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30 |
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Content – first draft – Situation Analysis and Target Market · Complete – all major sections presented · Relevant material is presented with sufficient depth and breadth · Research was insightful and relevant · Information was obtained for a variety of valid sources · Applies critical thinking · Logical progression of arguments · Facts/examples support claims
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40 |
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Total |
100 |
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Comments:
