In starting a new business venture, it is important to conduct a feasibility study to ensure that your business will be successful. Some things to be included are plan, cost, and sources of funding, manpower and personnel requirements, market and profitability. In the plan section of your feasibility study, State clearly the objectives and description of the project. Duration to complete the project is also included. It is usually answers the questions what, why and how about the project.
Indicate the cost of equipment and facilities needed for the project. The proponents should undertake reliable canvassing using at least two or three supplier and be particulars to models and capacities of equipment as well as the availability of materials. Also, it is important if there is budget for the project. If there is no sufficient budget for the project, a bank loan may be considered. In this case, the loan amount and its interest must be factored into the financial documents of the study. Realistic income targets from the venture should be projected.
As per personnel or manpower, it is important to determine the size and particulars of manpower as well as personnel’s job description, job titles and credential standards. Also, salary rates and allowance should be noted. In addition, the stability of the market determines the viability of the project. A survey should be conducted to know if there are sufficient clients or customers and to whom the commercial venture will cater. Of course, project should know if it is profitable. A ten or twenty percent return of investment (ROI) is usually regarded as profitable enough.
Vital Parts of Feasibility Study
A. Summary of Project
Name of Firm
Location – head office and plant site
Brief description of the product
Highlights of major assumptions such as market projections, share and prices, investment costs, method of funding
Summary of findings and conclusions on the following:
B. General Information – Describe the pre-operating period, during the operating period, labor, and professional firms or consultants to be hired, if any. Also, includes status of timetable of the project and other information such as pending litigations, information regarding intangibles, etc.
C. Competitive position considering imported and/or substitute products.
D. Marketing Program – description of the present marketing practices of competitors in the exports and domestic market. Projected export and proposed marketing program of the project. It includes the contribution to the economy, plant layout, structure, raw materials, utilities, and waste disposal.
E. Financial Feasibility – Total project cost, initial capital requirements, sources of financing, financial statements, and financial analysis.
F. Social Desirability – specific project contributions to the economy and society and social rate return.
Some Feasibility Study Mistakes
It is imperative to show your idea is feasible to attract investor and fund the project. No matter what is your offering whether a product or service, you need to convince other people to finance your ideas. I provide some feasibility mistakes which serve as guidelines to your feasibility study. Doing feasibility study without doing research. It is a wasting of time and money without preliminary research on validity of the idea. It is necessary to conduct initial research or pre-feasibility study before the start on of a full feasibility study.
Incorrect data interpretation. Sometimes, the writer overestimates the market size as well as the opportunity for the new venture. For example, you will observe that the product has a large market place, but not realized the strengths of competitors and their customer’s loyalty.
Incorrect cost estimation.
Make sure to detailed the cost to avoid over-estimation or under estimation. Also, cost estimates should be studied carefully.
Overlook indirect competitors. Make sure to investigate all products and services that deal to customers’ need.
Surveys dependence. Don’t over rely to survey because people tend to answer “yes” for new product but when it comes to purchasing, they say “no”.
Without expert Assistance. It is important to get expert views regarding the product, idea or services. What to include in your Technical Feasibility Product
Description of product
Economic uses of the product
Detailed Flow Chart of the Manufacturing
Process including the material and energy requirement at each step and normal duration of the process •Other processes and factors considered to determine the process to be adopted •Processes used in existing plants and in similar projects Plant Size and Production Schedule
Daily and annual production capacity of the plant
Days per year the project operate
Factors used in determining plant size
Expected attainable annual production volume for the next five years considering start-up and technical factors.
Machinery layout such as the number of specifications, rated capacities of major machineries, prices of equipment, and balancing of capacities of each major and auxiliary equipment and standby units
Spare parts and repair service available
Quotations from suppliers, machinery guarantees, delivery, terms of payments and other arrangements Plant Location and Layout
Location map of the plant
Plant Layout Suggested Outline for Feasibility Study
One of the important steps in business development is a feasibility study.
Feasibility study is used to determine the potential for success of a proposed business venture.
The sample outline below can be used to help you make your study. However, not all feasibility studies are alike because it depends to the type of business venture analyzed and the market.
The success of a feasibility study is based on the careful identification and evaluation of all of the important aspects for business success.
Identify the list of product(s) or services(s) to be marketed and the general business model such as how the business will make money.
Include the technical processes, size, location and kind of inputs. Also know the economic and social impact on local communities as well as environmental impact on the surrounding area.
Market Feasibility. Determine the industry description, industry competitiveness, market potential, sale projection and the access to market outlets.
Technical Feasibility. Find out the facility needs, suitability of production technology, availability and suitability of site, raw materials and others such as labor availability and qualified management personnel.
Financial Feasibility. Include the estimation of total capital requirements, equity and credit needs, budget expected costs and returns of various alternatives Management Feasibility. Identify the business structure and business founders.
Include information that will be used for decision making whether to proceed the proposed business ventures.
Rules in Preparing a Good Project Feasibility
Study A project study or feasibility study contains several chapters. The proposed project must be financially, economically, technically and socially feasible. A consultant or researcher must possess not only the technical expertise on the project involved, but also the right analytical, interpretative and writing skills to be able to produce the desired studies. He must know all banking, institutional, and governmental rules and regulations on the particular projects he is to work on.
Rules in Preparing a Good Project Feasibility
Know the nature of the proposed project well. If you are not familiar with the topic or project, you must obtain the technical expertise from qualified experts to help you in researching the basic required technology and other sensitive aspects of the project.
Research well. Explore all resource related to your study. Your project study must be included with statistics, data documents, and all information needed from all available resources.
Must be a good analyst. You must know how to analyze, evaluate, interpret, use and discard unnecessary data.
Data must be accurate. Your estimates and projections must be close to realities. Avoid making guesses and statistical improbabilities.
Organize study. You must know how to put in order your study.
Write it well. You must know how to write it properly.
Sample of Management Study
Excerpt from the proposed telephone industry business. Management study includes the planning, organizing, staffing and directing of the project. Also it includes the external activities in starting the business. The means and procedure are undertaken before the operation of the business. The form of management is indicated identifying each of management and each personnel. The role and duties of each personnel is clearly defined, as well as practice and develop skills learned from this project Management Analysis Our business covers a system of services that can be determined in large scales. A corporation owns the ETHECOM. This kind of business has a very large management. The management and operation of the business are determined and constructed by the joint-forces and capabilities of the corporate members and staffs. Organization Chart ETHELCOM provides its organizational line chart, compose of personnel deployed within the business. Registration of business The registration of business is an act that is provided by the constitution. It is very important and must be implemented in order for the business to be legal and to perform well and freely. The following are the steps for registering a business in the Philippines.
Prepare the article of partnership/corporation.
Registration of the business name with the Bureau of Domestic Trade and Industry.
Apply the registration of the partnership with the Securities and Exchange Commission.
Get the necessary permit from the office of the mayor and license to operate from the treasure of the city of municipality where the business will be located.
Secure a tax identification from the Bureau of Internal Revenue and a file VAT or Not-VAT permit.
The following are the qualification for the interested job seekers. Electronics and Communication Engineer Preferably Male, 22-30 yrs. old - Licensed - At least 5 years of experience Technician - Preferably Male, 22-30 yrs. Old - BSECE or Electronics/ Electrical graduate - At least 3 years of experience in the related field Sales - Male or Female, 21-30 yrs. old
High School Graduate
With pleasing personality
Job Description and Responsibilities President Responsible in making final decision for every undertaking the business may encounter.
Administer over all activities and for sees projects, forecast, and solve problems. Manager (Stockholders) To assist the President and his duties and responsibilities.
Must be responsible in assigning different task of each personnel.
Responsible for preparing financial statement of the business. Purchasing Personnel
Responsible for good quality of purchased products - Responsible for purchasing low cost of product
Responsible for scheduling of purchased product Technicians
Responsible for repairing, servicing and installation Sales Personnel
Responsible for the sales of product, operational reliability of services and provides customer care.
Tags: management study
Category: Feasibility Study
Comments Off Some Questionnaire Guide in Feasibility Study Preparations
What is the name of the firm?
Where is the location of head office and plant site?
Give a brief description of the project.
What are the assumptions being made including market projections, share and prices, investment costs, and method of financing?
Mention the summary of findings and conclusions regarding the market feasibility, technical feasibility and financial feasibility.
How shall the project be managed during the pre-operating period such as the firms or persons involved or to be involved in studying the different aspects of the project?
How shall the project be managed during the operating period including the type of business organization, organizational chart and function of each unit management personnel, duties and time to be devoted to the project, qualification and compensation?
What skills and corresponding numbers of labor are required such as qualifications, recruitment and training program, compensation, fringe benefits and facilities?
Include the time table of the project.
Indicate the annual volume of the domestic demand for the past 10 year?
Who are the major consumers of the product?
What is the projected annual volume of the domestic demand for the next 5 years? Also indicate the method used and factors considered in preparing the projection.
Who are the current and potential buyers of the product and where are they located?
What is the annual volume of the domestic supply for the past 10 years?
Who are the major producers of the product?
What are the prevailing prices of the product?
What are the present marketing strategies and practices of competitors?
What shall be adopted in the project as to the selling organization, terms of sales, channels of distribution, location of the sales outlets, transportation and storing facilities?
Tags: Feasibility Study
Category: Feasibility Study | Comments Off Financial Study
It is important if the proposed project is financially feasible, meaning the project cost is afford by the board or the company. Also, it involves the thorough coverage of all the monetary information.
It covers the detailed information on the total project cost, initial capital requirements, sources of financing, financial statements and financial analysis. The profitability level of the project is also defined such as the net income after taxes to the total investment. The identification of sources of financing is an essential element of feasibility study including the currency, security, repayment period, interest, and other features. In addition, the financial health of the business is also assessed in the financial statements as well as the analysis showing the income, cash flow and balance sheets.
Other information such as break-even outputs, sales and prices, amount of sales required to earn a certain amount of profit and the cash payback period are also provided. Tags: Feasibility Study, financial study
Category: Feasibility Study | Comments Off Management Study
Management study involves the appropriate business organization such as the people who will be in-charge both before and after the operating periods of the enterprise as well as the function.
Factors to be determined in management study:
pointing out the firms or personnel who will be involved in the operation of the project or enterprise
type of business organization
functions of each unit management personnel
skills and numbers of labor required as well the duties and time to be devoted in the project
qualifications, compensations, and fringe benefits of the personnel involved
facilities to be used
recruitment and training programs of the personnel
status and timetable of the project