entrepreneurship and ethics mod 3
TRANSCRIPT
Module – 3Feasibility 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 businessHelps 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 studyIf it is a government project, social desirability has to be
assessedPrepare the summary of the feasibility study including brief
description and major assumptions made.
Types of Project Feasibility
Types of Project
Feasibility
Technical
Managerial
Economical
Financial
CulturalSocial
Political
Environmental
Market
Technical Feasibility
Input Analysis
Throughput
Analysis
Output Analysis
Managerial Feasibility Analysis
Management SupportEmployee involvementCommitment
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/EmployeesCustomersStake holdersShareholders
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 competitionUSP, quality and pricingDemand ProjectionsExport facilitiesAdequate marketing infrastructure and
principal customersSelling arrangementsTrends 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 PerformanceSystem InterfaceDevelopment ProcessesRisk assessmentStaff qualificationFailure ImmunityCustomer supportSecurity
Feasibility Report
Includes the analysis of various factors and viability of 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
Write Project Description
Describe possible solutions
Evaluation Criteria
Write conclusion
Propose the most feasible
Solution
Importance of Feasibility Report
Helps to list all details that are required for your idea to work
Identifies the problems and possible solutionsDevelop 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 machineryTechnical Know-howMarket potentialOverall profitabilityProject 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 loanShows 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 overrunGovernment rules and regulations
Model project report for a new venture
Sequence of standard format to be followed in Preparing New Business Project reportI. Background of the BusinessII. Customers profileIII. 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 planIII. To recognize fundamental start-up issues
IV. Market AnalysisI. Brief discussion on the type of market, chief influencers, players
etc.II. Market descriptionIII. Reasons for starting business in a particular marketIV. Target ClientsV. Advantages of the services offered by the new businessVI. Market consumption patternsVII. Past and existing supply locationVIII. Production prospects and limitationsIX. Exports and ImportsX. Price structureXI. Flexibility of demandXII. Client behaviour, purposes, intentions, impetus, approaches,
inclinations and needs.XIII. Supply network and marketing rules formulated by the
governmentXIV. Government and technical limitations imposed on the promotion
of the product
V. Financial Assessment I. Investment expenditure and value of the entire
projectII. Methods of investmentIII. Anticipated productivityIV. Money flows of the project reportV. Investment value evaluated in context of different
points of meritVI. Estimated financial ranking
VI. Marketing AssessmentI. ProductII. PriceIII. Place IV. Promotion
VII.Operational PlanI. Business models II. Production of goods and services
VIII.Financial PlanIX. Management StructureX. Business Structure(Ownership, staff etc)XI. SWOT AnalysisXII.Appendices
I. Break-even analysisII. Profit and Loss synopsisIII. 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 detailsDescription of the businessOutline of the marketEvaluation of competitionHow the business will be organisedProposed marketing mixPremises and equipmentSources of capitalCash flow forecastFuture 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 youBe clear in your objectivesDo include market researchDo include a financial plan and projectionsExplain both Strengths and weaknesses of business
ideaDo reserve and modify your plan as circumstances
change
Format of a Typical Business Plan
1. The Executive Summary2. Description of the business3. Product/Service4. Management5. Financial requirements6. Organisation description7. Industry8. Marketing strategy9. Product/Operations Plan10. Ownership11. Key personnel12. Accounting records13. Financial information14. 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 Generati
on
Environmental
Scanning
Feasibility
Analysis
Project Report
Preparation
Evaluation,
Control and
Review
1: Idea Generation
Consumers/CustomersExisting companiesResearch and DevelopmentEmployeesDealers and Retailers
2: Environmental ScanningExternal Environmental Factor
Political Economical Social Technical Natural Demographical
Internal Environment Raw material Production/Operation Finance Market Human Resource
3: Feasibility Analysis
Market AnalysisTechnical Analysis
Material Availability Material requirement planning Plant location Plant capacity Machinery and equipment
Marketing PlanProduction Plan/Operation PlanOrganizational PlanFinancial Plan
4: Project Report preparation
5: Evaluation, control and reviewCompany 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
Marketing Aspects
Well defined market
Channel Strategy
Positioning statement
Pricing strategy
Communication
Strategy
Sales 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
Operational Aspects
Operations Strategy
Scope of
operations
Ongoing
Operations
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 yearsCurrent balance sheet figures and proforma
balance sheets for the first three years
Different Financial Projection Techniques available to an Entrepreneur
Proforma Income statementProforma Cash flowBalance Sheet
Assets Liabilities Owner equity Break even point Proforma sources an applications of funds
HRM aspects of a Business Plan
Top level managementMiddle level managementOperational level managementSupporting staffAdvisors
Below points provide clarity No and Type of employees Pay Structure Training methods Job description
Technical aspects of Business plan
Accounting, taxes and financeOrder taking and trackingInventory managementDatabase managementPresentationsInternet Marketing
Social Aspects of Business Plan
Consider the society’s welfareFocus on societal valuesOptimise the use of resourcesProtect environment, ecology by undertaking anti-
pollution measuresCSR activities like social welfare programmes,
charitable contributions, undertake social forestry and adopt villages to develop basic infrastructure
Share the profit with stakeholders of the businessAssist in the establishment of domestic social order
Errors in Business Plan formulation
Errors
Capacity utilisation estimates
Capacity Computation
Market study
Machinery selection
Project pruning and
Resource straining
Cash flow in initial
year
Selling price
Location selection
Project cost
Technology oriented products
Assignment
Prepare a Business plan with the above given parameters included for your own Business of interest