newventure feasibility analysis work book

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Innovation & Entrepreneurship Institute 8th Annual Feasibility Study Competition

FEASIBILITY STUDY WORKBOOK

COMPETITION DEADLINE: JANUARY 17, 2006

FINALIST PRESENTATIONS & AWARDS CEREMONY: JANUARY 26, 2006

DRAFT REVIEWS WILL BE OFFERED DURING THE WEEK OF NOVEMBER 28(MUST SIGN UP IN ADVANCE) AND UPON REQUEST BY IEI STAFF.

FOR MORE INFORMATION, CONTACTChris Pavlides Michelle EisenbergExecutive Director Associate Director 201 Speakman Hall 201 Speakman Hall215-204-1035 215-204-3081

[email protected] [email protected]

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AwardsFeasibility Plan Competition winners are eligible for cash and in-kind prizes and use ofthe Innovation Lab to prepare for the Business Plan stage of the annual Business

Innovation Competition.

GuidelinesWinning studies will convince the judges that your idea could work. Judges will considerthe following:

Market Opportunity

Is the value proposition sound? What is your unique selling proposition? Is there amarket for your product or service?

How innovative and well-thought-out is your product or service? Is your target market clearly identified and sufficiently large?

Who are the key market players competitors, possible partners, suppliers?

What is the competitive advantage over existing solutions?

Implementation Plan

Is the business operationally feasible?

Have the major operational risks been identified, with appropriate contingency plans,in regards to market entry barriers, intellectual property protection, suppliers,funding, etc?

Is the founding team qualified and sufficiently experienced to launch the business?

Revenue Model

Is the revenue generation plan reasonable and well-thought-out?

Are the major financial assumptions reasonable given current market conditions?

Are the financial projections realistic?

TipsUse the Feasibility Study Outline as checklist. (But remember, no two studies are everalike in content, emphasis or style.)

Keep the length to 5, but certainly no more than six pages, typed, single-spaced,12pt Times/Arial font
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Make the study compelling. Feasibility studies must convince readers that the ideacould work.

Make your case clear and to the point. Consider using numbers, diagrams, modelsor pictures to help condense your argument - without sacrificing detail (must beincluded in the page limit). Support claims with evidence.

Use credible sources and methods - and document all quotes, estimates, etc.Support all numbers with documented sources.

Have an idea but need other expertise on your team? Check out the Team BuilderBulletin Board. Also check here to see if you can team up with someone who alreadyhas a great idea, but needs some help.

For questions or further information, please contact:

Innovation & Entrepreneurship InstituteFox School of Business, 201 Speakman Hall215-204-3082, [email protected]
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New Venture Feasibility Analysis

Although every feasibility study should reflect the particular combination of opportunity,concept and entrepreneurial team that fits your business, it is important to consider the

full range of issues you might face - before jumping into more detailed study.

Function of a Feasibility StudyFeasibility studies help entrepreneurs - and their supporters - judge whether an idea isviable. The process of preparing a feasibility study is a testing process - a thoughtexperiment in what could go wrong and what needs to go right for an enterprise to takeroot and grow.

Preparing a feasibility study requires a tremendous amount of research and thinkingwhich often lead to significant changes in the original idea. The good news is that thestronger the feasibility study the easier the business study is to write - and the more

likely it is that your business will succeed.

Feasibility Plan NarrativeThe feasibility study is not a formal document but it is a very important one. It is yourfirst reality check. (The marketplace will be the real check, of course.) As such, thestudy should be very carefully thought through, extraordinarily well documented, andclearly written.

A feasibility study should at least touch on most issues included in the final businessplan, but for the feasibility study the focus is on getting the design right and testing itscoherence, rather than on convincing investors and other partners to extend their

support. Thus, clarity and evidence are more important for the feasibility study thanconvincing presentation. The first step in creating a business plan is to outline yourconcept, begin to define the scope of your business, and to visit each of the principalparts of your prospective plan:

1. Company Overview2. Product/Service Description3. Industry and Marketplace Analysis4. Marketing Strategy5. Distribution and Sales Strategy

6. Operations Plan7. Development Plan8. Management Team9. Exit Strategy10. Financial Estimates

The attached worksheets will help to guide you through this initial look at your business.In this initial stage, understand that you will have very little of the information needed tobuild a solid business plan. Nonetheless, use your best judgment to answer all of thequestions and complete all of the worksheets. In subsequent steps, you will beinvestigating and developing these issues in depth.


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Company Name:_____________________________________________

Team Members: ____________________________________

________________________________________________________________________________________________________________________________________________

1. Company OverviewThe Company Overview is a brief description of the company you have founded or want tofound. How will it be organized? Will it be a sole proprietorship, partnership, limited liabilitycompany, or corporation? What are your ambitions for the company? Will it always be asmall company, or do you want to grow it into a national or an international giant? Upon

reading this section, the reader should have a good idea of where you are and where youare going with your company.

What is the name of our company? Does it company currently exist, or will it beforming?

How is our company organized (e.g., sole proprietorship, partnership,corporation)?

What is our overall strategy and what objectives do we have? What are our goals forthe company (keep it small, grow it big, franchise it) What is the exit strategy forourselves and for our investors (sell to a larger company, go public, merge, buy outinvestors)


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2. Product/Service DescriptionThe Product and Services section is a detailed description of the products and/or servicesyou will be selling. You should not assume that the reader is familiar with your

product/service, so be sure to explain and describe it carefully.

What exactly is our product or service? What isn't it? Carefully describe.

What is the unique selling proposition (USP) of our product/service? What are itsfeatures and benefits? Do we have any proprietary rights to the product/service (forexample, technology, patents, copyrights, etc.)?

Why is our product/service superior to the competition, and how is it different?


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3. Industry and Marketplace AnalysisThe Industry and Marketplace Analysis section dispassionately describes and outlines theindustry and the marketplace in which you will compete. When finished with this section,you and your readers should understand the dynamics, problems, and opportunities drivingyour industry and marketplace.

What is the industry that addresses this market? What trends are important in thisindustry? How does this industry segment the market?

What is the market we intend to serve? How large is it? What is its growth potential?

What motivates customer purchase decisions?

Who are the major players/competitors in the market?


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4. Marketing StrategyThe Marketing Strategy section of your plan will make or break the prospects for yourventure. In the Marketing Strategy section, show how you are going to fit into yourmarketplace. What are unmet needs in the marketplace and how are you going to fill them?How will you differentiate your product or service from your competitors? What unique

features, benefits, or capabilities will you bring to the marketplace? Who are yourcustomers?

Who are our target customers? What problems are we solving for them? What aretheir profiles? What motivates their buying decisions?

What are the strengths of our product/service? Weaknesses? Who are ourcompetitors? How will we differentiate our product or service?

How will our product be priced? What is our cost and profit margin per unit sold?What are anticipated annual sales (units sold times price per unit)?


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5. Distribution & Sales StrategyHow will you reach your customers? How will you close the sale with your customers?Remember, "nothing happens until the sale is made" and the cash is received.

What distribution channels will we use (e.g., direct sales, internet, wholesalers, etc.)?

How will we communicate with our customers (e.g., advertising, promotions, etc.)?

How will our product or service be sold? Who will do the selling (our own salespeople, manufacturing representatives, etc.)?

What are the costs associated with our sales strategy? Which costs are fixed? Whichare variable?


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6. Operations PlanThe Operations section outlines how you will run your business and deliver value to yourcustomers. Operations is defined as the processes used to deliver your products andservices to the marketplace and can include manufacturing, transportation, logistics, travel,

printing, consulting, after-sales service, and so on. In all likelihood, about 80% of your

expenses will be for operations, 80% of your employees will be working in operations, and80% of your time will be spent worrying about operating problems and opportunities.

Which operations are critical to the success of our business? Which are secondary?

How will we produce and deliver our product/service? What will we do in-house, andwhat will we purchase (make vs. buy)?

What will it cost to produce and deliver our product or service? Estimate fixed costs(plant, equipment, etc.) and variable costs (labor, materials, etc.)


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7. Development PlanThe Development section is a road map of how you are going to get from where you arenow to where you want to be in the future. These steps can be as routine as securing retailspace, or as critical as applying for and getting a patent on key technology.

What must be done before we can introduce our product or service to themarketplace? What are the risks?

How long will it take to bring our product or service to market? What is our timeline?

What are the one-time start-up and development costs of our business (equipment,deposits, fixtures, furniture, )?

What additional information do we need understand and cost the development of ourproduct or service?


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8. Management Team

List the names and titles/roles of the individuals involved in our business. Whatexperience do they have in this industry and product line?

9. Exit StrategyThis refers to your future liquidity event, ie. How are the investors going to get their moneyout, and the return on their investment? Usual forms of exit are through the sale of thecompany to a larger competitor, initial public offering, or merger of equals.

Which exit strategy do we intend to use? Why? What is our time horizon?


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10. Financial PlanYour Financial Plan should be frosting on a cake. You have outlined a great businessconcept, demonstrated a real need in the marketplace, shown how you will execute yourideas, and now will show how much money everyone is going to make.

Summarize estimates made in previous sections: $

A. Annual unit sales:

B. Price per unit:

C. Variable cost per unit (production and sales):

D. Fixed costs (admin, production, and sales):

E. One-time start-up costs (eqpmt, mktg, legal, etc.):

F. Working capital rqd (receivables , inventory, etc.):

Calculate estimated annual gross revenues and income:

G. Estimated annual revenues (A*B):

H. Estimated annual variable costs (A*C):

I. Estimated annual contribution margin (G-H-D):

Calculate break-even figures:

J. Contribution margin per unit (B-C):

K. Annual break-even quantity (D/J):

L. Ratio of break-even to expected quantities (K/A):

Estimate the money you will initially need to start your business:

M. Total up-front funds required (E+F):

N. Additional units to cover up-front funds (M/J):

O. Break-even quantity with up-front funds (K+N):

Calculate financial performance figures:

P. Payback period for startup funds (M/I):

Q. Annual return on start-up investment (I/M):

R. Variable cost to price ratio (C/B):

S. Contribution margin ratio (I/G):


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Do these numbers look attractive enough to proceed? How can they be improved?

How much cash will we need to start our business? Where will we get it (personalsavings, friends & family loan, venture capital, an angel)?

Provide 3-year profit & loss projections of sales, expenses, and operating profit.

Please describe your assumptions in arriving at these numbers.

Year 1 Year 2 Year 3SalesExpenses

Operating Profit

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