feasibility analysis

FEASIBILITYANALYSIS : 

FEASIBILITYANALYSIS …go / wait / don’t go !!! PRESENTED BY : PRIYA JAIN PGDM III SEMESTER BBDNITM

APPROACH : 

APPROACH WHAT IS FEASIBILITY ANALYSIS ? METHODOLOGY OF FEASIBILITY ANALYSIS PROS AND CONS OF FEASIBILITY ANALYSIS CONCLUSION

WHAT IS FEASIBILTY ANALYSIS ? : 

WHAT IS FEASIBILTY ANALYSIS ?

DEFINITION : 

DEFINITION “A formal investigation of the business idea or opportunity leading to rational decision making to commit investment. An inchoate screening of a project idea which enables an entrepreneur to actually derive an outcome about the viability of the idea.”

METHODOLOGY OFFEASIBILTY ANALYSIS : 

METHODOLOGY OFFEASIBILTY ANALYSIS

PROCESS : 

PROCESS DECIDING TO CONDUCT FEASIBILITY STUDY CONDUCT PROJECT FEASIBILITY ANALYSIS OF THE FINDINGS PREPARATION OF FEASIBILITY REPORT

STEP 1 : 

STEP 1 DECIDING TO CONDUCT FEASIBILITY STUDY Idea generation Deciding to proceed with feasibility study Formulation of terms of reference Constitution of a feasibility team

STEP 2 : 

STEP 2 CONDUCTING PROJECT FEASIBILITY - TYPES Financial feasibility Commercial feasibility Economic feasibility Technical feasibility Check financial soundness Check technological viability Check economic benefits Check commercial dependability

STEP 2 – contd… : 

STEP 2 – contd… CONDUCTING PROJECT FEASIBILITY - TYPES Estimating total project cost Financial Feasibility Funding requirements and sources Financing strategy and structure Techniques used : Capital Budgeting Techniques – Net Present Value, Internal Rate of Return, Accounting Rate of Return, Profitability Index, Payback Period Cash Flow Analysis, Fund Flow Analysis, Ratio Analysis

STEP 2 – contd… : 

STEP 2 – contd… CONDUCTING PROJECT FEASIBILITY - TYPES Is the project possible with current technology ? Technical Feasibility Is the proposed technology/solution practical ? Do we possess the necessary technical expertise ? Is the required technology available “in house” ? Is the technology is not available, can it be acquired ? What the rate of technology obsolescence ?

STEP 2 – contd… : 

STEP 2 – contd… CONDUCTING PROJECT FEASIBILITY - TYPES Estimating demand of the product/service Economic Feasibility Assessing the income trends of the targeted customer Studying the impact of inflation on costs Analyzing the unemployment trends Cost Benefit Analysis Studying government policies affecting the project Techniques used : Break-Even Analysis

STEP 2 – contd… : 

STEP 2 – contd… CONDUCTING PROJECT FEASIBILITY - TYPES Description of the present and potential market Commercial Feasibility Assessing targeted customer Sales forecasting Estimate annual marketing expenditures Anticipated competition

STEP 3 : 

STEP 3 ANALYSIS OF THE FINDINGS Classification & codification of collected data Analysis of the data Interpretation of the findings

STEP 4 : 

STEP 4 PREPARATION OF THE FEASIBILITY REPORT - CONTENTS I. EXECUTIVE SUMMARY Definition of business venture The Company summary Product or service summary Market characteristics Investment objectives II. PRODUCTS/SERVICES CHARACTERISTICS III. MARKET RESEARCH AND ANALYSIS Potential customers Demand and supply forces in market

STEP 4 – contd… : 

STEP 4 – contd… PREPARATION OF THE FEASIBILITY REPORT - CONTENTS Competitors Pricing systems Industry Analysis Sales forecast IV. THE MARKET PLAN Prices Promotions Distribution channels Service and warranty considerations V. MANUFACTURING OR OPERATIONAL PLAN Facilities Location and site Inventory management Project layout Material inputs

STEP 4 – contd… : 

STEP 4 – contd… PREPARATION OF THE FEASIBILITY REPORT - CONTENTS VI. FINANCIAL AND ECONOMIC DOCUMENTATION Total investment outlay Project financing Start-up projections Profitability Balance sheet Income statement Cash flow statement Break-even analysis VII. TECHNICAL EVALUATION Obsolescence rate Sources of technology Availability of technically skilled personnel Collaborations

STEP 4 – contd… : 

STEP 4 – contd… PREPARATION OF THE FEASIBILITY REPORT - CONTENTS VIII. LEADERSHIP - ENTREPRENEURIAL TEAM & OTHER MANPOWER Labour - skilled Staff – administrative & sales Management Investors Suppliers IX. MAJOR RISKS & CHECKPOINTS Compensation

PROS & CONSOFFEASIBILTY ANALYSIS : 

PROS & CONSOFFEASIBILTY ANALYSIS

ADVANTAGES : 

ADVANTAGES Fewer processing errors and decreased response time Better decision-making – acts as a guideline for future Saves time of research when actually implementing the idea Prevents future costs and losses if the project is not viable Lists aspects critical to the project which enables proper spotlight on them during the phase of implementation

PITFALLS : 

PITFALLS Feasibility never demonstrates certainty It is merely a technique – not a trade-off between risk and return Requires a considerable amount of time It is quite expensive Time lag between feasibility study and project implementation could witness changes in the environment – original feasibility study is a waste then Only qualified and expert professionals can perform feasibility studies

CONCLUSION : 

CONCLUSION

A PLANNING PARADIGM : 

A PLANNING PARADIGM “Feasibility analysis is a pragmatic business plan reflecting the philosophy that entrepreneurs should do the planning to ensure the success of the venture. A planning paradigm like feasibility analysis enables the entrepreneur envision the future rather than focusing narrowly on the present.”

Slide 23: 

THE END