The Feasibility Study

1
The Feasibility Study

• GEB4111
• New Venture Finance

2
The Feasibility Study

• Its not just for start-ups
• It is a form of planning that examines
• A new business idea
• Evaluating an existing business
• Acquiring a franchise
• Assess the introduction of a new product or
  service
• Consider expansion potential
• Identify new markets to enable diversification

3
Starting a new business

• To determine the feasibility of starting up a
  completely new venture, there is a need to gather
  information that will prove the business idea is
  financially viable and that there is a profit to
  be made by pursuing it.

4
Evaluating an established business

• What is the market demand and need for this
  product/service?
• Can a market be created?
• What is the level of competition?
• Is the market growing, static or declining?
• What is the anticipated selling price?
• What are the costs involved
• to produce
• to operate
• to distribute
• to market?
• What could the business yield in terms of profit
  and is that sufficient reward?
• How much financing will be required and is it
  possible to acquire it?
• What legal requirements will apply?
• Is there any special experience or technical
  expertise required?

5
Acquiring a franchise

• A franchise is a business arrangement where the
  franchisee (franchise buyer) is granted the right
  by the franchisor (franchise seller) to
  manufacture or sell the product/service of the
  franchisor within a certain area. Franchises can
  involve
• a system a unique method of doing business (e.g.
  motels or fast food)
• a product the distribution of products (e.g.
  cars or petrol)
• a manufacturing process the product is
  manufactured under license (e.g. soft drinks).
• The benefits of franchising vs. bootstrapping a
  new business