MBA SEMISTER 3: NEW VENTURE FEASIBILITY:

FACILITATOR: DR AHMED KATO

FACULTY OF MANAGEMENT
ISBAT UNIVERSITY

COURSE DESCRIPTION:
This course unit provides the students the knowledge and skills to develop their feasibility
plan into a business plan for a new venture, which culminates in a business plan group
competition.

LEARNING OBJECTIVES
The principal objective of this course unit is to offer an understanding of a new venture
management process and the integration of functional area materials as they apply to business
planning.
By the end of this course unit, students are expected to have acquired knowledge to:
• Describe the purpose of a new venture feasibility analysis
• Describe and develop the components of a new venture feasibility analysis
• Understand how to apply new venture feasibility outcomes to a new venture.
• Develop a comprehensive business plan that accommodates the appropriate
components of a new venture feasibility

TEACHING METHODS AND ASSIGNMENTS FOR ACHIEVING LEARNING

OUTCOMES:
Specifically, the students will:
 Students will required to prepare a feasibility analysis report for a new proposed
venture creation as a part of a group project assignment within a team.
 Students will assume different roles within an entrepreneurial context and write up a
feasibility analysis report including the appropriate components of a new feasibility
venture, as well as analyse various business entry strategies and examine the effects
on their business concepts
 Students will identify markets, analyse potential competition, and build customer
profiles for the proposed new venture creation.

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 Students will have to prepare a business plan of a new venture as a part of a group
project assignment reflecting on the feasibility analysis report within a team. Students
will assume different roles within an entrepreneurial team and write-up the
appropriate sections of the business plan.
 The recommended length of the business plan should not be more than 12 pages for
its basic parts. The Financial projections, graphs and other material should be
included as appendices.

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 New Venture Feasibility

Introduction
Definition of New venture feasibility.
New venture feasibility analysis is the process of determining whether a business idea is
viable. It is premised on the preliminary evaluation of a business idea conducted for the
purpose of determining whether the idea is worth pursuing to provide an entrepreneur with a
more secure notion that a business idea is feasible or viable.

Feasibility of a business means the likelihood it will be a success, whether it will grow and be
profitable. Entrepreneurs eager to get started sometimes don't take the time to thoroughly
research the feasibility of the venture. There are times when, after doing their homework
regarding feasibility, entrepreneurs reluctantly decide not to proceed. This can be a wise
decision. Poorly thought-out ventures have greater risk and lower probability of success.

Overview of new venture Feasibility

One of the principal functions of the feasibility study is the decision of moving forward with
the business. Since all the factors related to the business are taken into account, a clear picture
of the different aspects is produced. Owing to the limited nature of resources, it is essential to
ensure that they are being utilized in the most appropriate manner. The most advantageous
path needs to be taken as important resources are not only saved from being wasted on the
wrong projects, but also invested into relatively profitable ones in the future. A firm saves
itself from facing losses, as consideration of the new project becomes dependent on how the
return is analysed against the investment. Other than that, a feasibility study also generates
concrete reasons for avoidance of the forethought business. The study is an exploratory
process, as it helps assess various options and their implications. The go/no-go decision is
one of the most vital in business development as decisions cannot be reversed and it is always
better to take calculated ones instead of fixing wrong ones in the future

Components of new venture Feasibility analysis,

1) Financial Feasibility
The financial attractiveness of a particular business idea is established through a feasibility
study. The conduct of any activity is not possible without monetary resources. This includes

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the estimation of all the costs that will play a vital part from the inception of the project to the
operational costs during the later stages of its lifecycle. One of the most important costs is the
start-up capital. The study involves the determination of the funds required to start a business.
Once these are deduced, the potential sources of generating this capital are also listed.
Another important aspect to estimate sales revenue, profitability and return on investment
(ROI). The degree to which an activity yields financial gains is developed. The potential cash
flows of the future are calculated. It also brings fourth the payback period, which puts
forward the amount of time the investment takes to break-even. All these figures are, thus,
summarized into annual cashflows for at least five years.

The ultimate test of feasibility of a venture is its forecast profit and loss statement, and the
management team's confidence that the forecast is attainable. Companies create a business
model that shows the factors that will lead to the company being extremely profitable. These
success factors include being able to operate with low corporate overhead, a low cost of
production resulting in high gross margins, or operating in a market that is fragmented with
no really strong, entrenched competitors. A feasible venture is one in which everyone
involved agrees that the financial opportunity is outstanding and the risk of failure is
relatively low.

2) Organizational and Operational Feasibility

Start-up entrepreneurs have to assess whether the team they have assembled has the skills and
experience required for this type of venture to succeed. If there are gaps in the team, the
founders must put together a plan that shows what individuals they need to add and how they
intend to find them. Starting a venture with an incomplete management team, or one lacking
sufficient prior entrepreneurial experience, reduces the chances the venture will succeed. It's
not enough to have a great product or a superior business plan. The management team must
be capable of efficiently and precisely executing the plan. The requirement of the human
resource is also scrutinized. The skills required by the professionals and an estimation of the
firm’s capacity falls under this category. The required background of the professionals and
any shortcoming being faced by the current human resource of the new business or project
are analysed. In case of absence of an effective team, hiring decisions may be made on the
basis of the feasibility study. The entire legal and corporate organizational structure is

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planned accordingly. Similarly, this study also helps ensure that the firm has adequate
resources for the running of smooth operations.

3) Market and Marketing Feasibility

An essential part of the feasibility study is the market feasibility. All the details of the
respective industry are presented in this section. Important details including the size, retail
value and trends of the industry are gathered. The particular market is also analysed along
with the future market potential. A detailed evaluation is required to ensure the success of the
business. The competitive landscape is also prepared. The firm, thus, adopts the most
appropriate strategy of positioning itself relative to the competition.

Market
It is easier to succeed in a market that has numerous potential customers than one with a
relatively small number. Entrepreneurs may develop a new technology that from their point
of view is an amazing innovation, but they later find out that few potential customers share
their view. The innovation may be a solution to a customer need, but the customers don't
view the need as important relative to other purchases they are considering. The cost of
production can also limit the market -- if the price is too high, it limits the number of
customers who can afford it.

Product/Service Feasibility Analysis

Product/Service Feasibility Analysis refers to an assessment of the overall appeal of the
product or service being proposed. The idea is that before a prospective firm rushes a product
or service into development, it should be confident that the product or service is what its
prospective customers want. The two components of a product/service feasibility analysis
are: Product/Service Desirability Product/Service Demand.

To get the attention of customers, you must bring products and services to the marketplace
that have clear, easily articulated superiority over the products or services you will be
competing against. Unless your products or services have this "wow factor," it is difficult to
get customers' attention, given the many other products and services presented to them
through advertising and other marketing methods. The benefits could be improving the

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customers' quality of life, saving them time and frustration, saving them money or helping
them make money

The description of the product/service is also determined. All the variations are considered
and analysed so the most profitable one may be adopted. A profile of the potential customers
is prepared and the size of the market in terms of prospective buyers is also estimated.
Through the use of historical data, sales projections may be estimated. Different locations of
the target audience are explored and the most beneficial audience and location may be
selected. The degree of acceptability of the deliverable exhibited by the proposed target
audience may be generated. It ensures that the right product is produced for the right clients.
Pricing strategies and decisions are taken. It directs the decision makers to the discovery of
the most beneficial opportunities.

4) Technical feasibility
Technical feasibility is fundamental to support the smooth operations of the business.
Variations in options related to logistics may be discovered. At this level the business
entrepreneurial managers are to identify the potential resources avail in terms of the required
human capital, materials, equipment and relevant technologies. The potential of the technical
resources available to the firm is estimated. An assessment of the skills of the technical team
is conducted. Any shortcomings and the ways of meeting them are looked into. It also
involves the evaluation of essential systems including hardware, software and technological
requirements of the overall business system.

5) Economic Feasibility
The economic benefits to be reaped by the business are ascertained by a feasibility study. It
helps provide the degree to which the economic advantages of the idea are greater than
the economic costs. An accurate analysis of the comparison of the all the costs to be incurred
and the benefits to be received is conducted. This not only determines the viability of the
project, but also directs the business towards saving itself from an inadequate allocation of
resources. The credibility of the idea is assessed, and the management achieves a distinct
breakdown of all the various costs it will have to incur from the initiation to the execution of
the entire project. These costs, when weighed against the benefits that may be generated,
result into the overall economic feasibility of the project.

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6) Legal Feasibility
Every country has its own respective legal implications. Any legal requirements that may
hinder business activity need to be considered. This analysis explores all the legal factors that
may conflict with the proposed business. All the relevant laws or protection acts are taken
into account. An organization may save considerable time and effort by learning any type of
locational constraints its business may face due to legal requirements. Business
entrepreneurial have to choose the nature of the proposed business i.e. proprietorship, private
limited company, public limited company , partnership or company limited by guarantee.
Some countries require companies to register with accredited national professional bodies for
instance URA, URSB, NGO board etc.

7) Scheduling Feasibility
The different phases of the lifecycle of the business are planned and taken into account. The
essential milestones and the entire schedule for their achievement is outlined. Based on the
future projections, the different stages of business activity are estimated. All the essential
activities and their respective times of fulfilment are enlisted. Critical stages of new venture
creation include:
a) Start up
b) Early stage
c) Later or mature stage/Initial public offering

8) Project durability
A lot of investment and precious resources are taken into a single project. These have to be
utilized to their most optimum capacity. A feasibility study develops the entire path that the
project may follow. It includes vital information like financial projections. It is only wise to
select the business idea or project that will be the most durable on a long term basis and will
endure financial risks of the future.

9) Organisational potential risks/Constraints

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As a result of the examination, the feasibility study identifies all the constraints that may be
faced by the business. These may include, but are not limited to, monetary, technical,
resource-related, technological, financial, marketing, logistical, legal, environmental
constraints. An estimation of these constraints provides a distinct view of all the problem
areas where the project may face hindrances in the future and their root causes.
In view of the above factors, the entrepreneur is ultimately able to test the viability of a
business idea or a new enterprise. When a new venture feasibility analysis is judiciously done
and conclusive, it typically culminates into a business plan, which outlines the action steps
necessary to take a proposal from a business idea to a reality.

Rationale for conducting a feasibility analysis for a new venture creation

The dynamic nature of today’s business environment has led to an increase in the risks and
uncertainties that are faced by organizations. The growth in the degree of awareness of the
customers has led to a dramatic increase in competition as more and more companies are now
trying to take care of the needs of the customers. It has become crucial for businesses to
outshine competition in terms of provision of value to its clients. Survival in the marketplace
has become difficult, however, entering it is an entire different story. An absence of proper
planning and forethought leads to the failure of entrants. Thus, to ensure profitability, it
becomes essential to conduct a feasibility analysis before plunging into the market.

The feasibility study acts as an investigative tool to assess the potential, viability or
practicability of a new business. Some important characteristics of Feasibility study:
 It is an excellent instrument for the prediction of the likelihood of success or failure of
a new business venture. It may also be adopted in the case of incorporation of new
products or ideas into the business mix.
 A feasibility study includes all the actions that are needed to be taken to determine
whether a business idea is likely to succeed. It is a stepwise process that helps weigh
the pros and cons of each step prior to getting into the actual process.
 It provides results for key decisions that may be, moving forward with the idea,
refining it or leaving it altogether.
 A thoroughly executed feasibility study helps the firm in attaining a broad picture as
well as a detailed analysis of the profitability of its future business. Conducting a
feasibility analysis assists to entrepreneurs to gain knowledge about the project before

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 investing budget, time or other resources into it. Sometimes, the scope of the project
may be drastically changed.
 The feasibility study ensures that all determinations are made prior to jumping into
the business and learning about the shortcomings later. Various alternatives of the
conduct of business are generated and the most optimum one is adopted.
 It is also an excellent source of provision of information to the future investors of the
business. They can receive a complete snapshot of the various factors related to the
venture.
 Feasibility studies are prevalent in countless industries as a measure to provide a
thorough guidance to ensure that the business starts off on the right foot.
 It enables the organization to focus on both short and long term goals. The
significance of a new venture feasibility can never be underestimated as the success or
failure of the business is dependent on it.

Conclusion
Conducting a new venture feasibility analysis is fundamental for the business entrepreneurs
to determine whether to proceed with the new venture opportunity. One underlying technique
that is frequently used in project management is identified as a go-or-no-go decision. This
tool allows a team to decide if the criteria have been met to move forward on a project.
Criteria on which to base a decision are established and tracked over time. You can develop
criteria for each section of the feasibility analysis to determine whether to proceed and
evaluate those criteria as either “go” or “no go,” using that assessment to make a final
determination of the overall concept feasibility. Determine whether you are comfortable
proceeding with the present management team, whether you can “go” forward with existing
nonfinancial resources, whether the projected financial outlook is worth proceeding, and
make a determination on the market and industry. If satisfied that enough “go” criteria are
met, you would likely then proceed to developing your strategy in the form of a business
plan.

Group Assignment
Discuss the various entrepreneurial opportunities that you would want to pursue in your
group, assess the sales turnover, profitability, originality, investment returns and feasibility of
your proposed new venture creation. Please limit your opportunity to a specific business

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sector, for instance agro processing, manufacturing, service sectors etc. want to pursue in
class.

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