TECHNOLOGY ENTREPRENEURSHIP

(ENT600)

UNIT 4 :

FEASIBILITY STUDY

Entrepreneurship Dept, FBM (2009)

ENT600/UNIT 4: FEASIBLITY STUDY

Introduction to Feasibility Study

A feasibility study is the preliminary evaluation of a
business idea, conducted for the purpose of determining
whether the idea is viable or worth pursuing.
Feasibility study takes the guesswork out of the
business launch and provides an entrepreneur with a
more secure notion that a business idea is feasible or
viable.
Normally a feasibility study will be conducted to
determine the viability of an idea before proceeding with
the development of the business.

Entrepreneurship Dept, FBM (2009)

ENT600/UNIT 4: FEASIBLITY STUDY

Purpose of a Feasibility Study

Provide a thorough examination of all issues and
assessment of probability of business success
Give focus to the project and outline alternatives
Narrow business alternatives
Surface new opportunities through the investigative
process
Identify reasons NOT to proceed
Provide quality information for decision making
Entrepreneurship Dept, FBM (2009)
ENT600/UNIT 4: FEASIBLITY STUDY

Feasibile or Viable Business

A feasible or viable business idea is one
where the proposed business is expected to
generate adequate cash flow and profits
withstand the risks it will encounter
remain viable in the long term and
meet the goals of the founders
Entrepreneurship Dept, FBM (2009)
ENT600/UNIT 4: FEASIBLITY STUDY

Composition of a Feasibility Study

A Feasibility Study is a composite of the
following evaluation or studies:
Market Feasibility Study
Organisational Feasibility Study
Technical Feasibility Study
Financial Feasibility Study
Entrepreneurship Dept, FBM (2009)
ENT600/UNIT 4: FEASIBLITY STUDY

MARKET

TECHNICAL
New
Venture
Idea

ORGANISATIONAL

Determination
Of Feasibility
of Proposed
New Idea

FINANCIAL

Entrepreneurship Dept, FBM (2009)

ENT600/UNIT 4: FEASIBLITY STUDY

A feasibility study will provide various information to the entrepreneur

such as follows:

Is there a demand for the product?

Who else are producing similar

products?

What is needed to make the product?

What are the equipment and

technology needs for the proposed
venture?

Who will manage the business?

What managerial requirements are

needed?

What is the cost of producing the

product?

What is the likely profit?

Determination of market opportunities and

risks

Analysis of the technical feasibility of the

product

Analysis of organizational capabilities and

personnel requirements

Analysis of financial feasibility and

resources

Entrepreneurship Dept, FBM (2009)

ENT600/UNIT 4: FEASIBLITY STUDY

MARKET FEASIBILITY STUDY

The market feasibility study is an assessment of the
overall appeal of the market for the product or service
being proposed. Aspects of market feasibility study that
should be carried out include:
Product/service
Customers
Market Demand
Competitors
Market Share

Entrepreneurship Dept, FBM (2009)

ENT600/UNIT 4: FEASIBLITY STUDY

MARKET

Market share

Product/Service

Competitors

Customers

Market Demand

Entrepreneurship Dept, FBM (2009)

ENT600/UNIT 4: FEASIBLITY STUDY

Market Feasibility Study:

Product/Service
This is an assessment of the overall appeal of the
product/service being proposed
A product is defined as anything that can be offered to a
market for attention, acqusition, use, or consumption that
might satisfy a need or want (Kotler, 2008)
A service is defined as any activity or benefit that one
party can offer to another that is essentially intangible and
does not result in the ownership of anything (Kotler,
2008)
Before any product/service enter the market it should
meet the prospective customers needs and wants.
Entrepreneurship Dept, FBM (2009)
ENT600/UNIT 4: FEASIBLITY STUDY

10

Market Feasibility Study:

Customer
Customer assessment involve determining who are the
customer/s the business wishes to serve.

Customers refer to individuals and households, business

organizations local as well as international and
government organizations that buy product and services
for consumption.

They are the target markets for the organizations product

or service
Target market defined as the group of customers with
needs and wants that can be satisfied by the business
through the supply of product/service.
Entrepreneurship Dept, FBM (2009)
ENT600/UNIT 4: FEASIBLITY STUDY

11

Market Feasibility Study:

Customer (cont)
The target market can be segmented or broken down
based on different criteria or factors such as age, marital
status, geographical areas, lifestyle, hobby, and interest.
The purpose of market segmentation is to enable the
business to satisfy the needs and wants of the consumers
it has selected with the limited resources the business has
Subsequently as the business progress and has more
resources it can broaden into other market segment which
it has not served before.

Entrepreneurship Dept, FBM (2009)

ENT600/UNIT 4: FEASIBLITY STUDY

12

Market Feasibility Study:

Market Demand
Market demand refer to the total potential purchase
that is expected from the target market. Normally it
is expressed in units or Ringgit.
The information on market demand is critical in
determining the viability of a proposed product or
service.
Market demand can be calculated based on the
following factors:
Population of the target market
Number of houses in the target market
Competitors sales
Entrepreneurship Dept, FBM (2009)
ENT600/UNIT 4: FEASIBLITY STUDY

13

Market Feasibility Study:

Competitors
Competitors refer to other businesses that provide similar,
substitute or alternative product/service to the same market
segment.
In competitors analysis, the business not only has to identify
who are the major competitors but also the number of
competitors in the market.
The presence of competitors can affect immensely on the
success of the business product/service that enter the market.
Thus In order to establish a market niche and compete
effectively, it is imperative for the business to identify who their
competitors are as well as their strengths and weaknesses.
Entrepreneurship Dept, FBM (2009)
ENT600/UNIT 4: FEASIBLITY STUDY

14

Market Feasibility Study:

Market Share
Market share refers to the portion of the
market that the business can control after
taking into consideration market demand and
the competitors position in the same market.
Normally market share is stated in the form
of a percentage of total market demand

Entrepreneurship Dept, FBM (2009)

ENT600/UNIT 4: FEASIBLITY STUDY

15

TECHNICAL FEASIBILITY STUDY

A technical feasibility study is concerned with
determining whether the business has the necessary
technology and equipment to produce the intended
product/service. Aspects of technical feasibility study
that should be carried out include;
Technology and Equipment
Materials
Manpower and
Location

Entrepreneurship Dept, FBM (2009)

ENT600/UNIT 4: FEASIBLITY STUDY

16

TECHNICAL
Technology
and
Equipment Materials

Manpower Location

Entrepreneurship Dept, FBM (2009)

ENT600/UNIT 4: FEASIBLITY STUDY

17

Technical Feasibility Study:

Technology & Equipment

In conducting technical feasibility study the business should
identify the type of technology to be used for the proposed
business venture.
In addition they have to know whether the technology is
accessible for their business ventures.

Apart from that the business must also identify the types of
equipment required.
The cost of technology and equipment needs to be included in
determining the feasibility of the venture.
The ability to obtain the technology and equipment will affect the
start-up timeline.
Entrepreneurship Dept, FBM (2009)
ENT600/UNIT 4: FEASIBLITY STUDY

18

Technical Feasibility Study:

Materials
The business should identify the types, quantity,
and quality of raw materials required.
A list of suppliers for the raw materials needs to be
identified and contractual arrangements with the
suppliers need to be made to ensure the
organization has uninterrupted supply.
The cost of the raw materials should also be
satisfactory and within the budget

Entrepreneurship Dept, FBM (2009)

ENT600/UNIT 4: FEASIBLITY STUDY

19

Technical Feasibility Study:

Manpower
The organization has to identify the technical workers
required in producing the product/service.
These technical workers need to have the appropriate
skills and qualifications in line with the requirement of
the venture.
The organization should also determine the number of
technical workers (full and part time) needed to support
the production level.

Entrepreneurship Dept, FBM (2009)

ENT600/UNIT 4: FEASIBLITY STUDY

20

Technical Feasibility Study:

Location
Location refers to the place where the proposed
business or project is likely to be set up.
There are various factors the business needs to
consider in selecting the appropriate location such as
the location should be such as being
near to the intended market or customers
near to the suppliers of raw materials
near to the major infrastructure

Entrepreneurship Dept, FBM (2009)

ENT600/UNIT 4: FEASIBLITY STUDY

21

ORGANIZATIONAL FEASIBILITY STUDY

An organizational feasibility study is concerned with
determining whether the business has the necessary
and sufficient human resource to bring a particular
product/service idea to market successfully. Aspects
of organizational feasibility study that should be
carried out include:
Organization Structure
Management Team
Compensation
Supporting Services

Entrepreneurship Dept, FBM (2009)

ENT600/UNIT 4: FEASIBLITY STUDY

22

ORGANISATIONAL

Organization
Structure

Supporting
Services
Management
Team

Compensation

Entrepreneurship Dept, FBM (2009)

ENT600/UNIT 4: FEASIBLITY STUDY

23

Organizational Feasibility Study:

Organization Structure
Organization structure identifies responsibilities for
each job position and the relationship among those
positions.
Technopreneurs must form the right organizational
structure in order to facilitate the accomplishment of
the organization goals and missions

Entrepreneurship Dept, FBM (2009)

ENT600/UNIT 4: FEASIBLITY STUDY

24

Organizational Feasibility Study:

Management Team
Management team refers to a group of individuals
responsible to bring a product/service idea to market
successfully
The organization should evaluate the prowess or ability
of its management team to satisfy itself that
management has the requisite passion and expertise to
launch the venture.
Thus it is necessary to identify the types of positions
needed as well as the qualifications and experiences
required to fill those positions.

Entrepreneurship Dept, FBM (2009)

ENT600/UNIT 4: FEASIBLITY STUDY

25

lnk

Organizational Feasibility Study:

Compensation
Compensation refers to the monetary and nonmonetary rewards in various form of pay which include
salary, wages, sales commission, allowances, bonus,
EPF and SOCSO contributions.
The organization should determine the types of
compensation that should be rewarded to their
potential staffs.
Any types of incentive such as ownership plan should
also be considered to entice potential employees.

Entrepreneurship Dept, FBM (2009)

ENT600/UNIT 4: FEASIBLITY STUDY

26

Organizational Feasibility Study:

Supporting Services
Supporting services refers to the assistance and services
given by private agencies and government.
The organization should identify the appropriate types of
supporting
services
to
launch
the
intended
product/service.
The availability of these services such as attorney or
professional public accountant will definitely assist in
bringing the product/service successfully to the market.

Entrepreneurship Dept, FBM (2009)

ENT600/UNIT 4: FEASIBLITY STUDY

27

FINANCIAL FEASIBILITY STUDY

The financial feasibility study is an
assessment of the financial aspect of the
business. Information in the financial feasibility
study should include:
Start up Capital
Financial Sources
Profitability Analysis

Entrepreneurship Dept, FBM (2009)

ENT600/UNIT 4: FEASIBLITY STUDY

28

FINANCIAL
Profitability analysis
Start-up
Capital

Financing
Sources

Entrepreneurship Dept, FBM (2009)

ENT600/UNIT 4: FEASIBLITY STUDY

29

Financial Feasibility Study:

Start-up Capital
The first stage in financial feasibility study is to determine the amount
of start up capital required to run the venture.
Start-up capital refers to the total cash required to start the business
which include the cost for the purchase of non current assets, working
capital, development costs and other expenses.
Non current assets are assets that are purchased and used as long
as the business is in existence. Their life span are more than one
year. Examples of non current assets are furniture and fittings,
machineries, equipment, renovation, etc

Entrepreneurship Dept, FBM (2009)

ENT600/UNIT 4: FEASIBLITY STUDY

30

Financial Feasibility Study:

Start-up Capital (cont)

Working capital also known as current assets refer to business
assets which have life span less than a year. Example of current
assets are cash, stocks or inventories which include raw
materials, finished goods.
Other expenses will include costs or expenses that are non
recurring or one time cost. Example of other expenses will include
registration fees, business licenses, insurance.
It is advisable for the business to estimate the start up cost
capital required until revenue are realized at full capacity.
It is also suggested that it is better to overestimate rather than
underestimate the cost involved

Entrepreneurship Dept, FBM (2009)

ENT600/UNIT 4: FEASIBLITY STUDY

31

Financial Feasibility Study:

Financing Sources
After determining the start up capital, the next stage is for the
business to identify the sources of fund to finance the start up
capital. The business has two options either to utilize internal
financing or external financing to finance the proposed venture.
Internal financing refers to the funds provided by family, friends,
partners or shareholders.
External financing refers to funds that are available from external
sources such as loans from financial institutions, venture capital,
business angel, government grants, etc.
The availability as well as accessibility to the funds will be crucial
in bringing the product/service to the market.
Entrepreneurship Dept, FBM (2009)
ENT600/UNIT 4: FEASIBLITY STUDY

32

Financial Feasibility Study:

Profitability Analysis
Profitability analysis involve determining whether the
proposed venture is generating enough profit to make
the proposed venture feasible.

This analysis is of great interest not only to the business

owners but also to third parties who are involve in
financing the venture.
Usually third parties require a certain rate of return on
their investment before deciding to invest in a particular
business venture.

Entrepreneurship Dept, FBM (2009)

ENT600/UNIT 4: FEASIBLITY STUDY

33

Financial Feasibility Study:

Profitability Analysis
Thus, in order to conduct a profitability analysis, the
business should prepare a 3 years financial projection
which will include the following financial statements:
Cash flow statement
Income Statement and
Balance Sheet Statement
Based on these statements various financial analysis
will be performed to determine the profitability of the
business.

Entrepreneurship Dept, FBM (2009)

ENT600/UNIT 4: FEASIBLITY STUDY

34

Conclusion
The feasibility study should give us a clear idea
whether the proposed business is a sound business
idea. If so, we can proceed with the preparation of
the business blueprint.

Entrepreneurship Dept, FBM (2009)

ENT600/UNIT 4: FEASIBLITY STUDY

35