A. Introduction/definition of concepts
Feasibility analysis is a comprehensive research study required by the entrepreneur or his agent to determine the practicability, profitability and viability of the business idea. Before jumping into a start up business, expanding an existing one or even acquiring an existing one, it is very necessary to analyze the feasibility of that business. For whatever purpose, the main task of feasibility analysis is to express the model of the business and its marketability; check its prospect for financial profitability and success; and convey the managing group’s capability to implement and accomplish the business objectives.
Feasibility analysis is therefore an overview of the business and a preliminary appraisal of the business idea to consider if it merits pursuing. It reasonably reveals without prejudice the strengths and weaknesses of the business, its opportunities and threats through the background and the assets required to carry through as well as the eventual diagnosis for achievement. A feasibility analysis provides the entrepreneur the opportunity to flesh up the initial business plan, consider the missing and available features needed to be put in position for the business to succeed. It is an opportunity to consider if it is visibly feasible and viable; despite the challenges one is likely to experience and how to solve those challenges. The main concern and tool of feasibility analysis are the necessary expenditure and the profit to be accomplished. This means it is all about finance.
A new startup business requires some financial funding which comes in several unique categories of financing options. Some universal and reliable funding sources easily available to most entrepreneurs are through the entrepreneur’s savings and personal bank soft loans, financial supports from friends and family which may or may not involve interests. These are typically the first stage of financing whereby the entrepreneur invests his own funds and raise funds from friends and family. For more ambitious businesses, the next stage source is usually the funding from angel investors. These are private investors who use their own capital to finance businesses. After this is the next stage of financing from institutional investors like venture capitalists companies who are specialists in funding new businesses for profitable gains. Such venture capitalists also sometimes provide any observable potential weakness in the business. These include legal, marketing or operational deficiencies that may be threatening the survival of the business. Sometimes angel investors and Venture capital companies’ bargain cash exchanges for an equity stake in startup businesses struggling to start operating.
. Reasons for Feasibility Analysis
Feasibility analysis is all about questioning your concept, ascertaining which components are in place to make it realistic to easily execute and recognizing the biggest obstacles you're likely to face.
Feasibility analysis mainly assists to:
· Appraise the business marketplace for the new business idea;
· Assess if the Managing team have the personality generally known with successful business persons. It is advisable to have self assessment first.
One must have that personality suited, skilled and knowledgeable to run a
business and lead a group to success.
· Identify the challenges of start ups and how one can overcome those challenges,
· Consider the financial feasibility of the business viz-a-viz its expected sales incomes, fixed and variable costs as well as break-even
calculations;
· decide to continue with the business plan due to its viability and other attractions or not. Sometime it takes asking oneself some bitter but pertinent questions whether to scrap the idea if it is no longer as originally
envisaged or needs to be amended, redirected or altered immensely.
In this wise, an ingenious suitable feasibility analysis will supply the historical setting of the business, describe the products and services, the account/financial profile/data, information on its operations as well as management, marketing research and strategy, including legal necessities. In actual fact, for such a serious research, all strata of the business are subjected to feasibility analysis, depending on the type.
