Preparing feasibility reports

What is the Proposal?

A feasibility study starts with a description of the products or services to be marketed, and it outlines a model of how the business intends to make a profit. It describes the types and quality of products that will be offered and a timeline for preparation, implementation and the time it will take to reach profitable production volumes.

A description of the project also includes its social, economic and environmental impact on surrounding communities.

What is the Market?

The market portion of the feasibility study identifies the target market segments and describes the scope and size of the overall industry. It includes estimates of the future direction and strength of the demand for the products and services. What are the demographics of the potential consumers? How will the goods get distributed to the market?

Is the market stable or is future changes expected that will offer opportunities for the new venture?

What about the Competition?

Is the competition concentrated in a few large manufacturers or spread among numerous small producers? Who are the major competitors, and how will the new venture compete against them? What are the barriers to entry into the market?

Your business reports should outline a pricing strategy designed to attract customers from competitors and grow the sales of the company.

What are the Technical Considerations?

The study will identify the type, size and location of any production facilities. It will outline the necessary buildings, equipment, distribution areas and inventory requirements and storage. Discuss any technologies that will be employed.

Describe the needed access to raw materials and labor. Who will be the potential suppliers and where are they located? What is the availability of the necessary skills in the local labor market?

A section of the feasibility study should discuss the environmental impact of the project and any potential regulatory issues or emissions problems.

How will the Venture be Organized?

For any new project to achieve success, it must have an organizational structure designed to manage and control its operations, marketing and sales. What are the positions that will be required, and are there people available with the necessary skills to fill these positions?

What are the Financial Projections?

Any new proposed ideas or ventures usually have an objective of somehow making a profit. Projections of future sales, expenses, profits and cash flow are intended to impart some understanding of the possible results of the project.

Financial considerations would describe the initial capital requirements, working capital needs and availability of supplier credit. They would also discuss possible alternative sources of funds, such as bank loans or venture capital partners.

A Business Feasibility Report versus a Business Plan

A business feasibility report is not a business plan. A feasibility study is an investigative process that seeks to determine the viability of a business venture. It is conducted before a business plan is even considered.

A business plan describes the steps needed to take a proposal from an idea to the reality of implementation after the decision has been made to go ahead with the project.

Executive Summary

Your business plan should always begin with an executive summary. This is a one- or two-page summary of what the business is setting out to accomplish and how it will be done. It should answer the questions why and how.

An executive summary should begin with an explanation of your idea for a business. It also should contain a brief description of the market and explain where the type of business you're proposing will fit in that market. The conclusion should answer the question of why you want to start the business.

Market Analysis

A business plan should contain accurate information about the market, your competitors and your potential clients. Research local businesses that offer services or products similar to those you want to offer. You also can hire a consultant to do a market analysis of your competition and client base. This section should help an investor understand the potential risks and gains expected from investing with your company, as well as outline the competition.

While writing your business plan, be clear and concise about your intentions. Do not merely state that you hope to move 1,000 units in one month. Instead, explain how you will move those units, who will buy them and what will be gained from the sale. If you are giving your business plan to possible investors or lenders, they will want to see all the details so they can make an informed decision about whether to fund your business.

Marketing Plan

Include a marketing plan to illustrate how you will market your product or service. Will you go with traditional, commercial advertising? Will you hire an advertising company, or will you produce it in-house? You do not need to nail down the very last detail, but you should have a general idea of how you will market your company and how much it will cost you.

Think about your plan from every possible angle. It is easy to talk about all the great things that your business can be, but make sure to examine the challenges your business will face and how you will deal with them.

Conclusion

Your conclusion should be a final summary of how much capital you need to begin the business, where you expect that capital to come from, and how long it will before you can expect to see profits.

Thinking about starting a business? If you’re looking for outside financing, a business proposal is an absolute must. Even if you don’t need to prove your idea to any outside parties, a business plan can be a useful tool to think through your idea and its execution before taking the big leap forward into your new endeavor. It can help you identify strengths and weaknesses in your idea and your team of employees or collaborators. Thinking through your plan also can help you prepare for possible obstacles that may fall in your way.

Guidelines while preparing a Plan

1. Write a three- to five-page executive summary that outlines the “big picture.” What is your company, and what are your goals? If you are looking for investors, this brief summary of your goals and strategy needs to be persuasive so they will keep reading the rest. Think of this as your opportunity to make a good first impression.

2. Write a detailed description of the business. This section should be about 10 to 20 pages and should go into detail on all aspects of the operation. Specifically define your goals and time line. Give a detailed market analysis, and talk about how you will break into that market. Discuss any competitors you have and how you will differentiate yourself from them. Give your investors a good idea of how the company will operate on both a day-to-day and a long-term basis allowing for growth.

3. Put together a detailed dossier on your founding team members. Use this section to explain the origins of the idea and what each person brings to the proposed company. If you are the only member of your business, explain why you are the best person for this job.

4. Provide detailed financial information for your business that includes startup costs and anticipated return on investment. This is arguably the most important part of your proposal from an investor's standpoint, so if you are using this business plan to raise capital, pay close attention to this section, and double-check all your figures. A lack of understanding of the financial side of your business will turn off investors very quickly. When you are drafting this section, think about how much money you need to get started, how you plan on spending that capital, how much money you will need to make just to break even and how quickly you expect to make a profit.

5. Gather any additional information or documentation to support your proposal. This may include presentation materials such as photographs, plans and blueprints that are relevant to your product or service. If you are offering a service or a product, this section can include letters of intent from potential clients or customers.

6. Put all the sections of your proposal together and proofread for errors and to ensure it all flows together in a logical way. The finished proposal should be detailed enough to answer all potential questions from investors, but also concise and easy to read. Your information should be correct, and each section of your proposal should build on the information contained in the previous ones.