Feasibility Study.pptx

1. Feasibility Study
Instructor: Engr. Hamza Naseer
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2. An important work in
project evaluation in
developing countries
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3. What is a Feasibility Study
• Is this a good business idea?
Helps answer the question of whether to go
forward with the business idea.
• The process of determining whether an
entrepreneur’s idea is a viable foundation for
creating a successful business

4. What is feasibility study?
• A feasibility study is an analysis of the viability of
an idea through a disciplined and documented
process of thinking through the idea from its
logical beginning to its logical end.
• Feasibility study is carried out in order to assess
the viability of a new project
• It is primary and most important thing in
development of a project

5. Key factor
• A key factor in any feasibility study must be
ensuring that you are dealing with correct
facts, correct assumption, and up to date
financial data.
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6. Reasons to Do a Study
• Gives focus to the project.
• Narrows the business alternatives.
• Identifies new opportunities.
• Identifies reasons not to proceed.
• Provides valuable information for “go/no go” decision.
• Increases probability of business success by identifying
weaknesses early.
• Provides documentation that the idea was thoroughly
investigated.

7. CONDUCTING A FEASIBILITY STUDY
 Too often, we launch new ideas without thinking through
what our market is
 Preparing a feasibility study will help you determine if
there is sufficient demand for the product or service AND
can the product or service be provided on a profitable OR
sustainable basis?

8. MARKET ASSESSMENT
 A market assessment may be conducted to help
determine the viability of a proposed product in
the marketplace.
 The assessment will help you identify
opportunities in the market or market segment
 If no opportunities are found, then you don’t have
to continue on with the feasibility study.
 If opportunities are found, the market assessment
can give focus and direction to the “big idea”.

9. Background
• Some feasibility reports may require some background
discussion in order to make the rest of the report
meaningful to readers.
• Describe your proposed plan in sufficient detail state if it
worked elsewhere and how it was implemented
• Background on the Situation. For many feasibility
reports, you'll need to discuss the problem, need, or
opportunity that has brought about this report.

10. Methodology
• It involves discussion on method of analysis for feasibility study
• Return on Investment (ROI) analysis
For comparing overall profitability
ROI = Estimated lifetime benefits - Estimated lifetime costs
Estimated lifetime costs
or
ROI = Net Present value / Estimated lifetime costs

11. Types of feasibility Study
1. Technical feasibility
can a solution be supported with the
existing technology or not?
2. Economic feasibility
is the existing technology cost effective?
3. Operational feasibility
Will the solution work in the organization if
implemented?
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12. The Components of a Feasibility Study
1. Description of the Business: The product or
services to be offered and how they will be
delivered.
2. Market Feasibility: Includes a description of
the industry, current market, expected future
market potential, competition, sales projections,
potential buyers, etc.
3. Technical Feasibility: Details how you will
deliver a product or service (i.e., materials,
labor, transportation, where your business will
be located, technology needed, etc.).
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4. Financial Feasibility: Projects how much start-up
capital is needed, sources of capital, returns on
investment, etc.
5. Organizational Feasibility : Defines the legal and
corporate structure of the business (may also include
professional background information about the
founders and what skills they can contribute to the
business).
6. Conclusions: Discusses how the business can
succeed. Be honest in your assessment because
investors won’t just look at your conclusions they
will also look at the data and will question your
conclusions if they are unrealistic.
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14. Feasibility Study
• A Feasibility Study is the analysis of a problem
to determine if it can be solved effectively.
• The results determine whether the solution
should be implemented.
• This activity takes place during the project
initiation phase and is made before significant
expenses are engaged.
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15. Definition of Feasibility Studies
• A feasibility study is an evaluation of a
proposal designed to determine the difficulty
in carrying out a designated task. Generally, a
feasibility study precedes technical
development and project implementation.
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16. Objective
• The feasibility study answers the basic
questions: is it realistic to address the problem
or the opportunity under consideration?
• And it produce a final proposal for the
management, this final report might includes:
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17. Feasibility includes
1. Project name
2. Problem or opportunity definition
3. Project description
4. Expected benefit
5. Result of rejection
6. Resource requirements
7. alternatives
8. Other consideration
9. Theorization
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18. Five common factors (TELOS)
1. Technology and system feasibility
2. Economic feasibility
3. Legal feasibility
4. Operational feasibility
5. Schedule feasibility
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19. 1. Technology and system
feasibility
• The assessment is based on an outline design of system
requirements in terms of Input, Processes, Output, Fields,
Programs, and Procedures. This can be quantified in terms of
volumes of data, trends, frequency of updating, etc. in order to
estimate whether the new system will perform adequately or
not this means that feasibility is the study of the based in
outline.
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20. 2. Economic feasibility
• Economic analysis is the most frequently used method for
evaluating the effectiveness of a new system. More
commonly known as cost/benefit analysis, the procedure is
to determine the benefits and savings that are expected from
a candidate system and compare them with costs. If benefits
outweigh costs, then the decision is made to design and
implement the system. An entrepreneur must accurately
weigh the cost versus benefits before taking an action. Time
Based: Contrast to the manual system management can
generate any report just by single click.
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21. 3. Legal feasibility
• Determines whether the proposed system
conflicts with legal requirements, e.g. a data
processing system must comply with the local
Data Protection Acts.
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22. 4. Operational feasibility
• Is a measure of how well a proposed system
solves the problems, and takes advantages of
the opportunities identified during scope
definition and how it satisfies the requirements
identified in the requirements analysis phase of
system development.
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23. 5.Schedule feasibility
• A project will fail if it takes too long to be
completed before it is useful. Typically this means
estimating how long the system will take to
develop, and if it can be completed in a given time
period using some methods like payback period.
Schedule feasibility is a measure of how reasonable
the project timetable is. Given our technical
expertise, are the project deadlines reasonable?
Some projects are initiated with specific deadlines.
You need to determine whether the deadlines are
mandatory or desirable.
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24. Example
• Car-Care center is a car service center that is
specialized in providing interior and exterior car
cleaning
• The following services will be offered:
– Water washing,
– Steam washing,
– Car polishing,
– Carpet cleaning,
– Air condition odor cleaning
– etc..

25. The location study
• The project will be located in Gujrat city.
• The service area has other competitors
providing low service.
• The shop has the area of 100 m2.

26. The legal study
• There is no legal constrains to establish the project,
similar small scale project already operating in the
city for long time without obligations.
• Commercial registration documents and tax file are
required.

27. The marketing study
Target customers and market
segmentation
• Geographic segmentation:
• The target customers are Gujrat city and the
surrounding area residents.
• Demographic segmentation
• Middle to high income level.

28. The marketing study
Studying the potential market/ demand
• Demand Gap
– Through our market observations and testing we find a
demand gap > available market capacity.
• The following schedule shows a simple weekly study of
potential market /target demand:
Sun Mon Tue Wed Thu Fri Sat Total
12:00-15:00 1 1 1 1 1 3 3 11
15:00-18:00 2 2 2 2 2 6 6 22
18:00-21:00 2 2 2 2 2 8 8 26
21:00-00:00 4 4 3 3 3 6 6 29
Total 9 8 8 8 8 23 23 88
Average served card per day 12.4

29. The marketing study
Studying the potential market/ demand,
cont.,
• Throughout the observations and conducted market
survey, we found the following:
– Long waiting time.
– Unsatisfied customers with the available service.
– Lack of service quality.
– Lack of some services like steam washing machines.

30. The marketing study
Demand estimation/ Projection of the Market demand:
• “Car Care” services:
Serial Product Price
1 Inside/ outside car water wash
30
2 Motor cleaning
25
3 Sterilizing
25
4 Internal car polish
75
5 Car waxing
200
Average
price 71

31. The marketing study
Demand estimation/ Projection of the Market demand, cont.,
• The estimated population of Gujrat city is about
25,000 families, we assume 1 person per
family.
• We estimate the 60% of the apartments are
occupied with full residencies.
• We estimated that the target customers owns
1.5 cars in average.
• We estimated the each customer will request
the cleaning service twice a month.
• Our estimated actual target customers will be
around 10% of the customer’s pool .

32. The marketing study
Demand estimation/ Projection of the Market demand, cont.,
Population (n) 45,000
Sample accepted the product (d) 10%
Universe (K) 4,500
Expected demand over 1st year
D(t) = K * X' 319,500