TECHNOLOGY ENTREPRENEURSHIP

(ENT600)

UNIT 4 :

FEASIBILITY STUDY

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 4: FEASIBLITY STUDY 1

 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 2

 Purpose of a Feasibility Study

1. Provide a thorough examination of all issues and

assessment of probability of business success.
2. Give focus to the project and outline alternatives.
3. Narrow business alternatives.
4. Surface new opportunities through the investigative
process.
5. Identify reasons NOT to proceed.
6. Provide quality information for decision making.

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 4: FEASIBLITY STUDY 3

 Feasibile or Viable Business

A feasible or viable business idea is one where the

proposed business is expected to:

i. Generate adequate cash flow and profits

ii. Withstand the risks it will encounter

iii. Remain viable in the long term

iv. Meet the goals of the founders

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 4: FEASIBLITY STUDY 4

 Composition of a Feasibility Study

A Feasibility Study is a composite of the

following evaluation or studies:

1. Market Feasibility Study

2. Organisational Feasibility Study

3. Technical Feasibility Study

4. Financial Feasibility Study

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 4: FEASIBLITY STUDY 5

 MARKET

ORGANIZATIONAL Determinatio
New n
Venture of Feasibility
of Proposed
Idea TECHNICAL New Idea

FINANCIAL

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 4: FEASIBLITY STUDY 6

A feasibility study will provide various information to
the entrepreneur such as follows:

• Is there a demand for the product? Determination of market opportunities and

risks
• Who else are producing similar
products?

• What is needed to make the product? Analysis of the technical feasibility of the
• What are the equipment and product
technology needs for the proposed
venture?

• Who will manage the business? Analysis of organizational capabilities and

personnel requirements
• What managerial requirements are
needed?

• What is the cost of producing the Analysis of financial feasibility and

product? resources
• What is the likely profit?

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 4: FEASIBLITY STUDY 7

1. 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:
a. Product/Service
b. Customers
c. Market Demand
d. Competitors
e. Market Share
Entrepreneurship Dept, FBM (2009) ENT600/UNIT 4: FEASIBLITY STUDY 8
 Competitors

Market
Customers
Demand

Market
Product/Service MARKET Share

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 4: FEASIBLITY STUDY 9

Market Feasibility Study:
A. 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:
B. 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.
• 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 11
Market Feasibility Study:
C. 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 12

Market Feasibility Study:
D. 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 13

Market Feasibility Study:
E. 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 14

2. 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:
a. Technology and Equipment
b. Materials
c. Manpower
d. Location

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 4: FEASIBLITY STUDY 15

 Materials Manpower

Technology
& Location
Equipment
TECHNICAL

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 4: FEASIBLITY STUDY 16

Technical Feasibility Study:
a. 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 17
Technical Feasibility Study:
b. 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 18

Technical Feasibility Study:
c. 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 19

Technical Feasibility Study:
d. 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 20

3. 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:
a. Organization Structure
b. Management Team
c. Compensation
d. Supporting Services

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 4: FEASIBLITY STUDY 21

 MANAGEMENT
COMPENSATION
TEAM

ORGANIZATION SUPPORTING
STRUCTURE SERVICES

ORGANIZATIONAL

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 4: FEASIBLITY STUDY 22

Organizational Feasibility Study:
a. 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 23

Organizational Feasibility Study:
b. 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 24

Organizational Feasibility Study:
c. Compensation

• Compensation refers to the monetary and

non-monetary 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 25

Organizational Feasibility Study:
d. 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 26

4. 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:
a. Start up Capital
b. Financial Sources
c. Profitability Analysis

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 4: FEASIBLITY STUDY 27

 FINANCIAL
RESOURCES

START-UP PROFITABILITY
CAPITAL ANALYSIS

FINANCIAL
RESOURCES

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 4: FEASIBLITY STUDY 28

Financial Feasibility Study:
a. 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 29

 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 over-estimate rather than

under-estimate the cost involved.

Entrepreneurship Dept, FBM (2009) ENT600/UNIT 4: FEASIBLITY STUDY 30

Financial Feasibility Study:
b. 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 31

Financial Feasibility Study:
c. 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 32

 Financial Feasibility Study:
Cont… 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 33

 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 34