Brian Ghilliotti

BES 218
Assignment 3
1. Explain what a feasibility analysis is and why it is important.
This is the process of determining if a business idea is viable. It consists of four steps. First,
they must determine the feasibility of the product or service. This is followed by determining if it
is feasible to launch a new business or product within its corresponding market. Next, it must be
determined if the entrepreneur is capable or has the staff that is capable to help organize and
promote the business and its products. Finally, it must be determined if the entrepreneur has the
financial capacity to launch a new business for the product or service. Will they have to borrow,
and can they realistically pay it back? If the answer to any of these questions in no, the
entrepreneur must drop or rethink the business plan. The primary reason why the entrepreneur
must go through this process is to avoid falling into the everything about my product or
business will be wonderful mental trap.
2. Describe a product / service feasibility analysis, explain its purpose, and discuss the
primary issues that a proposed business should consider in this area.
This is an assessment of the overall appeal of the product or service being proposed. It must be
determined if the product will sell. This is known as product /service desirability, and it must be
determined if the product serves need a in the marketplace.
Some of the questions to be considered: Does it make sense? Is it something that real
customers will buy? Does it take advantage of an environmental trend, solve a problem, or fill
marketplace gap? Is it a good time to introduce the product or service in the market? Are there
any flaws in the product or service?
These questions can be best determined by a feasibility test. This involves presenting a
preliminary description of a product or service idea, called a concept statement, to industry
experts and prospective customers to solicit their feedback. The concept test should cover a
description of the product or service, its intended market, the benefits of the product, a
description of how the product or service will be positioned relative to competitors, and a
description of the product or services management team.
Finally, it must be determined if the if there is real consumer demand for this proposed product
or service. The three primary methods to research this involves a) talking face to face with
potential customers, b) use online marketing tools to assess demand, and c) conduct library
Internet, and on the spot research. During this process, the entrepreneur must think out of the
box about who their real customer is.
3. Describe an industry/market feasibility analysis. Explain its purpose, and discuss the
primary issues to consider when completing this analysis.
This is an assessment of the overall appeal of the industry and target market that the product or
service will be promoted in. An industry is a group of firms producing a similar product and
service, while a target market is the limited portion of the industry that an entrepreneur wants to
promote its product for.

Regarding industry attractiveness, an entrepreneur must consider if the industry the

entrepreneur is entering in is at the beginning or end of its life cycle, how fragmented the
industry is, if this presents entry opportunity for the entrepreneur, and if the industry has high
barriers to entry.
Entrepreneurs must start off approaching markets with a specific target market in mind since
they usually do not have the resources to gamble on introducing a new product or service to a
broader market with established vendors that have wide economies of scale.
The challenge of identifying a target market is to find one that is big enough for the entrepreneur
to realistically establish themselves in, yet small and specialized enough to avoid being pushed
out by established competitors.
4. Describe what a financial feasibility analysis is, explain its importance, and discuss the
most critical issues to consider when completing this analysis.
A financial feasibility analysis is the final component of a comprehensive feasibility analysis. The
most import issues to consider are: needed start up cash, financial performance of similar
businesses, and the overall financial attractiveness of the proposed venture.
Wen considering the total start up cash that will be needed, an actual budget should be
prepared that lists anticipated capital purchases and operating expenses needed to start the
business. If the entrepreneur needs to borrow, they must have a reasonable plan on how to
repay the borrowed funds. When considering start up expenses, it is better to overestimate total
costs instead of underestimating.
The first step in the process of estimating potential start up expenses, as well as the potential
performance of your business introducing the new product and service, is to review the
expenses and performances of similar established businesses. Some resources that an
entrepreneur can use to gather information to answer these questions include IBISWorld,
BizMiner, and Mintel.
Entrepreneurs can also talk to other entrepreneurs in related businesses for more information if
they do not see themselves as future competitors. Finally, simple incognito observation of a
business that is similar to the one that the entrepreneur wants to start is another effective way to
get insights on operational expenses.
There are other factors that must be considered when analyzing the financial attractiveness of a
proposed venture. These projections are primarily based on a new ventures projected sales and
profitability. This is purely a good judgment call.
Rate of return and profitability should be judged against the following factors:
-amount of capital invested
-risks assumed in launching business
-existing alternatives for the funds being invested in the project
-alternatives for the entrepreneurs efforts

An entrepreneurial template for conducting a financial feasibility analysis is called First Screen
This form asks questions related to the issues brought up in this question. The final section of
the form, Overall Potential, includes a section that allows for revisions in case the entrepreneur
feels that they need to make changes to improve their new ventures feasibility.