ENTREPRENEURIAL DEVELOPMENT – Module 3

Module 3: (8 Hours)
Business Planning Process: Meaning of business plan, Business plan process,
Advantages of business planning, Marketing plan, Production /operations plan,
Organization plan, financial plan, and final project report with feasibility study,
preparing a model project report for starting a new venture.

BUSINESS PLAN

 Business plan is a written document prepared by entrepreneur that describes all

the relevant external and internal elements involved in starting new venture. It is an
integration of functional plans such as marketing, finance, manufacturing and human
resource plan.
 A business plan is a blue print of step by step process that would be followed to
convert business idea into successful business venture.

BUSINESS PLAN PROCESS:

The business plan process is simply the steps you go through and actions you take when
producing a business plan. In effect, it describes how you produce your business plan.
While most people focus on the ‘final output’, i.e. the business plan itself,
the business planning process is extremely important for entrepreneurs.
1. Idea generation: is the first step in the business planning process. This step
differentiates entrepreneur from usual business. An entrepreneur may come up with
new business idea or may bring in value addition to existing product in the market.
Sources of new idea for entrepreneurs are :
 o Consumers/ customers
o Existing companies
o Research and development
o Employees
o Dealers, retailers
2. Environmental scanning: once the entrepreneur is through the idea generation stage,
next entrepreneur is required to conduct environmental scanning which includes
analyzing external and internal environment that affects business idea.
1. External environment comprises of:
o Socio cultural factor: it gives brief overview about the culture and tradition
existing in society. It is comprised of values and beliefs of people which
determine the acceptance of product by customer in the market. Family,
education institution, religion affects business.
o A Company, Which Got Benefit Due to Social Environment McDonalds Strategy of
McDonalds in India, which made them Benefit in Social
Environment of India.
o McDonalds Made segment according to Demographic Factor in the Society of
India.
o McDonalds made their food according to Religion in India.
o Technological factor: it assesses various technological options available to
convert an idea to product. It also provides a brief overview about
technological updating in the organization.
o Economic factor: it assesses the status of the society in terms of economic
development, per capita income, national income, consumption pattern in
the business.
o Demographic factor: it assesses the population pattern of given geographic
area. This includes gender, age profile, distribution etc.
o Government factor: it assesses the various legislation, policies, incentives
formulated for particular industry. Flexibility of these rules determine ease for
entrepreneur in terms of opening venture in particular area.

2. Internal environment:
o Raw material: it refers to in terms of availability of raw material required for
the process of production. If the material availability is at distance place and is
very expensive then entrepreneur should give second thought to the same.

o Production/ operation: it assesses the availability of various machineries,

equipments, tools and techniques that would be required for production.
o Finance: it studies total requirement of finance in terms of start up
expenses, fixed expenses, running expenses etc.
o Market: refers to study on potential customer and target customers in
market.
 o Organization: refers to organization structure, culture, people, demand and
supply of required human resource in market and estimation of expenses to be
incurred on human resource.
3. Feasibility analysis: refers to conducting detailed analysis in relation to every
aspect relevant to business and determining credibility of business.
• Market analysis: is conducted to estimate the demand and market share for
proposed product and service in future. Demand and market analysis is based on
factors like consumption pattern, availability of substitute goods and services etc.

• Technical and operational analysis: is to assess operational ability of proposed

business enterprise. Technical or operational analysis collects data on following
parameters :
1. Material availability
2. Material requirement planning
3. Plant location
4. Plant capacity
5. Machinery and equipment.
o Marketing plan: lays down the strategies of marketing which can lead to
success of business plan. Strategies are in terms of marketing mix which
includes (product, price, place, promotion) which determines the potential
demand of customers for product in the market.
o Production plan / operational plan: production plan is drafted for
manufacturing sector where as operation plan is designed for business into
service sector. It comprises of strategies on parameters such as location layout,
cost, availability of material, human resource etc.
o Organizational plan: defines type of ownership pattern in company, sole
trading concern, family business, private or public limited company etc.
o Financial plan: financial plan indicates the requirement of proposed business
enterprise. Which includes fund flow, cash flow statement, break even point,
projected ratio, and projected balance sheet?
4. Project report preparation: project report is a written document that describes
step by step strategies involved in starting and running business.
5. Evaluation, control and review: as company operates in dynamic environment
company has to monitor and review strategies and policies to stay in line with
competition existing in market.

OBJECTIVE OR IMPORTANCE OF BUSINESS PLAN

 To give direction to the vision formulated by the entrepreneur
 To objectively evaluate the prospectus of business
 To monitor the progress after implementing business plan
 To persuade others to join business
 To seek loans from financial institutions
 To visualize concept in terms of market availability, organizational, operational,
and financial feasibility
 To guide entrepreneur in actual implementation of plan
 To identify actual strength and weakness of plan
 To identify challenges in terms of opportunities and threats from the external
markets.
 To clarify ideas and identify gaps in management information about their business,
competitors and market.
 To identify the resources that would be required to implement the plan
 To document ownership arrangements, future prospectus and projected growth of
the business venture.

MARKETING PLAN

Market plan refers to plan that describes market condition and strategy related to
how products and services will be distributed, priced and promoted in market.
Market plan describes the 4Ps of Marketing.

Product: Describes in terms of brand name, design and package of the product

Price: Describes in terms of pricing of the product, compared to competitors.
Explains as low, high or reasonable.

Place: Describes about the distribution of products to customer, retailers, and
wholesalers.

Promotion: advertise the product to reach mass customers, which creates the
awareness among the customers.
Components of Marketing:
1. Sales: Up sales and cross sales
2. Market: Price, Promote and Distribute
3. Account and Contact management: Customer database
4. Customer Service: Describes the customer service after sales.
INDUSTRY ANALYSIS: prior to preparation of market plan entrepreneur are required to
conduct industry analysis section of the business plan. Industry analysis provides
information about national and local market that affection marketing operation of
company. Industry analysis also involves collecting information about competitors
which is available in form of secondary data by news papers, article, websites,
catalogs, promotions, interview with distributors, customers etc.

STEPS INVOLVED IN MARKET RESEARCH


Defining the purpose or objective: it refers to entrepreneur should be clear about
the purpose of doing market research. Identify the sources through which required
data will be collected, whether required data will be from primary or secondary
source of information.

Gathering data from secondary sources: secondary source of information refers
to data available about competitor’s strategy and their position in the market.
Required information on competitors is available through magazines, news papers,
libraries etc.

Gathering information from primary source: primary data required for market
research is collected through methods such as observation, networking,
interviewing, focus group, exhibition etc.

Analyzing and interpreting results: results should be evaluated and
interpreted depending on the objective of research process. Summarizing results
will provide in preliminary insights about competitors market position and their
image in competitive environment.

CHARACTERISTICS/ IMPORTANCE OF MARKET PLAN

o It should provide strategy for accomplishing the company mission and goal.
o It must provide for the use of existing resources and allocation of all equipment,
financial resources, and human resources in company.
o It should provide for continuity so that each annual marketing plan can successfully
meet long term goals and objectives of company.
o It should be simple and specific in nature so as to provide appropriate road may in
terms of planning market strategy for company.
o It should focus on criteria to be evaluated to assess market success of the company.

MARKET PLAN

STEPS IN PREPARING MARKET PLAN

1. Defining business situation refers to understand past and present business

achievements of new venture. It gives basic insight about scenario persisting in market,
response of customers to new venture in market, and helps in predicting customer
acceptance of company product in market.
2. Defining target market: target market refers to group of potential customers towards
which venture aims its market plan. Knowledge of target market will provide basis for
determining appropriate market action strategy to meet needs of customers. Target
market also includes market segmentation which involves process of dividing market into
definable and measurable groups for purpose of targeting market strategy.

DEFINING THE BUSINESS SITUATION

DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )

CONSIDERING STRENGHTS AND WEAKNESS

ESTABLISHING GOALS AND OBJECTIVES

DEFINING MARKET ACTION PROGRAM

PRODUCT PRICING PLACE -DISTRIBUTION PROMOTION

MARKET STRATEGY

BUDGETING MARKET STRATEGY

IMPLEMENTATION OF MARKET PLAN

MONITORING PROGRESS OF MARKETING ACTIONS

3. Considering strength and weakness: strength of business refers to core areas which
company is specialized in which may be abundance experience of company in similar area
of business and weakness may be in terms of production capability, or layout which
permits limited space for equipment and operation.

4. Establishing goals and objectives: marketing goals of the company should be clear and
specific in nature as it has to clearly indicate about nature of product, target customers,
sales promotion, advertising support etc.
5. Defining market strategy and action program: it refers to specific activities
outlined to meet the venture, business plan objectives and goals.
1. Product and service: indicates description of product or service to be
marketed in the new venture.
2. Pricing: refers to price to be charged for product in market before which
company is required to consider various aspects such as cost, margin,
competition etc.
3. Distribution: refers to means through which product will be made available to
customer in market which involves decision relating to nature of product,
distribution channel, middlemen etc.
4. Promotion: refers to various channels through which entrepreneur will
advertise company product to customers in market.
6. Marketing strategy: it involves understanding the nature of product and
accordingly planning in for marketing product. Entrepreneur may market consumer
product directly to customers while manufacturing products are to be sold to business
than customers in market. Dell computers market its products both to customers as well as
business people.
7. Budgeting marketing strategy: after drafting marketing plan entrepreneur is
required to estimate total expenses to be incurred in process of implementing market
plan. Expense of marketing plan should be in line with planned expense of entrepreneur.

8. Implementation of market plan: market plan should be implemented in the company,

should be informed to the workforce involved in marketing activity, it acts as guiding
element to direct on strategies which will make marketing process effective.

9. Marketing progress of marketing actions: marketing of plan involves tracking

specific results of marketing effort. Sales data of product, data gathered by market survey
are few methods of monitoring progress of market plan.

PRODUCTION PLAN

 Production plan is the process of converting the input into output through a
conversion process. The inputs are in the form of land, labour, raw material,
machinery, capital and information. Transformation takes place through machinery
in manufacturing unit and through employee’s skills in service sector.
  Material Requirement Planning: Material requirements planning (MRP) is a
production planning, Scheduling and inventory control system.

Production Schedule: Scheduling is the process of arranging, controlling and
optimizing work and workloads in a production process or manufacturing
process.

Inventory Control: Inventory Control is the supervision of supply, storage
and accessibility of items in order to ensure an adequate supply without
excessive oversupply.
 Capacity Planning: Refers to the amount of output that can be produced within a
specified period.

DIMENSION OF PRODUCTION PLAN:

1. Plant location: refers to geographic location where the infrastructure of company

will be built and operations of the company will take place. Following aspects should
be taken care of before choosing plant location :
o Vicinity and Availability to raw materials
o Availability of labour
o Proximity to market
o Climate condition o
Cost of location
 o Tax, subsidies and loans
2. Plant layout: is pattern in which space would be arranged in order to utilize the
machinery, equipment, and manpower. Effective designing of plant layout reduces
unnecessary movement of employees and helps in effective utilization of time and
resources in company. Variables to be considered while planning plan layout :
o Space is utilized properly
o Proper light and ventilation in all the area of premises o
Ensure smooth flow of operation
o Supervision can be carried out in smooth manner
o There are provision for emergency exit
o There is flexibility to introduce changes in future
3. Inventory management: inventory management refers to maintaining inventory in
form of raw materials more than production requirement to meet future unpredicted
obligations.
4. Monitoring stock turn and coverage: monitoring individual stock items will
identify fast and slow movers depending on the industry.
5. Quality management system: quality management refers to maintaining quality in
terms of product produced in company. As customers these days are getting conscious
about quality day by day maintaining quality standards in product will help in building
company image and also build customer loyalty towards company.
6. Total quality management: management focuses on perceptual enhancement
through prevention of problems and errors. It requires continuous monitoring and
control process, performance and quality etc.
7. Budgeting production plan: depending on the selling price per quantity, projected
cost of production at each quantity can be estimated. The amount of production is
dependent on the capacity of production unit.

PREPARING YOUR PRODUCTION PLAN:

1. Determination of Requirements:

st
The 1 activity in Production Planning is the determination of the requirements for the
planning horizon. Demand forecasting plays an important role. Managers thus need to be
aware of the various factors that would affect the accuracy of the demand and sales
forecast.

There are company factors that could influence the level of demand for the firm's products.
These internal factors include the company's marketing effort; the product design itself; the
strategies to improve customer service; and the quality and price of the product.

There are also external factors or marketplace factors that significantly affect demand such
as the level of competition or possible reaction by competitors to a firm's business
strategy; the perception of consumers about the products and the consumer behavior as
affected by their socio-demographic profile.
 2. How to Meet the Requirements

The next major activity involves the identification of the alternatives that the firm may
employ to meet production forecasts as well as the constraints and costs involved.

Identify the most appropriate plan that meets aggregate demand at the lowest operating
cost once the most appropriate plan has been selected, then the firm evaluates the plan and
later on finalizes it for implementation. For more efficient and effective planning process,
the formation of a production planning team composed of managers from manufacturing,
marketing, purchasing and finance, is recommended.

3. What are the inputs to the production planning process?

To be able to perform the aggregate planning process, the inputs required are collected
such as material, machines, layout structure, design, and people.

4. How do you address the demand fluctuations?

There are three basic production planning strategies that the company can choose from to
address demand fluctuations. These are the (1) Chase Demand strategy, (2) Level
Production strategy, and the (3) Mixed Strategy.

1 Chase Demand Matches the production rate to the order or demand rate
Strategy through the hiring and firing of employees as the order
rate varies
2 Level Production Maintains a stable workforce working at a constant
Strategy production rate with the shortages and surpluses being
absorbed by any of the following: • Changing the
inventory levels • Allow order backlogs
3 Mixed Strategy The strategies here could include combination of any of
the following: • Having a stable workforce but employ
variable work hours (e.g., increase no. of shifts, flexible
work schedules or overtime) • Subcontracting /
outsourcing

5. Monitor effectiveness of your production plans: The important

considerations in monitoring the effectiveness of your production plan
ORGANIZATIONAL PLAN

Organizational plan involves deciding form of ownership that entrepreneur
intends to enter. Nature of planning, organizing, leading and controlling will be
determined by nature of business or form of ownership.

Your team of managers and lower-level employees are the ones who will carry out
most of the operations plan, so it's important to describe who they are, what their
qualifications are and what their responsibilities will be. Include an organization
chart showing the hierarchical structure of your business. Also describe how your
business will be structured, what legal form of ownership it will use (sole
proprietorship, partnership, LLP, LLC, corporation, etc.), and the chain of command.
What is the company's management philosophy and business culture, and how will
these contribute to your business's success?

DEVELOPING MANAGEMENT TEAM

LEGAL FORM OF BUSINESS

TAX ATTRIBUTES OF FORMS OF BUSINESS

DESIGNING THE ORGANIZATION

BUILDING MANAGEMENT TEAM AND ORGANIZATION CULTTURE

ROLE OF BOARD OF DIRECTORS

BOARD OF ADVISORS

STEPS IN ORGANIZATIONAL PLAN

1. Developing management team: refers to group of employees employed in the

company who are in charge of managing the activities on the operating part of
organization.
2. Legal form of organization: refers to composition and legal existence of business.
Business may be proprietorship, partnership or corporation form of business. Three
legal forms of business are :
1. Corporation/Limited Company is legal entity that runs by stock holders
having limited liability. It is regulated by the statute and is treated as
separate legal entity for liability and tax purpose.
 2. Proprietorship: is form of business with single owner who has unlimited
liability, controls all decisions, and receives profit.
3. Partnership: two or more individuals having unlimited liability who have
pooled resources to own a business.
“Partnership is the relation between persons who have agreed to share
the profits of a business carried on by or any of them acting for all”

Others form:

4. LLC: Limited Liability Company: A corporate structure whereby the members

of the company cannot be held personally liable for the company's debts or
liabilities. Limited liability companies (LLC) differ slightly from one country to
the next. However, it is essentially a hybrid entity that combines the
characteristics of a corporation and a partnership or sole proprietorship. While
the limited liability feature is similar to that of a corporation, the availability of
flow-through taxation to the members of a LLC is a feature of
partnerships.
Liability: the state of being legally responsible/accountable for something.
5. LLP: Limited Liability Partnership: LLP is an alternative corporate business
form that gives the benefits of limited liability of a company and the flexibility of
a partnership.
 Ownership: it refers to pattern of investment and control of owners in
company, which includes conditions relating to sharing of profit and loss in
business.
 Liability of owners: of business covers two aspect either members of business
will have limited or unlimited liability depending on legal form of business agreed
by partners.
 Costs of starting business: refers to expenses incurred in starting the business
and proportion of contribution from every member of business or sources through
which required finance of business will be raised.
 Continuity of business: refers to question on who will take over business
operations in future and what will be member’s role in coming future.
 Transferability of interest: entrepreneur will have two options in relation to
transferability of interest owner may transfer his interest after assessing
credibility of member in business or may sell interest with his own wish.
 Capital requirement: refers to amount of capital required to start up business
venture, sources through which required finance for company will be obtained,
what will be contribution of members or the owner towards business.
 Management control: it refers pattern in which control of business will be in
the hand of individual person or members in business. It also comprises of power
of members in terms of decision making, guiding business activity in company.

 Distribution of profit and loss: profit of the firm may be shared as per the
terms and conditions agreed by the members of business, loss or liability of
 individual depends on nature of business agreement of partner with the
business.

3. Tax attributes for forms of business: tax advantage and disadvantage will vary in
accordance with form of business. In proprietorship and partnership profit and loss of
business is considered same as that of individual as in corporation as business is
treated as separate entity tax is laid on business and earning of individual separately.

4. Designing the organization: it comprises of formal and explicit indication to the

members of the organization as though what is expected from them. These
expectation are group in following area :

a. Organization structure refers to task, responsibility and accountability of every

member in the business.
b. Planning, measurement and evaluation of schemes communicate goals and
strategies to attain desired goals in business.
c. Rewards: forms of rewards and yardstick based on which employees will be
rewarded in company.
d. Selection criteria refer to guidelines for selecting employees in company.
e. Training: refers to determining skill requirement of employees in company and
accordingly design training program for employees in company.
5. Building the management team: this process involves seeing that strategy of business
should be in line with objective of the company, management team of the company
should be role model for employees in company and accordingly plan and guide
employees towards organization goal attainment. Management team of the company
should be flexible to try new techniques and innovation in the company. Management
team should focus on hiring efficient employees in company and develop core values
which guide and regulate employee’s behaviour and attitude in company.

6. Role of board of directors: board of directors in the company are required to review
operating and capital budget, developing long term strategic plan for growth and
expansion, supporting day to day activities, resolving conflicts among owners or
shareholders, ensure proper use of assets, developing network source of information
for entrepreneurs.
7. Board of advisors and organization: board of advisors are not permanent
employees of the company. They are set of expertise who guides business in terms of
management and technical issues in company.

FINANCIAL PLAN

 It studies total requirement of finance in terms of start up expenses, fixed

expenses, running expenses etc. financial plan indicates the requirement of
proposed business enterprise, which includes fund flow, cash flow statement,
breakeven point, projected ratio, and projected balance sheet.
 Operating and capital budget: before developing pro forma income statement,
entrepreneur should prepare operating and capital budgets. If entrepreneur is
running sole trading concern than he is responsible for budgeting decision and if it is
partnership or other form of legal concern then budgeting decisions are to be taken by
assigned member of business.
 Pro forma of income statement: refers to projected net profit calculated from
projected revenues minus projected costs and expenses. It should comprise of sales on
monthly basis, insight on operating expenses, salaries and wages should highlight on
total number of employees employed in company.
 Pro forma of cash flow: It is result of difference between actual cash receipts and
cash payments. Cash flow takes place in company only when payments are made or
received.
 Pro forma of balance sheet: summarizes the projected assets, liabilities, and net
worth of new venture. Balance sheet represents the position of the business at end of
year. Assets represent the items that are owned or available to be used in venture
operation.
 Break even analysis: entrepreneur in initial stage is required to know when profit
may be achieved which will help him understand financial potential of start up
business. BEA is useful technique to analyze how many units have been sold or how
much sales orders have to be achieved in order to break even. Break even is volume of
sales where venture neither makes profit nor loss.
 Pro forma for sources and application of funds: summarizes projected source of
fund available to the venture and how these funds will be distributed.
CONTENTS OF PROJECT REPORT

1. Cover page: page of the project report should contain the title of the project, name,
address so that the readers of the report can easily contact entrepreneur relating to
queries of report.
2. Table of contents: table of content are compiled after the main body of the project
report is finalized. Topics covered in the project report along with the page number
should be mentioned in the project report.
3. Executive summary: should be written after the completion of project report as it
gives brief gist of project. Length of the executive summary should not exceed more
than two pages.
4. Company information and industry: here they should explain the ownership form of
the company, which should contain the reason for venturing into the proposed business
plan, how you plan to satisfy the needs and expectation of the potential customers and
existing competitors in industry. It should also include SWOT analysis of company.

5. Technical plan: in this part of the report the key aspect analyzed during the technical
feasibility of the report should be highlighted. The choice of the product and service to
be offered should be justified. Report should be able to explain how the product of the
company is creative and innovative from the existing product in the market.

6. Marketing plan: this aspect of the product should focus on the industry and market
feasibility conducted at earlier stage. It should describe about the pricing policy,
findings of market research, how large is the market for the product to be offered by
the company, details about marketing strategy adopted by the company to promote
the product, target Customers Company is focusing on.
7. Operations plan: it describes about the manufacturing and service delivery process
to be utilized for production of chosen product and service. It should explain about the
innovation brought in the process of production which makes it better when
compared to existing competitors. It should also focus on the location, availability of
resources required for production.
8. Organizational plan: it gives information about the management team who are part
of the company. It focuses on the management and technical skills possessed by the
employees in company and how it will prove to be beneficial for the work process to
be carried in the company. It should highlight as though why even after possessing
such efficient skills they preferred joining your organization.
9. Project timeline: this chapter explain about the network diagram which explains
about the time duration required for the project. Diagram explains about the various
activities in the project, which are sequentially organized and the time duration
required for the execution of the project is arrived by estimating time required for
completion of every activity for the formation and later process of the company.

10. Critical risk and assumption: it explain about the various assumption made during
the formation of the company E.g. rather then considering the previous sales
 forecast for similar product to be offered by the company, the organization may
have gone in for expert advice, there may be various risks related to the product
and kind of service company is planning to offer in the market all these details
should be highlighted in this part of the report.
11. Social plan: it explains about how company project will benefit the society. It should
highlight how company will generate employment opportunities, lead to skill
development of local people, provision of goods and services to be provided to the
local people, utilization of local resources etc. It should also include various help
provided by the financial agencies and government to start SSI in country.
12. Exit strategy: this is the negative aspect of the business but the company should
explain how they would close down the business if the company is not able to earn
the expected profitability, the investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan: it is important part of the report which will contain brief content all
the sections with numbers in monetary terms. It explain about the financial
composition of the company, various sources through which company has raised
required finance, total expenditure incurred by the company which will be effectively
explained through the means of break even analysis and ratio analysis in the company
financial report.
14. Conclusion: this summarizes the key aspect of the report in concise manner. It should
end the report on a positive note so that the readers develop positive image about the
report.
15. Appendices: it contains conclusion part of the report and supplement data which is
important part for the report but cannot be included in the initial topics of the report.

NETWORK ANALYSIS:

Network is a set of symbols connected with each other with a sequential relationship
with each step making the completion of a project/event. A business plan or any project
contains various activities. Any delay in any activity will affect the other activities,
project is delayed, and costs will go up leading to reduced profit.

Network analysis: diagram presents various activities of project. An event or node

marks the beginning or end of activity and is represented by small circles in network
diagram. An activity is represented by straight line arrows. There can be only one
activity taking place between nodes at a time. This diagram is usually used to depict
information relating to construction activity during process of formation of business.

A number of networking techniques have been developed for project scheduling. They
are:
1. Programme evaluation and Review techniques (PERT)
2. Critical path method
Critical path method: it is method through which entrepreneur can evaluate time period
required for completion of activity depending on their past experience. Critical path is
defined as longest duration path between the first and last nodes of the project.

Programme evaluation and Review techniques (PERT)

PERT was first developed as a management aid for completing Polaris Ballistic missile
project in USA during 1958. It worked well in completing this project well in advance.
From then on PERT schedules the sequence of activities to be completed in order to
accomplish the project within a short period of time. It helps to reduce both cost and time
of the project.

Steps involved in PERT:

 The various activities involved in the project are drawn up in a sequential
relationship to show which activity follows what.
 The time required for completing each activity of the project is estimated and noted on
network.
 The critical activities of the project are determined.
 The variability of the project duration and probability of the project completion in a
given time period are calculated.

FEASIBILITY ANALYSIS: to assess the practicality of

The process to make changes in the current system in order to achieve new effective
system. The feasibility study includes complete initial analysis of all related system.
Therefore the study must be conducted in a manner that will reflect the economic as well
as technical feasibility of the system proposal.

Types of Feasibility Analysis

1. ECONOMIC FEASIBILITY:

Economic feasibility is the most frequently used method for evaluating the effectiveness of
the candidate system that is proposed system, more commonly used as cost/benefit
analysis. The procedure is to determine the benefit and savings that are expected from the
candidate system and compare them with the cost, if the benefit over weight cost then the
decision is made to design and implement the system, otherwise further justification in the
proposed system will have it be made, if it has chance to improve. Cost estimate for a
system we consider several elements. Hardware, Personnel, Facility, Operation, Supply cost
etc.

8. MARKET FEASIBILITY

Market Feasibility takes into account the importance of the business in the selected area.

 Nature of market: The nature of market in terms of monopolistic or perfect

competition is to be studied.
  Cost of production: It is essential to study and control cost of production. Cost of
production decides the selling price.
 Selling price and profit: Selling price plays a vital role in profit. In price
sensitive goods like cosmetics, one should be careful in fixing the price.
 Demand: Present demand and demand forecast are prepared and studied. This
will decide the facility planning.
 Market share: Estimated market share is to be made. Comparison is made with
share of similar products.
 Target market: Study is made with regard to the target market and market
segmentation.

9. RESOURCE FEASIBILITY –
This involves questions such as how much time is available to build the new system, when
it can be built, whether it interferes with normal business operations, type and amount of
resources required, dependencies, etc. Contingency and mitigation plans should also be
stated here.
 Availability of raw materials: The study of availability of raw materials, sources of
supply, alternate sources, its quality and specifications cost etc., are to be studied.

 Selection of machinery: The selection of machinery required to produce the

intended product is to be carried out. The specifications are capacity, cost sources of
supply, technology evaluation of various makes of the machine. Their good and bad
etc., are studied.
 Utilities: The details about availability of utilities like water, gas electricity, petrol,
diesel etc. are to be studied.
 Production capacity: Establishment off production capacity and utilization of
production capacity are analyzed.
 Staff requirement: Study and analysis of requirement of workers, technical staff
and officers etc. is to be made.

10. TECHNICAL FEASIBILITY

Technical Feasibility: In the technical feasibility the system analyst look between the
requirements of the organization, such as Suggest input device which can enter a large
amount of data in the effective time. Output devices which can produce output in a bulk in
an effective time. The choice of processing unit depends upon the type of processing
required in the organization.

 Technical viability: The technical viability of the opportunity is to be studied.

11. FINANCIAL FEASIBILITY

Financial feasibility refers to a study on whether a project is viable after taking into
consideration its total cost and probable revenue
 Total capital cost of project: It is very essential to study the total cost of project.
This includes fixed capital, working capital and interest factor.
 Sources of capital: The study of main sources of capital is to be made. If capital is
borrowed, interest burden is to be studied in detail.
 Subsidiary sources for additional finance: After study of main sources of capital,
subsidiary sources of capital are to be identified and studied.
  Financial for future development of business: Financial requirement for future
development of business are to have studied. Working capital requirement for at
least three months running of enterprise are to be estimated.

12. CULTURAL FEASIBILITY: In this stage, the project's alternatives are evaluated for
their impact on the local and general culture. For example, environmental factors need
to be considered and these factors are to be well known. Further an enterprise's own
culture can clash with the results of the project.
13. SOCIAL FEASIBILITY STUDY
Social feasibility study is important in the social environment.
 Location: The location is in such a place that it should not have objection from the
neighbours.
 Social problem: The enterprise should not create any nuisance to the public.
 Pollution: There should not have any sort of noise or other pollution
objectionable society. Suitable measures are to be taken for controlling
pollution.
 Other problem: Any other problems related to the society and people are to be
studied.
PROJECT – MEANING
 A project is a venture/step by step activities undertaken by a person for a specified
period of time for some specific result or outcome.
 A project in business and science is a collaborative enterprise, frequently involving
research or design that is carefully planned to achieve a particular aim.
ERRORS IN BUSINESS PLAN FORMULATION: REASON FOR FAILURE OF BUSINESS
PLAN
1. Market Study: A neglected task
Deals with quantifiable variables which need to be very specific in carrying out the
survey process
2. Outdated financial report and industry comparison: some project report consists of
outdated financial data, and industry information in terms of companies whose
products are no way related to present products to be offered by the company.

3. Excessive technical terminology: entrepreneurs with technical background make use

of more technical words which may be difficult for investors to understand for which
entrepreneur before coming up with his presentation should take knowledge level of
target audience into consideration.
4. Undue optimistic projections: projections relating to sales and revenue may be
inflated in the report which may not match with any of data relating to present market
situation again creating ambiguous image about company's report in eyes of investors.

5. Avoiding the mention of potential threats and internal weakness: a feel good
report may not always work in eyes of investors as they like to evaluate critically in
terms of its threats and weakness, so rather than giving more scope for investors to
evaluate on the same it is better for the entrepreneur to mention about weakness and
threats in report on his own.
6. Incorporating financial information without knowing its full implication: while
including financial information in the report entrepreneur takes help of
 experts after understanding all its implications, if the entrepreneur just includes the
information and not in position to explain relevance of these concept then it creates
doubt in the minds of investors about entrepreneur understanding about the report.

7. Absence of what if scenarios: as business environment is dynamic in nature, company

in future may have to face unstable conditions and the same has to be included by the
entrepreneur during time of presentation.
8. Shabby, underdeveloped, full of typos: as outer look of the report creates first
impression about the report, in case if the report is shabby with stains on it, spelling
mistake, ink spots on the report will create bad image about the project in eyes of
potential investors.
9. No personal equity in the venture: if the entrepreneur poses that he has got no
equity investment in the company investors have mindset that entrepreneur is not
bearing any risk related to business which makes investors to give second thought to
invest in business on personal risk.
Entrepreneurial Development Cycle by M P Akhori:
1. Stimulatory Phase- This phase involves planned publicity for opportunities,
motivation training and help and
guidance in selection of product or
service.
2. Support Phase- This provides help
in registration of units, arrangement of
finance as well as land, sheds, power,
water, common facility centres etc.
Help is also provided in marketing of
products.
3. Sustenance Phase- Once the
enterprise is set up then help is
provided for modernization,
diversification, additional finance etc