16.2 Entrepreneurship FvAsrBrLtry g UDY Feasibility Study 16.

The following points help the entrepreneur to decide if he should continue

the business idea or not:
the efforts with (v) Not only this, it also include study of right time to introduce a product? Is there any
particular occasion when they buy/try new product e.g. Diwali, Wedding Season etc.
(a) 'Fo,
"Is this business possible? during wedding.season there is not only wide range of Indian clothes
(b) Is this business practicable? "*u*ple
available in the *arket but there is also increase in related products like omaments,
(c) Probability of success of business in future? footwear etc.
(d) Do I have access to all the resources required So in order to test desirability and demand for the produc! eoncept testing is done at thig
to start the business? mentioned and shared with potential
stage. Under this, description about product/service is
Feasibility analysis helps to critically analyze the business concept in detail. feedback on the same provides
-
of both primary as well as secondary data.
It requires use customers, industry to solicii their responses. Their
"*purtr It provides answer to question like preference /dislike
insight about trre viability of product.
Primary data can be collected from potential customers, industry experts etc uUoit the produca suggestions that can be incorporated to improve
the business'
while
secondary data can be callected through previous studies (if any), published the demand for the product
,o.rr."r, ,"poii, Given the volatile nature of the market these day+ forecasting
and feedback taken by6ther firms. Intention Survey"' It helps
is not an easy task. Therefore start-uPs can go fo1 "Buying
the demand for product in market in future date'
l6.l.1Need for feasibility analysis entrepreneurs identify/ estimate
and distribute it among targeted rnarket'
a. Feasibility analysis helps in providing guidelines for preparing business plan. Entrepreneur may use questionnaire to this effect
customers to buy the product. Any modifications
It gives th"* an indication ibout intention of
b' Through feasibility study, Shortcomingsfioops if any can be detected and
measures re[uired in the product may be brought to notice of entrepreneur at this stage.
It improves
can be taken to resolve them. the product in the market.
chances of successfully launching
c. Ithelps in understanding the viability of the concept or business idea.
d' It boosts up the confidence level among entrepreneur w.r.t the business idea. (b) IndustryAnalYsis
e. It reduces the chances of business failure. Industry refers to groups of finns producing similar or substitute products/services.
f. It helps entrepreneur understand the risk involved. Entrepreneur should conduct feasibility analysis to find, industry attractiveness
for the
indrlstry like demographic characteristics
g. It saves entrepreneur from potential business loss and ensures that if thel- work product. tarious parameters can be used to study the
hard against each
ln t direction chances of success will be high. of the target group, growth pattern in industry, number of fimrs coirrPeting
h. also helps to eam confidence of potential investors. other, pto"fit ti"rgi"s]ungy b"oi.tt in the industry etc'
of competitors
Industry is considered athactive enough if pryfit margrns are high, number
1.2 Elements of Feasibility Analysis lot of scoPe for the firm to venture
is low and firrr,s life cycle is in initial siages. This gives
Feasibility analysis includes tTdy of various aspects of business. It includes in the ihdustry and innovate.
identifying
product viability, technical feasibility and commercial feasibility. Following are
some oi tf," (c) Technical Feasibility
that should be considered included by *hil" conducting
:|Lff:t^qects
reayryrrry analysls. ".,t "p."r,.,r, Technical feasibility is study of most appropriate technology to be adopted
by business to
markeiable product. Under this, factors like teclrnology to
transform business idea into
Product/Service Feasibitity Analysis ";rily ideal size of plant to be installed
V(a) be used, production process invoive4 raw matirials needed,
It includes studying various aspects of product /service to be provided to customers. and equipments required are assessed'
The
main aspect to be examined here is testing the desirability and demand for Alsofactorslikemanpowerrequiremen!fundsneededtosupportuseoflatesttechnologie+
productlr"J.". are judged for success
In order to test the desirability one needs to examine following factors: cost involved in developlng or buyout along with implementatioo
(i) l{hat excites customer about the product. What attributes makes them desire a
of business.
product? Is it look of the product, is it the fragrance, do they give importance
to size (d) Commercial FeasibilitY
and shape of the product (e.g. soaps).
scale.-It is
(ii) 14/hat need does the product satisfy? Commercial viability is the study of viability of business idea on commercial
yet such products
possible to develop environmentally sustainable as ryel.l as useful products,
(iii) Does it fill a gap in market? may not be commercially appropriate. Therefore it is imperative to conduct corimercial
(iv) Does it solve customefs problenr? r"rimlity test before taking ti'," rit ut decision to commence the production of the product'
 16.5
FeasibilitY StudY

EntrepreneurshiP
Ori
o

idmtify followingrelevant factors:

commercial feasibility help entrepreneurB
(a)Manufacturingcostofproductionovershortandlongntn. a
(b)Arrticipatingdemandforproductinnearfutrrreandinlongrun
G) ComPetitionlevelinthemarket can
p*dtdol competifon level and inefficiency in operations
High* cost oJ fntense challenges
pose serious thread ior nnn in long
; d" should either be able to figlrt these
of time'
at its planntrg stage only to avoid wastage
to nrvive or should scraP Ur9 g.oiJ
,oo.rnout, manPo$rer and caPital 1. Explainthemeaningandrreedo.fleasibilityanalysisinthebusiness.
of feasibility analysis?
Feaslblltty 2. what are the.r*io.i, contents --- -L^^L^Ar^r ilc nr
(e) Flnanclal , ,Arromisingbusinessprospectwidroutbeingaauq"yrrchec-kedforitscommercial
--: --^ ^- related
pro{1ct Tu-oJ"T sfirdy of ryio}1.costs aspects
Assessing financial feasibility of
the 3.
is a distant dream"' comment'
with carrying th";ffi:-u"i".n""ia"r feasibility firm, identifies following
factors: ;ffi;;ii"rtiuuity to conduct feasibility study
in detail." comment'
"f 4.
,,All kilds of business are required
(i) Cost of the Proiect of capital
Cost of proiect primarily inc\des
capitatbg{eeting. expenditure o11+[siuon 5. Disctrssvarious",P"*tobeconsideredunderthefeasibilitysfudy.
cmcialfeasibilitiesto
arethemost
and fixt,re and other long r""rffi andtechnicarfgpibiuty shrdies
asse6 like land u,ruairrg, prantr;at*".tii"ry,-r,rrnitr* 6. Financial
"r,a a ro"g turrn.o-*itor*t of substantial
amo,nt therefore il Uy ti entrepreneur"' Elucidate'
tersr revenue rurdir,g assets. It is in long ""uf""t"a
decisions for invesfinent in these
typ* ;;t,
shourd be taken carefully- Investments

in nature and expose the firm to substantial risks'

terur assets are irreversible
(ii) Working CaPital
EstimationofWorkingcapitalrequirementsshouldbedonewithutmostcareasboth
caPiis,cal routine nature
over investnrents ,I r^d., i""&t^u"* in working ltlp"t and
to
"r'*"u
great;rcr,t. Having insumaemt working ."pltd;ril telf Io liquidity crunch
activities capital will block the
in*resmene in working
will stall tt"u.,rii"rr..u*riuo"*nil" e*.=rriu"
nrn* tnt $'ill rurderrrine tre profitability
(,o) BreakEvenAndyris the variable
a firm is able to meet all
Break even level is that level of activityat "'ryth
tt p.riiur" sares.volumes at which break+ven level will
costs out of ib revenue. Identifying "ofu*,r,os, as i!indicates the stage till which fi,* will
be achieved is important for working
give an idea about resurc€s and time required
continue to make l0sses. Break.r*i,.,"lwil
io reachthat partiorlar level of activity'
(tv) hoiected Income Statements -.- -a^r
Financeisthebaclcboneofanybusiness.Futuresalesarep*i"d{andrevenuecharts and
to assess.the inflow il;"tfl;; of fun{s in tt* uusiness. Proiected income
are prepared so
expenditure ro,.**t qp letween the income and expenditure
reflect tr." ;;d;J":f
arranging for funds or deployingexcess
thattheaift"*,.=U"tn*nthett"o c#U"Utiagtiby
funds in lucrative avenue$'

of examining viability of a business idea'

It
o Feasibility Analysis refers to the grocess
idea;
means assessmelrt of potential of business