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LESSON 9
PROJECT FEASIBILITY STUDY AND WRITING A BUSINESS PLAN

Learning Objectives:
At the end of the lesson the student will be able to:

 Discuss the importance of a feasibility Study;

 Enumerate the Parts of the Feasibility Study;
 Conduct environmental scanning;
 Describe the nature, concepts, and principles of business and business planning; and
 Demonstrate and perform actual product and business planning through business trial
run.

What is a Feasibility Study?

 Is an activity designed to find out what is feasible, achievable, attainable, practicable
or workable.

Who needed the product feasibility study?

Project feasibility studies are needed by:
1. Management need feasibility studies when they have to decide on new products or
when they have excess funds to invest.
2. Investors, like top management in number 1, would want to put in money where the
rate of returns is high.
3. Lenders need to know if the borrowers are capable of paying the loans that will be
granted to them.
4. Government agencies need to know the details of government projects before
funds are released.

What are the parts of the Feasibility Studies?

1. The Executive summary- presents the highlights of the study that are shown in
detail in the different sections ,presents the conclusions arrived at on the feasibility
studies.
2. The Project background and history- discusses the proponents of the project or
the owner of the project, location, name of the business and forms of organization
whether sole proprietorship, partnership or corporation.
3. The Industry study- involves the analyses of threat of new entrants and substitutes
and bargaining power of buyers and suppliers.
4. The market study- consists of market description, demand, supply , statistical
analysis of demand and supply, general marketing practices, proposed marketing
programs, projected sales and system designs.
5. The management study- consist of personnel requirement, management policies,
timetable (Gant chart), and system designs.
6. The technical study- consists of the identification of the product, the process of
acquiring, processing and bringing the product to the point of sale.

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 7. The financial study- consists of projected balance sheet, projected income
statement, projected cash flow over a period of time, usually five years. The tests
are for liquidity, capital adequacy, profitability and breakeven point.
8. The socio-economic study- shows the impact of the project on the personnel, on
the community, on the environment, on the government and other beneficiaries

What Is a Business Plan?

A business plan is a written document that describes in detail how a business —
usually a startup — defines its objectives and how it is to go about achieving its goals. A
business plan lays out a written roadmap for the firm from each of a marketing, financial, and
operational standpoint.
Business plans are important documents used to attract investment before a company
has established a proven track record. They are also a good way for companies to keep
themselves on target going forward.
Although they're especially useful for new businesses, every company should have a
business plan. Ideally, the plan is reviewed and updated periodically to see if goals have been
met or have changed and evolved. Sometimes, a new business plan is created for an
established business that has decided to move in a new direction.

KEY TAKEAWAYS

 A business plan is a written document describing a company's core business

activities, objectives, and how to achieve their goals.
 Startup companies use business plans to get off the ground and attract outside
investors.
 Businesses may come up with a lengthier traditional business plan or a shorter lean
startup business plan.
 Good business plans should include an executive summary, products and services,
financial planning, marketing strategy and analysis, financial planning, and a budget.

Understanding Business Plans

A business plan is a fundamental document that any startup business needs to have in
place prior to beginning operations. Banks and venture capital firms indeed often make writing
a viable business plan a prerequisite before considering providing capital to new businesses.
Operating without a business plan is not usually a good idea. In fact, very few companies are
able to last very long without one. There are definitely more benefits to creating and sticking to
a good business plan — including being able to think through ideas without putting too much
money into them and, ultimately, losing in the end.
A good business plan should outline all the projected costs and possible pitfalls of
each decision a company makes. Business plans, even among competitors in the same
industry, are rarely identical. But they all tend to have the same basic elements, including an
executive summary of the business and a detailed description of the business, its services
and/or products. It also states how the business intends to achieve its goals.

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Elements of a Business Plan
The length of the business plan varies greatly from business-to-business. All of the
information should fit into a 15- to 20-page document. If there are crucial elements of the
business plan that take up a lot of space—such as applications for patents—they should be
referenced in the main plan and included as appendices.
 Executive summary: This section outlines the company and includes the mission
statement along with any information about the company's leadership, employees,
operations, and location.

 Products and services: Here, the company can outline the products and services it
will offer, and may also include pricing, product lifespan, and benefits to the consumer.
Other factors that may go into this section include production and manufacturing
processes, any patents the company may have, as well as proprietary technology. Any
information about research and development (R&D) can also be included here.

 Market analysis: A firm needs a good handle of the industry as well as its target
market. It will outline who the competition is and how it factors in the industry, along
with its strengths and weaknesses. It will also describe the expected consumer
demand

 for what the businesses is selling and how easy or difficult it may be to grab market
share from incumbents.

 Marketing strategy: This area describes how the company will attract and keep its
customer base and how it intends to reach the consumer. This means a clear
distribution channel must be outlined. It will also spell out advertising and marketing
campaign plans and through what types of media those campaigns will exist on.

 Financial planning: In order to attract the party reading the business plan, the
company should include its financial planning and future projections. Financial
statements, balance sheets, and other financial information may be included for
already-established businesses. New businesses will instead include targets and
estimates for the first few years of the business and any potential investors.

 Budget: Any good company needs to have a budget in place. This includes costs
related to staffing, development, manufacturing, marketing, and any other expenses
related to the business.

Types of Business Plans

Business plans help companies identify their objectives and remain on track. They can
help companies start and manage themselves, and to help grow after they're up and running.
They also act to get people to work with and invest in the business.
Although there are no right or wrong business plans, they can fall into two different categories
—traditional or lean startup. According to the Small Business Administration, the traditional
business plan is the most common. They are standard, with much more detail in each section.
These tend to be much longer and require a lot more work.
Lean startup business plans, on the other hand, use a standard structure even though
they aren't as common in the business world. These business plans are short—as short as
one page—and have very little detail. If a company uses this kind of plan, they should expect
to provide more detail if an investor or lender requests it.
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Special Considerations
Financial Projections
A complete business plan must include a set of financial projections for the business.
These forward-looking projected financial statements are often called pro-forma financial
statements or simply the "pro-formas." They include the overall budget, current and projected
financing, a market analysis, and its marketing strategy approach.
In a business plan, a business owner or financial officer projects revenues and
expenses for a certain period of time and describes the operational activity and costs related
to the business.

Other Considerations for a Business Plan

The idea behind putting together a business plan is to enable owners to have a more
defined picture of potential costs and drawbacks to certain business decisions and to help
them modify their structures accordingly before implementing these ideas. It also allows
owners to project what type of financing is required to get their businesses up and running.
If there are any especially interesting aspects of the business, they should be
highlighted and used to attract financing. For example, Tesla Motors.'s electric car business
essentially began only as a business plan. A business plan is not meant to be a static
document. As the business grows and evolves, so too should the business plan. An annual
review of the plan allows an entrepreneur to update it when taking markets into consideration.
It also provides an opportunity to look back and see what has been achieved and what has
not. Think of it as a living document that grows and evolves with your business.

BUSINESS PLAN GUIDELINES

Business Plan provides a detailed description of how objectives will be achieved, along
with the necessary justification.
A good Business Plan makes a compelling case to those who must approve it and
provide the required funding or other necessary resources. As such, you need to provide the
following content:

 Describe who you are

 Describe what you want to achieve
 Describe the tangible benefits to be realized Quantify and/or qualify the return on
investment
 Detail the options and the suggested plan of action for attaining the desired end state
 Provide evidence that your ‘business case’ has been fully researched and is ‘highly’
viable
The Business Plan provides a clear description of what needs to be done, including when
and how to implement an organization’s strategic goals and vision. It should itemize and
describe the benefits that an organization will realize if the plan is followed, as well as the
costs that will be incurred. The plan should include any requirements for achieving its purpose,
and a scorecard to gauge performance once the plan is accepted and unfolds. It should also

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be written with a clear focus on the readership. Ultimately the Business Plan needs to be
approved and funded. Its content should include:
 Relevant and beneficial to the organization
 Relatively short (c. 20 pages -- but there is no absolute rule)
 Easy to read (and approve)
 Clear and concise
 Compelling
 Action-oriented Credible
 Factually correct
 Understandable and free from any extraneous details

What are the Guidelines in writing a business plan?

1. State your objectives
2. Describe the business
3. Describe your products or services
4. Identify your potential market
5. Identify your competitors
6. Consider your pricing policy
7. Determine your marketing method
8. Identify your material requirements and sources of supply
9. Determine the process and equipment you will use to manufacture your products
10. Determine your key personnel
11. Identify your work force
12. Determine your financial requirements
13. Prepare a budget.

What are the most common mistakes when writing a business plan?
Some common mistakes are classics. Others are reflections of the growing need for
planning as steering and management tools. But they are all common pitfalls to avoid. Do your
planning right and it’s a powerful tool for quick decisions, rapid adjustment, and optimizing
management.

1. Not planning
Too many businesses make business plans only when they have no choice in the
matter. Unless a bank or investors want a plan, there is no plan. Don’t wait to write
your plan until you think you’ll have enough time. “I can’t plan. I’m too busy getting
things done,” business people say. The busier you are, the more you need to plan. If
you are always putting out fires, you should build firebreaks or a sprinkler system. You
can lose the whole forest for paying too much attention to the individual burning trees.

2. Using a single static plan

Now more than ever, as we deal with the crisis of 2020, stop thinking of the business
plan as just a plan. That conceptual mistake blocks you from the enormous benefits of
planning as a process, with regular review and revision.

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 3. Losing focus on cash
Most people think in terms of profits instead of cash. When you imagine a new
business, you think of what it would cost to make the product, what you could sell it for,
and what the profits per unit might be.

4. Skipping idea validation

Don’t overestimate the importance of the idea. You don’t need a great idea to start a
business — you need time, money, perseverance, and common sense. Few
successful businesses are based entirely on new ideas. A new idea is harder to
execute than an existing one because people don’t understand a new idea and they
are often unsure if it will work.

5. Making the planning process overwhelming

Focus on the content. What matters is what you plan, not how you write about it.

6. Spongy, vague goals

Leave out the vague and the meaningless babble of business phrases (such as “being
the best”) because they are simply hype. Remember that the objective of a plan is its
results, and for results, you need tracking and follow up. You need specific dates,
management responsibilities, budgets, and milestones. Then you can follow up. No
matter how well thought out or brilliantly presented, it means nothing unless it
produces results.

Assessment Task

Guide Questions

1. What is a business plan? How important it is in doing a business?

2. Why do you need to understand business plans?
3. How can you avoid having pitfalls in planning a business? Cite an example
4. Why do you think that business plans need to be relevant and beneficial to the
organization?
5. How do steps in business planning help improve business plans?

Performance Task

1. Write your business plan, in line with your SWOT Analysis and your business vision
and mission.

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