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AP Primer i in i Entrepreneurship E t hi
Fall2012
Content
2008PrenticeHall HS12 A Primer in Entrepreneurship, Prof. Dr. Ulrich Kaiser, Fall 2012 (Lecture 3) Seite 2
AP Primer i in i Entrepreneurship E t hi
PartIIDevelopingSuccessfulBusinessIdeas Lecture3 FeasibilityAnalysis
Agenda
1.FeasibilityAnalysis:AnOverview 1.1Timing g 1.2FourTypesofFeasibilityAnalysis 2.Product/ServiceFeasibilityAnalysis 2.1ConceptTesting 2.2UsabilityTesting 3.Industry/MarketFeasibilityAnalysis 4.OrganizationalFeasibilityAnalysis 5.FinancialFeasibilityAnalysis
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Questions
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tobeansweredintodayslecture.
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1FeasibilityAnalysis:AnOverview
Feasibilityanalysisistheprocessofdeterminingifabusinessideaisviable.
FeasibilityAnalysis... ... isthepreliminaryevaluationofabusinessidea idea,conductedfor thepurposeofdeterminingwhethertheideaisworthpursuing. launch and ... takestheguesswork(toacertaindegree)outofabusinesslaunch, providesanentrepreneurwithamoresecurenotionthatabusinessidea isfeasibleorviable. ... followstheopportunityrecognitionstagebutcomes beforethedevelopmentofabusinessplan.
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1FeasibilityAnalysis:AnOverview
1.1Timing Beforeacompanyundertakesafeasibilityanalysis,aconceptstatementshould bedeveloped.
2008PrenticeHall ll
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1FeasibilityAnalysis:AnOverview
1.1Timing
Thesequencepicturedmakesperfectsense.
BUT
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1FeasibilityAnalysis:AnOverview
1.2FourTypesofFeasibilityAnalysis
Financial FeasibilityAnalysis
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2Product/ServiceFeasibilityAnalysis
Theproduct /servicefeasibilityanalysisisanassessmentofthe overallappealoftheproductorservicebeingproposed.
idea
components
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Purpose
1. evaluatetheunderlyingpremisesofaproductorservicethatan
entrepreneurthinksiscompelling
2. helpdevelopanidea 3. estimatethepotentialmarketsharetheproductorservicemight
command
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!
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2008PrenticeHall HS12 A Primer in Entrepreneurship, Prof. Dr. Ulrich Kaiser, Fall 2012 (Lecture 3) Seite 17
3Industry/MarketFeasibilityAnalysis
TheIndustry/MarketFeasibilityAnalysisisanassessmentoftheoverall appealofthemarketfortheproductorservicebeingproposed.
Therearethreeprimaryissuesthatshouldbeconsidered.
1. 2. 3.
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3Industry/MarketFeasibilityAnalysis
Aprimarydeterminantofanewventuresfeasibilityisthe attractivenessoftheindustryitchooses. Industriesvaryconsiderablyintermsoftheirgrowthrate. industryattractiv i veness Characteristicsofthemostattractiveindustries beinglargeandgrowing beingimportanttothecustomer beingfairlyyoungratherthanolderandmoremature havinghighratherthanlowoperatingmargins b crowded d d notbeing Inadditiontoevaluatinganindustrysgrowthpotential,anewventure will illwanttoknow k moreabout b the h industry i d it i plans l toenter.
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3Industry/MarketFeasibilityAnalysis
Gettingtoknowmoreabouttheindustrycanbeaccomplished throughbothprimaryandsecondaryresearch. industryattractiv i veness
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Roleofprimaryandsecondaryresearch ininvestigatingindustryattractiveness Originalresearchthatiscollectedbytheentrepreneurand Primary involvesanentrepreneurtalkingtopotentialcustomersand Research keyindustryparticipants. probesdatathatarealready ycollectedand Researchthatp Secondary haveitssourceinindustryrelatedpublications,government Research statistics,competitorswebsites,andindustryreportsfrom researchlikeForresterResearch. Research
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3Industry/MarketFeasibilityAnalysis
Asecondconsiderationisthetimelinessoftheintroduction ofaparticularproductorservice. products/services being ganimprovement p ofthosealready availableinthe marketplace Windowofopportunity:Open?Closed? dtimefor f enteringthe h market: k Good Arecustomersbuying? Areindustryincumbentsmakingmoney?
Shouldwetrytocaptureafirstmover advantage?
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3Industry/MarketFeasibilityAnalysis
Anichemarketisaplacewithinalargermarketsegmentthat representsanarrowergroupofcustomerswithsimilarinterests. ident tificationofanich hemarke et
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3Industry/MarketFeasibilityAnalysis
Anotherusefulwayofthinkingaboutthistopicistodistinguish betweenverticalandhorizontalmarkets. ident tificationofanich hemarke et
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Therearetwoprimaryissuestoconsider.
1. 2.
ManagementProwess ResourceSufficiency
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Managementshouldhave: q p passion. therequisite Thepassionthatthesoloentrepreneurorthefoundingteam hasforthebusinessidea. theexpertise tolaunchtheventure. Theextenttowhichthesoloentrepreneurorthefoundingteam understandsthemarketsinwhichthefirmwillparticipate. Soloentrepreneursorfoundingteamswithestablishedsocialand professionalnetworks alsohaveanadvantage advantage.
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5FinancialFeasibility Analysis
Asthefinalstageofacomprehensivefeasibilityanalysis aquickfinancialassessmentisusuallysufficient.
Mostimportantissuestoconsider:
1. 2 2. 3.
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5FinancialFeasibility Analysis
Anactualbudgetshouldbepreparedthatlistsalltheanticipatedcapital purchasesandoperatingexpensesneededtogeneratethefirstCHF1in revenues. revenues
tot talstartupcashneeded
Whatevercangowrong,willgowrong.
Itisararestartupthatdoesnothavesomesetbacks ingettingupandrunning.
Whenprojectingstartupexpenses,itisbetterto overestimateratherthanunderestimatethecostsinvolved.
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5FinancialFeasibility Analysis
financialp performan nceofsim milarbusin nesses Theproposedstartupsfinancialperformanceisestimatedbycomparing ittosimilar,alreadyestablishedbusinesses. Thereareseveralmethodstodothis,allofwhichinvolvealittleethical detectivework:
1 1. 2.
Availablereports,ofwhichsomeareforfreeandsomerequire afee:They yofferdetailedindustry ytrendanalysis y andreports p onthousandsofindividualfirms. Simpleobservationresearch:Forexample,theownersofNew VenturesFitnessDrinkscouldestimatetheirsalesbytracking thenumberofpeoplewhopatronizesimilarrestaurantsand estimatingtheaverageamounteachcustomerspends.
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5FinancialFeasibility Analysis
financialp performan nceofsim milarbusin nesses
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5FinancialFeasibility Analysis
ove erallattra activeness softheproposedv venture Theextenttowhichabusinessopportunityispositiverelativeto eachfinancialfactor,whichisassociatedwithpromisingstartups, i b is based donanestimate i rather h than h actual lperformance. f Factorsthatpertaintotheoverallfinancialfeasibility: steadyandrapidgrowthinsalesduringthefirst5to7years inaclearlydefinedmarketniche highpercentageofrecurringrevenue abilitytoforecastincomeandexpenses withareasonabledegreeofcertainty internallygeneratedfundstofinanceandsustaingrowth availabilityofanexitopportunityforinvestorstoconvertequityintocash
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Doyouknowtheanswer?
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testyourself.
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References
Barringer,B.andD.,Ireland(2008):Entrepreneurship SuccessfullyLaunching NewVentures,Pearsons PrenticeHall.
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Outlook
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