Writing Feasibility Study

Business plan is compose of executive summary, company analysis, industry analysis, customer analysis, and customer analysis, competition analysis, marketing plan, management plan, financial plan, operation and development plan.

Executive summary – it contains precise synopsis of the business plan.  It should be easy to read and no longer than 2 to 4 pages.  Executive Summary should sell idea to prospective investor such as the size and scope of the market opportunity, profitability model and skills of the management team to execute the plan.

Company Analysis – it includes the planned overview of the company and explains how the company is organized such as the products and services to offers.

Industry Analysis – it asses the competitors and analyze the market research issue including the size of the target market and trends of the industry.

Customer Analysis – it involves in knowing what the customer wants. It is essential to know exactly and identify the target customer such as average income of the customer and geographically location of the customer. Also, know how its products and services satisfy their need and able to pay.

Competition Analysis – it defines the direct and indirect competitors and evaluates their strengths and weaknesses

Marketing Plan Analysis – it contains the strategy knowing the target markets including the company’s pricing strategies, promotional strategies, branding strategies, product, and services description.

Management Plan – it shows that the company has required human resources. It should have key management personnel including their background in order to make a successful business as well the boards of directors or board of advisors

Financial Plan – it involves the growth of the company’s revenue and profitability model.  It also evaluates the amount of capital needed, the proposed use of these funds and the anticipated future earnings such as the projected income statements, balance sheets, and the cash flow statement.

Operation and Development Plan – it explains the functions required to run the business, milestones to be reached as well as the quality should be controlled.

According to Wikipedia, financial feasibility can be judged by the total estimated cost of the project, financing of the project in terms of its capital structure, debt equity ratio and promoter’s share of total cost, existing investment by the promoter in any other business and projected cash flow and profitability.

Financial feasibility study determines how much start-up capital is needed as well as sources of capital and returns on investment. It is an analysis of the total costs of a proposed project and the potential income that the project can get.  It the potential income of the proposed project can cover all the costs, then the project is financially feasible.

Your financial feasibility study should analyze the start-up capital requirements, capital sources and returns for investors. Start-up capital is a cash you need to start your business and should keep it running until it is profitable. Sources of capital for your business include investors, bank business loan, large corporations and your personal money from your savings and checking account.

Return on Investment also known as ROI is significant measure in investing. The return on investment is calculated by an investor to measure the performance of an investment and compare the efficiency of a number of different investments. The formula for Return on Investment (ROI) is:

ROI = net profits before tax / share holders equity

In all the components of feasibility study, financial feasibility should be completed because it is use to evaluate and make sure that the project or business will live it up to its performance expectations.

Reduction of Mercaptain Sulfur in JPA Jet Fuel Blend Stocks

Development of new jet engines by the Army and Navy has opened a new market for jet fuels meeting Philippine Government JP4 specifications.  Recent trial runs at the Oiltown refinery have shown that a profitable JP4 fuel can be manufactured there.  However, this fuel fails to meet specifications covering the mercaptan sulfur (RSH) content and must be treated for removal of the mercaptans  Government specifications limit the RSH level to 10 ppm.

The removal of RSH is accomplished commercially by two general methods: extraction or conversion to a disulfide compound (RSSR).  The extraction method removes RSH molecules from the fuel by contact with a chemical of high RSH solubility.  The conversion method employs an oxidation-reduction reduction which converts RSH to a very stable and odorless disulfide.  The degree of reduction in both methods depends on the temperature, strength of treating solution, contact line, and presence of a catalyst.

When treating jet fuel of this kind, processors have encountered side reactions which affect fuel properties other than RSH levels.  Corrosives and smoke are most frequent.  Untreated stocks, however, barely meet Government specifications.

Before undertaking evaluation of processes for reduction recaptans, Communication Research Co. conducted an extensive literature search and also interviewed processors who have been working with JP4 fuels.  On the basis of the information thus accumulated, the research program concentrated on the five processes most commonly acceptable in the industry.  Laboratory investigation began on 3 October 1978 and the entire program was completed on 1 April 1979.

Complete details of procedure, results, and analysis are reported below for each of the four treatments tested.

Caustic and Potassium Cresolate

Process Description

Alkalies remove the acidic mercaptan sulfur from petroleum by forming a water soluble salt.  The degree of removal depend on a chemical equilibrium determined by type of mercaptan, type and strength of alkali, catalyst present, temperature, and contact time.  In continuous refinery processing, the alkali is introduced downstream of a mixing chamber.  After the mixing process, a settling tank is used to permit the treating solutions settle out by gravity.

Reduction of Mercaptain Sulfur in JPA Jet Fuel Blend Stocks

Summary

The Metallic Lead Sweetening process is recommended as a potential method for reducing mercaptan sulfur in JP4 jet fuel blend stocks.

Development of new jet engines has required parallel development of fuels of the JP4 type.  Production of these fuels to Philippine Government specifications is handicapped by lack of process for reducing total mercaptans to 10 ppm or less.

Five processes were therefore evaluated for adequate mercaptan reduction: (1) Caustic Treating; (2) Potassium Cresolate Treating; (3) Air Caustic Sweetening; (4) Bender Sweetening; and (5) Metallic Lead Sweetening.  The Caustic and Potassium Cresolate treatments were tested in batch type treats.  The other three methods were evaluated in small continuous pilot plant units.

The Bender and Metallic Lead processes were able to reduce mercaptan to specified levels  Since the Bender process incurs expense of royalties and catalyst preparation, the Metallic Lead process is recommended.

Of the five processes evaluated for reducing recaptan sulfur content of JP4 blend stocks, only the Bender and Metallic Lead Sweetening processes were found suitable.

Caustic treating, potassium cresolate treating, and air caustic sweetening were found inadequate for use in batch-type treats.  The Bender and metallic lead processes and also the air caustic sweetening process were tested in pilot plant units.  Again the caustic sweetening process was unsatisfactory, but the other two methods reduced mercaptan to specified levels.

The Bender process, however, is covered by proprietary patents and incurs additional expense of royalties.  Further, it requires extensive preparation of catalytic agents used to bring the process to optimum, and this also incurs additional costs.  The metallic lead process, however, is readily available and performs equally well, and therefore is recommended.

Since the metallic lead process is already in use at the San Blippo refinery, technicians from Oiltown could profitably spread training periods there and then return to initiate metallic lead processing at the earliest possible date.

A Feasibility Study of Establishing a McDonald Branch along Nicanor Reyes Street, Sampaloc, Manila

1.    General Objectives

1.1    Description of the Business Project

The proposed business will need a three-storey building in a 2,000 square-meter lot with a parking space at the rear.  The customers will drive in the left entrance greeted by the water-sprinkled Indian trees partly shielding the establishment from the fumes coming from the busy street.  Embraced by the multi-colored lights, the trees will set the cosmopolitan setting to a rustic atmosphere.  The M insignia appearing to be cradled by the trees from a distance will outshine the multi-colored lights below stressing the romantic surrounding.  The building will be constructed to hide the stockroom complementing the architectural masterpiece.  The smoothly cemented exit passing through the well-manicured lawn will draw sighs of satisfaction from the customers.

The state of the art tables, chairs and utensils will enhance the customers feeling that they are in a five-star hotel.  Very affordable, the food will enthrall every customer to come and savor the food over the widely spaced tables on the immaculately marbled floor.  The electronically flushing system of the restrooms will motivate the customers to force their friends and relatives to frequent this new McDonald Branch at the heart of the university belt.

1.2    Project Time Table

All minor detail considered, the project will start serving the ten thousand targeted daily customers within five months.  The contractors will complete the fence and the framework of the building in the first month.  They will finish the walls and the floors in the second month. They will install the electrical and the air conditioning units in the third month  After the first and second layer coating, they will complete the final painting in the fourth month and finally they will landscape and plant balled-trees in the fifth month.  As the project will be in progress, the company will buy the facilities to be used.

1.3    Management of the Business

With three managers alternately scheduled on an eight-hour duty to man the 130 crew in the 24-hour service, the business will surely satisfy the customers, propelling profit to soar.

The personnel will make a customer feel that he is the only one served amidst the queuing multitude.  The high wage given by the company and, likewise, the humane treatment of the superiors will inspire the crew to render machine-precise service.

2.    Product and Market Aspects

2.1 Market Outcome

A variety of expensive fireworks commence the business to attract the children, students, parents and professionals.  This opening blast will have been advertised a month before.  The initial big crowd from the different districts of the city will keep growing to actualize the management’s vision that this McDonald Branch will be the most profitable among the food chains that mushroom in the metropolis.

2.2 Market and Selling Price

The customers can order from a variety of choices in the counter staffed with beautiful and handsome ever-smiling crew.  The waiters will serve the orders in the well-crafted, smoke-free dining areas with both oriental and western motifs to fit their number and their tastes.  These areas will enhance customer-privacy as the customers enjoy eating while talking about the gossips of the town, or as they engage in a highly intellectual calisthenics about a hot political issue.  The area will also conduce lovers to cement their relationship with their soul-penetrating interlocked gazes that only lovers could fathom, as they savor their food.

3.    Technical Aspect

3.1    Location Factor

Situated at the corner of R. Papa and Dr. Nicanor Reyes streets at the heart of the University belt, this food center will surely draw customers from the cross-section of society.  The following factors will back-up the company’s foresight:

3.1.1    Topography

The 2,000 square-meter lot does not need labeling because the area is already flat.  Although the place lies in the lowest part of Manila, Mayor Atienza’s Buhayin ang Maynila program has eradicated the perennial floods that residents of the area suffer from.  No matter how strong the typhoon will be, the rains will not flood the area.  The customers will not be drawn away from enjoying the services of McDonald.

3.1.2    Cost of Land

The fertile business venture will cheapen the current Php 20,000 per square meter piece of land.  The forty million peso worth of property will double after only three years of operation.

3.1.3    Security

The place will be very safe.  Secretly installed cameras will monitor every move to ensure the security of the customers. Four security guards simultaneously assigned to the area will guarantee the safety of the clients.  This will be backed up the policemen assigned at the outpost nearby.

3.2     Size and Layout of the Building

To maximize the 40 x 50 meter land area, the engineers will erect the 20 x 50 meter land area, the engineers will erect 20 x 30 meter proposed three storey building, leaving five meters at both sides and 18 meters fronting the street.  Only two meters will be left at the back of the building  This will ventilate the establishment.

3.3    Equipment

The San Jose Builders will construct the building.  This construction company will use modern building equipment like a cement mixer, caterpillar, automatic digging drill, and other state-of-the-art construction materials.

4.    Project Cost

4.1 The Land and the Building

This project will cost about Php 43,500,000 which is roughly broken into the following:

Cost of 2,000 meter lot – Php 40,000,000
Cost of the 3-storey building – Php 3,000,000
Accessories and equipment – Php 500,000
Total Cost – Php 43,500,000

The 40 million pesos worth of land is the biggest of the capital investment but it is worth it because unlike the other expenses, the land value will appreciate through the years.  The contract with the San Jose Builders for the proposed three-storey building is Php 3,000,000.  This includes materials and labor.  With the five-month paying scheme, McDonald will pay Php600,000 every month until the last month.  The food center will need Php500,000 for the imported accessories like tables, chairs and other needs.

4.2    Franchise

The food center will pay the current Php1,000,000 McDonald franchise.

4.3    Sources of Financing

The proprietor will put in Php3,500,000  The remaining Php40,000,000 will be borrowed from the bank

5.    Business Operation

5.1  Revenues

With 50 thousand monthly net income target from about five thousand daily customers, the proposed branch projects the following net income by month and years:

First month – Php 1,500,000
First year – Php 18,000,000
Second year – Php 36,000,000
Third year – Php 54,000,000
Fourth year – Php 72,500,000

After four years of operation, this venture will have gained Php 11,500,000 as shown in the following computations:

Net income in four years – Php 72,500,000
Minus the sum of investments – Php 61,000,000
Difference – Php 11,500,000

Loaned money from the bank – Php 42,500,000
Interest of loaned money – Php 17,000,000
Franchise – Php 1,000,000
Maintenance – Php 500,000

Total – Php 61,000,000

5.2 Accessories and Equipments

Being of high quality, the accessories will still be usable after four years.  However,  Php 500,000 pesos is allotted for maintenance and replacements of damaged property,

Summary

The figures above prove how financially rewarding this business venture is.  Because food is a necessity, a venture like this guarantees 99% success  This is especially so if the location is the University belt like McDonald N. Reyes.

(This feasibility study was taken from Technical Writing Revised Edition by Corazon C Obnamia, et al)

Everyday we think to own our business but the problem is how to make sure that our business will become successful.  By looking around your area and you will see what people needs.  To prevent the waste of money and time, make sure to have a feasibility study to assess the viability of your business idea. Before spending money, feasibility study should be conducted in order to foresee if the business has a good chance of succeeding.

Business magazines and daily newspaper is a good source of business information. Also, yellow pages will give you an idea of a business already operating in your area. Also, seek business advice from others who are in the same industry.  Getting information you need will find out

Some factors to consider when preparing feasibility study are the following:

-    demand and market
-    skills and talent needs by customer
-    capital needs and requirements
-    potential client or customer
-    management and operations
-    resources including facilities, equipment, staff, etc.
-    competition
-    market size
-    economic benefits

When you pass the feasibility test, you are now ready to the next step which is to business planning.  Business planning will see the picture of the future. According to Wikipedia, business plan is a formal statement of a set of business goals, the reasons why they are believed attainable, and the plan for reaching those goals.  It may also contain background information about the organization or team attempting to reach those goals.

Project feasibility such as system or program development needs to determine if the project or business is technically, operational and economically feasible.  Before the launching of any business, it is important to conduct a feasibility study to analyze the viability of the project.

During technical feasibility study, the researcher will examine the whether the technology is available or not or whether the required resources are available. Things to consider in technical feasibility include manpower such as tester, debuggers, system analyst and programmer. Also need to consider the software and hardware to be used. Of course, the researcher needs to examine the monetary factors since it might need a huge investment.

If the expected benefits are equal or exceed the expected cost, it means that the project or business is economically feasible.  The cost benefit analysis will help to measure the cost, benefits and risks.

Operational feasibility study is concern if the program or system will be used and implemented.  One of the implementation methods is to conduct a parallel run in order to verify the functionality of the system. The users of the system should be happy and satisfied to the new system.  New system should be cost effective, efficient, and flexible and reduce the work load.

Feasibility study needs to focus on potential market opportunities and market assessment.  If there is no adequate demand for the product, there is no need to continue the business venture. Market feasibility study is one of the important aspects in your business feasibility study because it entails the analysis of existing market. Market analysis involves the study of market size, market trends, and market profitability.  Market size includes the size of the market based on present sales and potential sales of the product being market. Market size is obtains through government data and customer surveys. Market trends include the changes in prices and customer demands.

Market feasibility study describes the size and scope of the industry as well as industry competitiveness.  It also uses to forecast sales projection, and potential suppliers and buyers. In addition, marketing strategies and marketing plan is presented.

During market study, you should estimate the market size and the targeted geographical area. Also, you should describe your target market and your competition and how your customer or client benefits to your products or services. Identifying your key competitors and outline their market share, business strengths, assets, strategies, and goals will determine to overcome the market.  You should also analyze the industry such as the industry’s current need or demands and current supply. And then you will need to define your marketing and sales strategy including the distribution and pricing of your product and marketing campaign.

Some entrepreneurs overlook the first step of the project cycle which is conducting a feasibility study.  Knowing the importance of feasibility study can save companies time, investment, effort and embarrassment. The purpose of conducting a feasibility study is to determine the long term viability of the business.

The first step is to examine the market. Examining the market involves a thorough analysis of the competitive landscape for the product or services to be offered.  Some entrepreneurs often assume that their product or services to be offered are no competition but in reality they have to viewed customer that allocates time, money, resources as a competition.

Knowing and understanding the needs of the marketplace is not guarantee that you meet customer’s expectation and not mean that you will have a successful business venture. You should analyze the need of technology requirements including the resources to be used.

Another thing to be considered is the business strategy to reach the market as well as the business model.  Business model analyze the value proposition, competitive strategy and revenue generation.  You should have a scenario planning to guarantee the long term success.  You should know whether business model will offers enough profit potential.

At last you should determine the financial projections, operating requirements, recommendation and findings.