Ben watched as water stream from his friends face, they have fail again, this will be there fifth business, not that they don’t have experience in those business nor do they lack capital, for no just reason they keep failing.
“What am I going to tell my wife now’ Tade said “that she has a failure as a husband”.
“hmm” Ben sigh, he has been keeping his own tears since though he has no wife to tell his woe but his parent will surely be on his neck soon if he did not return the borrowed money plus interest, the old man had made him sign on paper this time after he fail to return the previous one and the paper meant one thing; he will sue him.
He smile “ can he actually sue me?” he frown back “may be” and he his right the old man can go any length to collect his money he would not let go of 10 million naira even for his child.
“Wait” Tade said “shouldn’t we analyze why we failed”
‘What is there to analyze’ Ben reply “we have failed already “
“In case of next time”
“Well there is no next time”
Like this story every entrepreneur keep hoping from one business to another and eventually quit, the most painful part is that they will receive evangelism calling and start evangelizing of how bad entrepreneurship is when their mistake was not conducting feasibility study that will show them if and how profitable their business will be in their proposed location.
A business can be profitable in one location and become a loss generating machine in another environment, which is why entrepreneur need to check and recheck if their business will be profitable in their chosen location by conducting feasibility study.
Why you need to conduct a feasibility study
To determine profitability or workability of a business.
To know the quantity of resource needed in a business.
To show bank or investor that investing in a particular business will be a good idea.
To identify future problem
To determine the best business model
To identify target market and how best to reach them.
To know the availability of labour in a location
Sources of information for feasibility report/ study
Feasibility report or study require adequate information and figure that can only be gotten from relevant source.
Note: make sure your source is trustworthy remember your capital and at least 1 year of your life depend on it, you don’t want to be like Ben and John form the story.
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Below are the sources you can get adequate information from
If your industry has association you can track down some member for interview. Though some of the member will not tell you anything about the business, don’t give up, someone will surely do.
This is the best source of information. To get information from your competitor, you can pose as a customer.
Does your business deal with suppliers, if yes locate at least two and interview them. To get them to respond well, act as a customer who is ready to negotiate with them.
If you will need external fund, go to bank and interview some of their staff, ask about their loan capacity, what collateral they require and most importantly their interest rate.
This is crucial. Ask your potential customer how they have been solving their problem all this while, this will let you know if your propose solution will be better.
It is not actually a source, but will connect you to many sources.
Conducting a feasibility study
Feasibility study comes first before report, without it you can’t write feasibility study. Below are the steps to take when conducting feasibility study
The first stage of feasibility study is the proposed location for your business, you need to know if the location will be suitable for your kind of business. Go out and check the location, does it have a good road network? How easy to get raw material in that location? What of employee, how easy to get them?.
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Here, you will study the equipment and material needed for your business, can you afford them? If you take loan will you be able to pay back the interest. Technical analysis will also let you know the required capital and cost of production.
Here, you will go out and interview your competitor and potential consumer. With the information you get map out the total addressable market, and then select your target market.
For instance, you can’t say you will sell milk to every Nigerian, though almost all Nigerian drink milk, if you plan to do that your dart will be scatter all over the board. Therefore chose a target market you can serve, and that have low competition then grow from there.
Using the previous instances you can target old people, they are underserved.
Market analysis can make or mar your business, so take your time when conducting it.
This is another important phase of your feasibility study. Try s much as possible to get accurate data do not inflate your figure, bank and investor will know.
Information you need to get here are
- Average unit cost of production
- Average price of goods
- Average revenue
- Average profit
- Average profit margin
You can get this by averaging the data of your competitor.
Here you will study the best form of business organization that will be suitable for your kind of business. Also include staff requirement.
How to write feasibility report
After feasibility study what next is your feasibility report, to write it follow the below steps.
This is a summary of your feasibility report and it should be written last. Also this is where your reader (investors or bank) will first check so it should be catchy and concise, it should contain the following.
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- Short overview of your company
- Reason for starting it
- Vision and mission
- Equipment and material needed
- Summary of your financial
Introduction and background information
This should contain the following
- Name of your company
- Write the register name of your business and the form of business you intend to operate.
- Where is your business located? Why?
- What is the cost of building
- Company description
- What problem does your company want to solve and how do you intend to solve it? Write it down and include organization chart, number of staff and their qualifications.
This is where you will write down the market segment you are targeting, why you are targeting this segment and how do you intend to put your product or services in front of your target customer.
It should contain the following
- General market information
- Description of the market
- Quantity consume for the past 5 to 10 years
- Quantity supply for the past 5 to 10 years
- Selling price for the past 5 to 10 years
- Sales projection for the next 5 to 10 years
This should contain the following
- Description of the product
- Manufacturing process of the product
- Production projection for the next 5 years
- Production capacity
- Require manpower
- Raw material and equipment needed
- Waste and waste disposal method.
Financial and economy
This should contain the following
- Total cost
- Total revenue
- Income statement
- Balance sheet
- Financial projection
- Cash flow
- Require investment and loan
- Interest on loan or equity for investment
- Break even analysis
This is where you conclude your write up. Make it short and concise
If you intend to use the feasibility report to obtain loan and investment , put your body and soul into it and give it to two or three professional to help your proofread it.