December 23, 2019

Economic Feasibility Studies 

Warren Cooley

Warren Cooley
Principal Consultant/Warren Cooley, LLC

Share This Post

1. Describe your product and/or service.

a. Think of your target market first. 

 

Who are they?

  • Size – now, and over next 10 years (needs to be validated by data and trends).
  • What distinguishes them?
    a. For people – demographics and psychographics.
    b. For businesses and government agencies, not just their line of business/service, but drill down to current and future anticipated direction that they are/will likely be pursuing.
  • What are they currently doing to take care of the need that your product and/or service is intended to satisfy?

 

What evidence do I have that my product and/or service can meet a need of the target markets?

  • Remember – many needs are not latent.
  • For those that are not latent, you will need to engage in an educational process to demonstrate to your target markets that your product and/or service meets a need that they did not intuitively know they have. Think, how can my product and/or service meet a need faster, or more completely than current solutions.
  • Who are current and anticipated competitors; not every Tom, Dick and Harry (old school term); top five (5) works.

 

What will be your cost to develop the product, and what will be your sales price?

b. Create one or more customer value propositions (CVP’s)

c. Now we have taken our generally described product and/or service and given some life to it. Ready to do a market assessment.

 

2. Conduct a market assessment.

a. Define your target markets – No more than five (5).

  • These should be the markets that will generate 75-80%’ish of your sales. Balance will come from outliers.
  • Project the size of these markets
    – 1) Annual at this level – think out 5-10 years if possible.
    – 2) Remember for every year you create projections beyond current year, reliability diminishes.
 

b. Project the potential number of products and/or services that can sell to each market segment, over your projection period. Not that you can sell, but total potential.

  • What percent of this total will be captured by existing and potential competitors?
  • What’s left is yours. This is the number that you project for your business.
    – 1) If you anticipate variation depending on sales price, show results.

 

3. Prepare a marketing plan.

a. My take on goal of marketing – raise awareness of your product, in a way that emphasis your CVP and competitive advantage.

b. Whatever you include in your marketing plan, simultaneously determine what means you will use to measure the results of each marketing channel. If you don’t do this, you will likely spend a lot of money without offsetting results.

c. Remember marketing includes every action you take to create and maintain,

  • An image of your business.
  • An offer/close to sell your product and/or services.

d. Remember

  • Marketing – Raise awareness, with competitive edge integrated into all messages.
  • Sales – Takes over after marketing has done it’s job. Sales is all about closing the deal. A note, if you don’t have a good sales process your will loose 20% or more of your potential sales.
  • Customer service – Third leg of the stool, so to speak. Customer service includes all the actions you take to make sure that you have satisfied customers, and that they keep coming back to you for their purchases.

e. Tie your marketing plan to your market assessment. 

  • The way you will reach the projections made in the market assessment is to implement your marketing plan, plus execute excellent salesmanship and customer service.

 

4. Prepare an operations plan

a. The result of this stage is for you to have an estimate of the operating actions and expenses that you will experience to bring your product and/or service to market.

b. Two (2) categories,

  • Getting into business, or developing the product
  • Operating the business.

 

5. Prepare pro forma financial statements, over the projection period that you determined you would use in the market assessment phase.

a. First project capital requirements and their anticipated sources.

b. Then, prepare an operating statement, combining,

  • Operating revenue
  • Cost of goods sold (or services delivered)
  • Operating expenses

c. Consolidate all this data into three (3) financial reports.

  • Balance sheet
  • Profit and loss statement
  • Cash flow statement

 

6. Package

a. Create a package that is commensurate with your intended use; i.e., 

  • Investors
  • Loans
  • Grants

b. Make sure you know the criteria of those to whom you will be submitting your feasibility/investment/debt financing/grant package.

Share This Post