Briefing Paper 4
How to write a feasability study for your community business?

Why do I need a feasibility study?
A feasibility study is a formalised, written approach to evaluating your idea and can help you identify:

There are many reasons why new community ventures fail, but lack of planning and research is the main one. As you plan, your knowledge of your market, customers and the environment in which you will work will grow. You'll also find out obstacles to your idea as well as solutions to deal with them! This process considers all areas of your idea and ensures you have something concrete on paper.

What does a feasibility study involve?

It can involve some or all of the following:

Who undertakes such studies?
Commissioning a feasibility study may seem pointless if you are confident that your idea is a sound one, but a decision made without thorough research can be costly. A feasibility study reduces the risk of making poor decisions and increases your success. It gives you an objective and independent view of your idea potential and enables you to make informed decisions about how it could be launched.

How do I format and write my Feasibility Plan?

This can be broken down into several sections:
a) Executive Summary - the main purpose is to gain the reader's attention. Give a brief and clear overview of the key points of each section of your plan. While it is the first section, it is the last to be written. Two pages is more than enough!

b) Product/Service - describe the benefits of your product or service from the customer's point of view. What is your product or service? How is it different from what's already available? If a product, will you manufacture it and how? Who are your suppliers? What are your distribution channels? Describe patents, trade secrets, or other information. You must determine if the concept is a working and tested product or service.

c) The Market - is there a market for your idea? Can this be proven? Describe the size of your market (both in terms of customers and finances). This requires research and is perhaps the most difficult section, but also most important. What is your target market? What is your estimated market share percentage? Describe seasonal fluctuations, the potential annual growth of the total market for your product or service, and factors affecting that growth.

d) Price and Profitability - how will you price your product or service; at a discount, at a premium or somewhere in between? The gross margin must be high enough to at least cover your expenses. Community businesses do make profit, but its what they do with the surplus that differentiates them.

e) Plan for Further Action - the future! Does the feasibility plan show that the idea is worthwhile? If so then it is time to proceed to the business plan… What can help me get started? Try thinking about the following and make some notes…

THE IDEA
How would you describe your idea? What is it? Will it work? How is it different from existing "businesses"? Who will buy from you? Can you put your idea on paper? It is not enough simply to say "a service for the community" or "a café for young people". Paint a picture of your idea in words so that anyone reading this description knows exactly what you are talking about. To start your Feasibility Study - start with your "business idea" on paper. Discuss it with others and adjust it as you obtain more information and ideas.

PROFILES - KEY PEOPLE
It is not enough to have a good idea - you need people who can implement it.
Who are they? That is,
What are your/their skills and strengths? Does their background help or hinder the proposed venture?
Create a one page resume of each key person. This is not merely a job history, but a picture of each key person, showing pertinent strengths, skills, experience, training and qualifications. It will reveal to you and any potential lender, supplier, partners or agent, the operational/management strengths (and weaknesses) of you and your team. It will also show you the need to acquire any missing skills you can identify.

PERSONAL OBJECTIVES
Why do you want to go into this venture? How will it effect your personal life? Consider Short Term - say up to one year; Medium Term - one to three years; Long term - greater than three years. You need to sort out personal desires first to avoid potential conflict in private and "working life".

THE MARKET

Customers: You cannot sell to everyone. So, who are your potential customers? Make a List. Why will they buy from you? Identify your Market Segments or groups: What knowledge do you have of your market segments or groups? How many are there? What will they buy? How often will they buy? What will be their average purchase?

Products & Services: Create a list showing the products / services you will be offering to each segment. Also look at how long it will take you to produce or procure them. Determine how much it will cost to buy or produce them and how much you can sell them for.

Suppliers: Identify preferred and alternative suppliers on a list and show products /services / prices on this list. Collect catalogues and brochures to assist this study.

Competition: List your competitors and show their perceived strengths and weaknesses. For each main competitor, list two good points and two bad points. You need to understand why they are competition to your proposed business.

Ask the Question: How can you attract their customers from them? Price is not the only answer.

Map: Obtain a map and on it define your market boundaries, your location, your competitors, your suppliers, and any demographic information on your market.

YOUR BUSINESS OVERVIEW

Location: identify your site, is it rented, owned, or at home? Why locate there? What are the advantages and disadvantages?

Site Plan: draw up the site plan. Sketch the floor plan, identify assets and if necessary, use several alternative floor plans.

Floor Plan: work through your plan, placing a value on each item.
Identify those you already have and those to be purchased or leased.

This will allow you to:

STAFFING
What staff will you need, and why? If none, who will back you up, do the banking, allow you to take holidays? If you need staff:

1. Who will they be?
2. What will be the cost?
3. What are their duties?
4. What training will be required?
5. What alternatives are there?

WORKING CAPITAL
When calculating how much working capital you need it may be necessary to allow for up to six months funds. This may be due to no sales or low sales, having to extend credit, buying too much or overheads being higher than expected.

After working through these details, the next step is to make a recommendation - either to begin or not to begin a business.

Recommendation: recommendations from the Study regarding the viability of putting the business idea into practice should be honest, short and direct. These recommendations are not usually a straight "yes" or "no", but rather "Yes, if . . . ." Or "No, unless . . . ." You use the feasibility study to help make your decision: "Will this idea work for me or not?"

SOURCES OF HELP
To write your Feasibility Study, you need to go to others for help and information. Don't try to do it all yourself when there are so many sources of assistance available.

Small Business Advisory Centres information, business counselling, training workshops, research facilities, back up and support facilities, networking, and publications.
Accountant: advise on all financial issues, assist in feasibility study, legal structure suggestions, assist in funding estimates, sourcing and applications, check books if buying an existing business.
Solicitor: Contracts, leases, legal representation.
Bank: finance, information and support, leasing, advice on contracts, specialist services.
Business Advisers/Consultants: Someone to talk to, specialist advice, (especially if you are setting up as a co-operative: Lancashire CDA, Co-operative and Mutual Solutions, ICOM), mentoring, negotiations, training, back-up. Trade Associations: membership and support, group deals, training, advice, research, industrial relations expertise, and networking. Potential Suppliers: information, back-up, promotional support, training, etc.

SOURCES OF INFORMATION

Own Research: Small Business Advisory Centres, librarian, libraries, publications, directories, Chambers of Commerce, other business people.
Competitors : Check out your competition, their location, layout, advertising and service. This can be a great source for ideas - what are they doing right or wrong?
Government Departments: Information and publications available from many Departments
Local Council : Demographic reports, publications, studies, future plans for development.

briefing index - 1 - 2 - 3 - 4 - 5a, b, c - 6 - 7 - 8a, b - 9 - 10 - top

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Network Co-ordinator : Andy Wynne MPEN, Bridge 5 Mill, 22a Beswick Street, Manchester, M4 7HR mpen@bridge-5.org tel - 0161 273 1736

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