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FEASIBILITY STUDIES AND
BUSINESS PLANS
Be
sure you know what you want and what to expect when pursuing a new venture,
business or project. A lot of time, resources and hard money can be saved in
knowing what to do and the order in which to do it. A good rule of thumb is to
never commission a business plan until a feasibility study has been completed
first.
A
feasibility study is normally less than 20% of the cost of a business plan and
although a feasibility study will not be anywhere close to the in-depth “nuts
and bolts” view of a business plan, it will do exactly what the name implies. It
will show if a project is feasible before any other steps are taken or indeed
paid for.
There are very big differences between a feasibility study and a business plan.
A feasibility study
is designed to discover if a business or project is “feasible” or if it is not:
(In short, does the business or project warrant further investment of time,
money and further study or is it a non-starter). A feasibility study is a
relatively inexpensive way to safeguard any wastage of further investment
(will it work or won’t it).
If a project is seen to be feasible
from the results of the study, the next logical step is to commission a full
business plan.
Will the investment made in the feasibility study itself then be wasted? No..
Because the research and information uncovered in the study will be of good use
in the business planning stage and will also reduce the research time and
therefore the cost of the business plan.
A business plan
is designed to “plan” in advance how a business or project will be started,
implemented and managed: (In short, a working “blue print” of the entire
operation of the business or project). Business plans are commissioned for
one of three reasons: Reorganization, investment/funding or a management
blueprint for operation.
Man never plans to fail, he only fails
to plan!
FEASIBILITY STUDIES
demonstrate to a prospective project owner or investor that a given concept is
financially viable and whether further study and/or a business plan is
warranted.
For
a feasibility study, basic data is obtained from the client through a series of
queries, questions and meetings, wherein the client provides some of the
research and other data and facts need to be gained from a variety of sources.
The
typical feasibility study contains, among other items, notes on financial
projections, a general description of the business, general details describing
how the company / project will be formed, managed and marketed, statements
concerning the competition and a cash-flow projection based on averages.
Further notes can be included as to general details of the project and
revelations found during the research stage. The study will normally be
completed quickly and in very general format compared to that of a business
plan. A feasibility study should answer five questions.
1.
Will
it work or not?
2.
Is it
profitable or not?
3.
What
will it basically cost to fund or start?
4.
Is it
worth doing?
5.
Is it
worth commissioning a business plan?
BUSINESS PLANS A Business Plan is
a detailed blueprint for building a given company. A business plan contains all
that the Feasibility study has plus specific time-lines, detailed budgets with
monthly and seasonal forecasts, letters of intent, resumes of staff, background,
competition, strengths & weaknesses, work sheets and full notations, appendix
and all related and required documents that will be referenced as the company is
being developed.
A
well-written business plan will show exactly what revenues can be expected and
when to expect them, what overheads and expenses will need to be paid and
exactly when they will be due.
It
will also show staffing levels and salaries along with costs of employment,
sales levels with monthly and seasonal trends, setup costs, building/office
costs, utility and telephone costs, legal, insurance and accounting costs,
office furniture and supplies costs and a myriad of other costs and projections
as well as legal requirements and conformation to regulations.
In
addition to the projections and costs, the business plan will feature sections
on demographics, sales and sales methods, objectives, expansion plans,
contingency exercises, product/services market introductions, regulatory
requirements, laws of City, State and Federal government relating to the
business / project and much more.
A
well-written business plan can help maximize potential and minimize overheads,
liabilities and risk associated with any project.
Man
never plans to fail, he only fails to plan!
A
feasibility study and a business plan are totally separate documents and each do
a very specific job. The costs associated with each are also completely
different.
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