ELECT 1 MIDTERM MODULE
Feasibility Analysis — detailed discussion (Hisrich et al., Ch. 5)
This guide walks your students through how to test whether a business idea is viable before
committing resources. It follows the classic feasibility checklist: market, technical, financial, and
organizational feasibility, then adds SWOT and risk assessment procedures. Use it as lecture
material, a handout, or the rubric for the assignment.
1) Purpose of a Feasibility Analysis
A feasibility analysis answers a simple question: “Should we proceed?” It reduces uncertainty
by evaluating whether the idea can attract customers, be built technically, make money, and be
run by the team. If the feasibility study is positive → proceed to a full business plan. If negative
→ pivot or abandon.
2) Market Feasibility
What it is: assessment of demand, customers, competitors, pricing, channels, and market size.
Key components
Industry description & trends (growth rate, seasonality).
Target customers / segments (demographics, behaviors, pain points).
Value proposition — why customers will buy.
Competitive analysis — direct & indirect competitors, substitutes, barriers to entry.
Market sizing (TAM / SAM / SOM) and market share assumptions.
Go-to-market channels (online, retail, distribution partners).
Validation data — primary research (surveys, interviews, pilot sales) + secondary data
(reports, statistics).
How to do TAM / SAM / SOM (simple numeric example — step-by-step):
Suppose the product is an “urban micro-farming kit” for a single city.
1. City population = 1,200,000 people.
2. Average household size = 4 people → number of households = 1,200,000 ÷ 4.
o Step-by-step: 1,200,000 ÷ 4 = 300,000 households.
3. SAM (serviceable available market) — households living in apartments (assume 30%):
300,000 × 0.30.
o Step-by-step: 300,000 × 0.30 = 90,000 households.
4. SOM (serviceable obtainable market) — initial realistic penetration in first 2 years
(assume 5% of SAM): 90,000 × 0.05.
o Step-by-step: 90,000 × 0.05 = 4,500 households.
5. If average kit price = ₱1,500 → first-2-year revenue potential for SOM = 4,500 × 1,500.
o Step-by-step multiplication: 4,500 × 1,500 = (4,500 × 1,000) + (4,500 × 500) =
4,500,000 + 2,250,000 = ₱6,750,000.
Validation techniques
Customer interviews (10–30 qualitative).
Small paid pilot / pre-orders.
Online surveys for quantitative estimates.
Competitor mystery shopping and price benchmarking.
3) Technical Feasibility
What it is: assesses whether the product/service can be built with available technology, within
time and cost constraints, and meets quality/ regulatory requirements.
Key components
Product/service specification — features and performance requirements.
Development approach — in-house vs outsourced, timeframe, milestones.
Prototype/MVP plan — what to build first to validate technical risks.
Manufacturing & supply chain — suppliers, lead times, minimum order quantities.
Intellectual property (IP) — patents, trademarks, freedom to operate.
Regulatory / compliance — health, safety, permits, certifications.
Scalability & maintainability — tech stack, modular design, capacity planning.
Assessment output
List of technical risks and mitigation (e.g., prototype feasibility, supplier reliability).
Go/no-go milestones (e.g., MVP ready within 3 months and cost under ₱150k).
4) Financial Feasibility
What it is: determines if the venture can be profitable and cash-flow positive given realistic
assumptions.
Key components
Startup costs: capital expenditures (equipment, tooling), initial inventory, legal, set-up.
Operating costs: rent, salaries, utilities, marketing, COGS (variable costs).
Revenue model and pricing: unit prices, subscription fees, service rates.
Sales forecast: monthly for 12–24 months with assumptions.
Cash flow projection: monthly inflows/outflows; identify cash shortfalls.
Profit & loss (P&L): projected gross margin, EBITDA.
Break-even analysis.
Funding requirements & sources: owner’s equity, loans, grants, investors.
Sensitivity analysis: best / base / worst case.
Break-even example (explicit arithmetic):
Fixed costs per year = ₱240,000.
Selling price per unit = ₱500.
Variable cost per unit = ₱200.
Contribution margin per unit = price − variable = 500 − 200.
o Step-by-step: 500 − 200 = ₱300.
Break-even units = Fixed costs ÷ Contribution margin = 240,000 ÷ 300.
o Step-by-step division: 240,000 ÷ 300 = 800.
So break-even = 800 units/year.
Other financial checks
Payback period (years until cumulative cash flow turns positive).
NPV / IRR if projecting multi-year cash flows (use spreadsheet).
Unit economics — lifetime value (LTV) vs customer acquisition cost (CAC).
5) Organizational Feasibility
What it is: evaluates whether the entrepreneur(s) and the organization can execute the plan.
Key components
Founding team skills and gaps — technical, marketing, finance, operations.
Legal structure & governance — sole proprietorship, partnership, corporation; roles and
responsibilities.
Human resources plan — hiring needs, recruitment timeline, compensation.
Operational processes — production workflow, quality control, customer service.
Partnerships & advisors — suppliers, distributors, mentors.
Culture & values — alignment with business model and customer expectations.
Output
Org chart, role descriptions, hiring plan, training needs, and a plan to fill skill gaps (e.g.,
hire CTO or outsource development).
6) SWOT Analysis (how & why)
What it is: a concise tool to synthesize internal and external findings.
S — Strengths: internal advantages (e.g., proprietary design, low-cost supplier).
W — Weaknesses: internal disadvantages (e.g., no sales team, limited cash).
O — Opportunities: external trends you can exploit (e.g., rising eco-conscious
consumers).
T — Threats: external risks (e.g., strong incumbent competitors, regulatory change).
Sample SWOT (for Urban Micro-farming Kits) — brief:
Strengths: compact, easy-to-use kit; low price point; clear eco-message.
Weaknesses: limited brand recognition; dependence on one supplier for soil medium.
Opportunities: increasing interest in home gardening; partnerships with schools.
Threats: cheaper imports; seasonal demand dips.
Using SWOT in decisions
Convert SWOT into a TOWS matrix to plan strategies: use strengths to seize
opportunities (S–O), improve weaknesses to exploit opportunities (W–O), use strengths
to counter threats (S–T), and minimize weaknesses to avoid threats (W–T).
7) Risk Assessment
What it is: systematic identification, analysis, prioritization, and mitigation planning for risks.
Steps
1. Identify risks (market, technical, financial, operational, legal, reputational).
2. Analyze likelihood and impact (qualitative or numeric).
3. Prioritize by risk score (e.g., Likelihood × Impact).
4. Mitigate: prevention, reduction, transfer (insurance), or acceptance.
5. Monitor and review continuously.
Risk matrix (simple 3×3 example):
Likelihood: Low (1), Medium (2), High (3)
Impact: Low (1), Medium (2), High (3)
Risk score = Likelihood × Impact (range 1–9).
Example risk calculation (digit-by-digit):
Risk: Supplier failure. Estimate Likelihood = 2 (Medium), Impact = 3 (High).
o Risk score = 2 × 3 = 6 (High priority).
Mitigation: qualify 2 alternate suppliers, keep safety stock for 2 months.
Common mitigation strategies
Pre-sell or get deposits to reduce revenue risk.
Build MVP to test tech risks early.
Keep 3–6 months of cash runway.
Use contracts and insurance for legal/operational risks.
8) Feasibility Study Process & Deliverables (practical checklist)
Typical steps
1. Define the business idea & scope of study.
2. Conduct market research and validate demand.
3. Develop technical plan and prototype/MVP.
4. Build financial projections and break-even analysis.
5. Assess organizational readiness and legal requirements.
6. Conduct SWOT and risk assessment.
7. Write conclusions and recommendation (go / pivot / stop).
Deliverables
Executive summary (one page).
Market analysis (TAM/SAM/SOM + validation).
Technical feasibility report (MVP plan, suppliers).
Financial model (12–24 months cash flow + assumptions).
SWOT & risk register.
Recommendation and next steps.