Chapter 5

Feasibility
Feasibility and
and
5 Business
Business Planning
Planning
Section 5.1 Feasibility Analysis:

Testing an Opportunity
Section 5.2 The Business Plan
Glencoe Entrepreneurship: Building a Business

SECTION
Feasibility Analysis:
5.1
Section Objectives
• Discuss the importance of defining a prospective business by writing
a clear and concise business concept.
• Describe how a feasibility study can be used to test a concept in the
marketplace.
Chapter 5 Researching and Planning Your Venture

SECTION
5.1
The Main Idea

Business concepts need to be tested in the market.
Once a concept is judged feasible, a business plan will help the

entrepreneur develop a strategy for executing the concept.

SECTION
5.1
Content Vocabulary
business concept target customers
beneficiaries competitive matrix
feature prototype
benefit business model
feasibility analysis value chain
industry

SECTION
5.1
Developing a Business Concept
Once you have a idea for a business

businessconcept
concept
new business, define it by aaclear
writing a clear and concise clearand
andconcise
concisedescription
descriptionofof
aabusiness
businessopportunity;
opportunity;ititcontains
contains
business concept. four
four elements: the productoror
elements: the product
service,
service,the
thecustomer,
customer,the
thebenefit,
benefit,
and the distribution
and the distribution

SECTION
5.1
Developing a Business Concept
In developing a business benefits

features
benefits
features
concept, consider the things that promote or
features and benefits your
distinctive
things thataspects,
distinctive aspects, orenhance
promotequalities, oror
enhance
qualities,
the
the value
valueofofaaproduct
characteristics
characteristics of
product ororaaservice
ofaaproduct
product or
service
or
product or service offers. to the
servicecustomer
to the customer
service

SECTION
5.1
Testing the Concept in the Market
An entrepreneur can use a feasibility

feasibilityanalysis
analysis
feasibility analysis in the
order to decide if there is theprocess
processthatthattests
testsaabusiness
business
concept; it allows the
concept; it allows the
enough demand for a entrepreneur
entrepreneurtotodecide
decidewhether
whetheraa
product or service. new
newbusiness
businessconcept
concepthas has
potential
potential

SECTION
5.1
A feasibility analysis can help an entrepreneur determine whether

business conditions are appropriate to go forward with starting a
business.

customers
product and
industry service
Feasibility
Analysis
founding
value chain Questions team
start-up needs competition
9
SECTION
5.1
Testing the Industry
The broadest level of industry

industry
feasibility analysis looks at aagroup
the industry in which the groupofofbusinesses
businesseswith
withaa
common
commoninterest
interest
business will operate.

SECTION
5.1
Talking to Customers
The most important part of target

targetcustomers
customers
the feasibility analysis is people
testing customers to peoplemost
mostlikely
likelytotobuy
buyaa
business’s
business’sproducts
productsand andservices
services
measure interest and
identify the target
customers.

SECTION
5.1
Testing Product or Service Requirements
To consider all of the prototype

prototype
requirements of a product aaworking
or service, create a workingmodel
modelused
usedbyby
entrepreneurs
entrepreneurs to determinewhat
to determine whatitit
prototype. takes
takestotodevelop
developtheir
theirproducts
productsoror
services
services

SECTION
5.1
Studying the Competition
An easy way to evaluate competitive

competitivegrid
grid
the competition is to create aatool
a competitive grid. toolfor
fororganizing
organizingimportant
important
information
informationabout
aboutaabusiness
business
venture’s competition
venture’s competition

SECTION
5.1
Looking at Start-Up Resources
A strong business model business

businessmodel
model
is important to investors. aadescription
descriptionofofhow
how
entrepreneurs
entrepreneurs plantotomake
plan make
money with their business
money with their business
concepts
concepts

SECTION
5.1
Analyzing the Value Chain
A business can create a value

valuechain
chain
competitive advantage by
improving the value chain or its the
thedistribution
distributionchannel
channelthrough
through
products and services. which
whichaaproduct
productororservice
serviceflows
flows
from the producer to the customer
from the producer to the customer
The value chain includes
manufacturers, distributors, and
retailers.

SECTION
5.1
After You Read
1. Discuss the importance of defining a prospective business by

writing a clear and concise business concept.
A clear and concise business concept is the first step in taking an

A clear and concise business concept is the first step in taking an
idea and building a business plan to execute the concept. The
idea and building a business plan to execute the concept. The
business concept helps the entrepreneur focus on the critical
business concept helps the entrepreneur focus on the critical
elements of the business: the product or service, the customer, the
elements of the business: the product or service, the customer, the
benefit, and the distribution.
benefit, and the distribution.

SECTION
5.1
After You Read
2. Describe how a feasibility study can be used to test a concept

in the marketplace.
A feasibility study determines whether a new business concept has

A feasibility study determines whether a new business concept has
potential—whether there is enough demand for a product or service
potential—whether there is enough demand for a product or service
and whether business conditions are appropriate for proceeding
and whether business conditions are appropriate for proceeding
with a business idea.
with a business idea.

SECTION 5.2
The Business
Plan
Section Objectives
• Explain the importance of business planning.
• Identify and describe the components of a business plan.
• List two of the key mistakes that entrepreneurs make when writing a
business plan.
• Identify and analyze various sources of information for a business
plan.
• Describe how to professionally package and present a business
plan.

SECTION 5.2
The Business
Plan
The Main Idea
A business plan presents a strategy for turning a feasible business
concept into a successful business.

SECTION 5.2
The Business
Plan
Content Vocabulary
business plan direct channel
executive summary indirect channel
vision statement Small Business Administration
mission statement (SBA)
distribution channel trade association

SECTION 5.2
The Business
Plan
The Business Plan: Your Road Map to
Entrepreneurial Success
Once you have a feasible business

businessplan
plan
business concept, the next aadocument
step is to develop a documentthat
thatdescribes
describesaanewnew
business
businessand
andaastrategy
strategytotolaunch
launch
business plan. that business
that business

The Parts of a Business Plan
Cover Page Market Analysis
Title Page Competitive Analysis
Table of Contents Marketing Plan
Executive Summary Operations Plan
Management Plan Organizational Plan
Company Description Financial Plan
Product and Service Plan Growth Plan
Mission and Vision Statements Contingency Plan
Industry Overview Supporting Documents

22
SECTION 5.2
The Business
Plan
Executive Summary
The executive summary executive

executivesummary
summary
should include the most aabrief
important information from briefrecounting
recountingofofthe
thekey
keypoints
points
contained
containedininaabusiness
businessplan
plan
each section of the
business plan.

SECTION 5.2
The Business
Plan
Executive Summary
To save time, investors and lenders rely on the executive summary to
help them decide whether the business plan is worth pursuing.

SECTION 5.2
The Business
Plan
Management Team Plan
The management team presents your qualifications and those of any
partners.
You must describe how your management team has the capabilities
to execute your business plan.

SECTION 5.2
The Business
Plan
Company Description
The company description section of the business plan outlines the
company’s background information and basic business concept.

SECTION 5.2
The Business
Plan
Product and Service Plan
In the product and service plan section of the business plan, you
present the nature of your business and the unique features of the
product or service.

SECTION 5.2
The Business
Plan
Vision and Mission Statements
The vision statement and mission

vision statement
visionstatement
mission statement
statement
mission statement state a declaration
distinctive ofofthe
aspects, specific
the guiding principles by a declaration
distinctive aspects,thequalities,
specific oror
qualities,
aspirations
aspirations ofofaof
characteristics
characteristics acompany,
aaproduct
ofcompany,
product the
oror
the
which a company functions. major goals
service
major
service goalsfor
forwhich
whichititwill
willstrive
strive

SECTION 5.2
The Business
Plan
Industry Overview
The industry overview section of the business plan presents your
research into the industry, those companies providing similar,
complementary, or supplementary products or services.

SECTION 5.2
The Business
Plan
Market Analysis
The market analysis section of the business plan presents your
research on the customer profile gathered from primary and
secondary marketing research resources.
The results help you determine your overall marketing and sales
strategies.

SECTION 5.2
The Business
Plan
Competitive Analysis
The competitive analysis section of the business plan should
demonstrate that the proposed business has an advantage over its
competitors.

SECTION 5.2
The Business
Plan
Marketing Plan
A marketing plan discusses how a company plans to make its
customers aware of its products or services.
A marketing plan also describes the market niche, pricing, company

image, marketing tactics, a media plan, and a marketing budget.

SECTION 5.2
The Business
Plan
Operational Plan
The operational plan describes all

the processes involving the distribution
production and delivery of the distributionchannel
channel
product or service. the
themeans
meansby bywhich
whichaaproduct
productoror
The operational plan describes the service
serviceisisdelivered
deliveredtotothe
the
distribution channel customer
customer
of the product or service.

SECTION 5.2
The Business
Plan
Operational Plan
The operational plan indirect

direct
directchannel
indirect channel
channel
channel
describes the direct the
channel and/or indirect themeans
meansofofdelivering
deliveringaaservice
service
ororproduct directly
indirectly
to
product indirectly to
the
the
directly totothethe
channel you will use to customer, such as via
through
via aWeb
customer, such as through a aasite
Web site
deliver your product or wholesaler
wholesaler
service.

SECTION 5.2
The Business
Plan
Organizational Plan
The organizational plan section of a business plan looks at the
people aspects and the legal form of the business.
It also describes the roles and compensation of key management

personnel and important employment policies.

SECTION 5.2
The Business
Plan
Financial Plan
The financial plan presents forecasts for the future of the business.
The financial plan includes financial statements.

SECTION 5.2
The Business
Plan
Growth Plan
The growth plan describes how the business will expand in the
future.
Investors and lenders like to see that a business has plans to

grow in a planned and controlled way.

SECTION 5.2
The Business
Plan
Contingency Plan
The contingency plan section of the business plan looks at the risks
to business, such as changing economic conditions and lower-than-
expected sales.
It then suggests ways to minimize the risks.

SECTION 5.2
The Business
Plan
Cover Page, Title Page, Table of Contents, and
Supporting Documents
Every business plan should have a cover page, a title page, a table
of contents, and supporting documents.

SECTION 5.2
The Business
Plan
Developing a Business Plan
To begin developing a business plan:

Make a research plan and gather data.
Set up a notebook to organize data.
Write a first draft.

Common Mistakes in Preparing Business Plans
projecting exaggerated growth levels
trying to be have expertise in all areas
claiming performance above industry averages
underestimating the need for capital
41
Sources of Business Plan Information
Small Business Administration (SBA)
Service Corps of Retired Executives (SCORE)
Small Business Development Centers (SBDCs)
chambers of commerce
trade associations
42
SECTION 5.2
The Business
Plan
Small Business Administration (SBA)
To encourage entrepreneurship in
our free enterprise system, the
Small
SmallBusiness
BusinessAdministration
Administration
government operates the Small
Business Administration (SBA).
(SBA)
(SBA)
The operational plan describes the the
thefederal
federalagency
agencythat
thatprovides
provides
distribution channel services
of the product or service.
servicestotosmall
smallbusinesses
businessesandand
new entrepreneurs, including
new entrepreneurs, including
counseling,
counseling,publications,
publications,and
and
financial aid
financial aid

SECTION 5.2
The Business
Plan
Trade Associations
Trade associations supply trade

tradeassociation
association
information to an
entrepreneurs about start- anorganization
organizationmade
madeupupofof
individuals
individualsand
andbusinesses
businessesininaa
up issues, operating costs, specific
specificindustry
industrythat
thatworks
workstoto
and analysis of trends. promote
promotethat
thatindustry
industry

Packaging and Presenting the Business Plan
1 Bind the plan.
2 Use index tabs to separate sections.
3 Use an easily readable 12-point type.
4 Use bold subheadings and bullets.
5 Use the company logo at the top of every page.
Number each copy of the business plan and include a

6 statement of confidentiality.
Include a statement on the cover page prohibiting copying of
7 the plan.
45
SECTION 5.2
The Business
Plan
After You Read
1. Describe the importance of planning.
Planning helps the entrepreneur achieve goals and organize and

Planning helps the entrepreneur achieve goals and organize and
analyze critical data. Researching costs and developing strategies
analyze critical data. Researching costs and developing strategies
about operations may reveal problems that the entrepreneur hadn’t
about operations may reveal problems that the entrepreneur hadn’t
seen previously.
seen previously.

SECTION 5.2
The Business
Plan
After You Read
2. Identify and describe the components and formats of a

business plan.
A business plan should include these components: executive

A business plan should include these components: executive
summary; management team plan; company description; product
summary; management team plan; company description; product
and service plan; vision and mission statements; industry
and service plan; vision and mission statements; industry
overview; market analysis; competitive analysis; marketing plan;
overview; market analysis; competitive analysis; marketing plan;
operational plan; organizational plan; financial plan; growth plan;
operational plan; organizational plan; financial plan; growth plan;
contingency plan; and cover page, title page, table of contents, and
contingency plan; and cover page, title page, table of contents, and
supporting documents. There is no right or wrong format for a
supporting documents. There is no right or wrong format for a
business plan.
business plan.

SECTION 5.2
The Business
Plan
After You Read
3. List two of the key mistakes that entrepreneurs make when

writing a business plan.
Common mistakes include: projecting exaggerated growth levels,

Common mistakes include: projecting exaggerated growth levels,
trying to be a jack-of-all-trades, claiming performance that exceeds
trying to be a jack-of-all-trades, claiming performance that exceeds
industry averages, and underestimating the need for capital.
industry averages, and underestimating the need for capital.

SECTION 5.2
The Business
Plan
After You Read
4. Identify various sources of information for a business plan.
Business plan information sources include: the Small Business

Business plan information sources include: the Small Business
Administration (SBA), Service Corps of Retired Executives
Administration (SBA), Service Corps of Retired Executives
(SCORE), Small Business Development Centers (SBDCs), chambers
(SCORE), Small Business Development Centers (SBDCs), chambers
of commerce, and trade associations.
of commerce, and trade associations.

SECTION 5.2
The Business
Plan
After You Read
5. Describe how to professionally package and present a

business plan.
Follow these guidelines to package a business plan: (1) Bind the

Follow these guidelines to package a business plan: (1) Bind the
plan. (2) Use index tabs to separate sections. (3) Use an easily
plan. (2) Use index tabs to separate sections. (3) Use an easily
readable 12-point type. (4) Use bold subheadings and bullets to
readable 12-point type. (4) Use bold subheadings and bullets to
make information easy to find. (5) If there is one, use the company
make information easy to find. (5) If there is one, use the company
logo at the top of every page. (6) Number each copy of the business
logo at the top of every page. (6) Number each copy of the business
plan and include a Statement of Confidentiality for the reader to
plan and include a Statement of Confidentiality for the reader to
sign. (7) Include a statement on the cover page prohibiting copying
sign. (7) Include a statement on the cover page prohibiting copying
of the plan.
of the plan.

Feasibility
Feasibility and
and
5 Business
Business Planning
Planning
End of
Chapter 5
Section 5.1 Feasibility Analysis:Feasibility and
Business Planning
Section 5.2 The Business Plan

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Feasibility

Section 5.1 Feasibility Analysis:

Section 5.2 The Business Plan

Glencoe Entrepreneurship: Building a Business

Chapter 5 Researching and Planning Your Venture

Glencoe Entrepreneurship: Building a Business

The Main Idea

Once a concept is judged feasible, a business plan will help the

Chapter 5 Researching and Planning Your Venture

Glencoe Entrepreneurship: Building a Business

Chapter 5 Researching and Planning Your Venture

Glencoe Entrepreneurship: Building a Business

Developing a Business Concept

Once you have a idea for a business

Chapter 5 Researching and Planning Your Venture

Glencoe Entrepreneurship: Building a Business

Developing a Business Concept

In developing a business benefits

Chapter 5 Researching and Planning Your Venture

Glencoe Entrepreneurship: Building a Business

Testing the Concept in the Market

An entrepreneur can use a feasibility

Chapter 5 Researching and Planning Your Venture

Glencoe Entrepreneurship: Building a Business

Testing the Concept in the Market

A feasibility analysis can help an entrepreneur determine whether

Chapter 5 Researching and Planning Your Venture

Glencoe Entrepreneurship: Building a Business

start-up needs competition

Testing the Industry

The broadest level of industry

Chapter 5 Researching and Planning Your Venture

Glencoe Entrepreneurship: Building a Business

The most important part of target

Chapter 5 Researching and Planning Your Venture

Glencoe Entrepreneurship: Building a Business

Testing Product or Service Requirements

To consider all of the prototype

Chapter 5 Researching and Planning Your Venture

Glencoe Entrepreneurship: Building a Business

Studying the Competition

An easy way to evaluate competitive

Chapter 5 Researching and Planning Your Venture

Glencoe Entrepreneurship: Building a Business

Looking at Start-Up Resources

A strong business model business

Chapter 5 Researching and Planning Your Venture

Glencoe Entrepreneurship: Building a Business

Analyzing the Value Chain

A business can create a value

Chapter 5 Researching and Planning Your Venture

Glencoe Entrepreneurship: Building a Business

After You Read

1. Discuss the importance of defining a prospective business by

A clear and concise business concept is the first step in taking an

Chapter 5 Researching and Planning Your Venture

Glencoe Entrepreneurship: Building a Business

After You Read

2. Describe how a feasibility study can be used to test a concept

A feasibility study determines whether a new business concept has