Unit No.

2
Identification of Business Opportunities and tests of feasibility
Project Management Feasibility and Viability analysis – Technical –
Financial – Network – Appraisal and Evaluation – Project Report
Preparation, Mobilizing resources for start-up. Basic start-up
problems.
 Discover

The stage in which the entrepreneur

generates ideas, recognizes
opportunities, and studies the
market
Idea

Innovation Opportunity
 What is An Idea, Opportunity and
Innovation?

• An idea is a concept for a product or service that does not

exist or is not currently available in a market niche.
• In contrast, an opportunity is an idea for a new product or
service with a market that is willing to pay for that
product or service so that it can form the basis of a
profitable business.
• Innovation is the process of making changes to
something that adds value to customers.
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5
 What is an Opportunity?
An opportunity has four essential qualities

2-6
 Three Ways to Identify an Opportunity

Online Shopping Apps Redbus.in Electric cars

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 Entrepreneurial Process

• Generating Business Idea

• Opportunity recognition
• Environmental Scanning: Internal and External
• Feasibility Analysis
• Business Plan
• Preparing Project Report

9
 Idea Generation

Where do I begin?

Fun

95% perspiration and 5% inspiration

‘Business is not about
the idea of power, but
the power of ideas’
•IDEA GENERATION is the creative
process of generating, developing, and
communicating new ideas.
 From Where the Good Idea
came????????
• Customer needs and wants are the logical place to start
the search for ideas.
17-13
 Generating Ideas
Employees

Lead Users
Competitors
 Opportunity Recognition

Online Shopping Apps Redbus.in Electric cars

15
“It is useless to tell a river to stop running;
the best thing is to learn how to swim in
the direction it is flowing.”
-Anonymous
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Competitor Analysis

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• Project Management
Feasibility and Viability
analysis – Technical –
Financial – Network –
Appraisal and Evaluation

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 Head start for village India

• Company: Hippocampus Learning

Centres
• Founder: Mr. Mahesh Malhotra
• Inception: 2011
• Area of business: Pre-schools of
rural kids: tries to bridge the urban-
rural gap in kindergarten education
• Funding: $21 mn in 5 rounds
• Investors: Asian Development
Bank, Unitus Seed Fund, Khosla
Impact, Acumen and Lok Capital

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• In rural India, a vast majority of parents are less exposed
to education facilities and demand far less than their
urban counterparts
• While addressing pre-schooling needs, it also generates
employment for women who are trained for 15 days.
Things taught during six months of Montessori training
and two years of experience are condensed into a two-
week curriculum.
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• HLC charges Rs 2,000 per year per child as fees.
• It has reached about 11,000 pre-school students and has a
little over 600 teachers.
• They invested in a business that is highly scalable and
profitable, while serving a dire social need
• Also, unlike these training centres where the pedagogy is
mostly in English, HLC offers bilingual training.

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 Format of a Project Report:

• 1. Cover Sheet
• 2. TABLE OF CONTENTS
• 3. EXECUTIVE SUMMARY
• 4. THE BUSINESS
• 5. Funding Requirement
• 6. The Product or Services
 Format of a Project Report:

• 7. The Plan
a. Marketing Plan
b. Operational Plan
c. Organization Plan
d. Financial Plan
• 8. Critical Risks
• 9. Exit Strategy
• 10. Appendix
 EXECUTIVE SUMMARY

• The first impression about the business personal

 THE BUSINESS

• Details about the business concept

• Objective of the business

• A brief history about the past performance of the

company

• Form of ownership
 Legal Forms of Business
Three basic legal forms of business:

• Proprietorship - Single owner, unlimited liability, controls all decisions,

and receives all profits.

• Partnership - Two or more individuals having unlimited liability who

have pooled resources to own a business.

• Corporation - Most common form of corporation; regulated by statute;

treated as a separate legal entity for liability and tax purposes.
 Funding Requirement

• Investors & financial institutions

• A careful, well- planned funding requirement

should be documented.

• It is also necessary to project how these

requirements would be fulfilled.
 The Product/ Services

• Key features of product & the product range

 The Plan- Marketing Plan

• Marketing Mix strategies are to be drawn based on the market

research

• Taste, needs, habit of the customer – Marketing Segmentation and

Targeting

• Marketing mix strategies

• Budget
 Operational Plan

• Plant location & plant layout.

• Budget
 Organization Plan

• Responsibilities & duties amongst people in the

organization
• Information about board of directors
• Manpower plan
• Details about the laws that would be governed in
managing the employees of the organization
• Budget
 Financial Plan
• Two to five years for an existing company
• 1.Projected sales
• 2.Projected income & expenditure statement.
• 3.Projected breakeven point
• 4.Projected profit & loss statement
• 5.Projected balance sheet
• 6.Projected cash flows.
• 7.Projected fund flows.
• 8.Projected ratios
 Critical Risks

• The investors are interested in knowing the tentative risks

• Purpose- To evaluate the viability of the project & to

measure the risks involved in the business

• It give confidence to the investors as they can calculate the

risks involved
 Exit Strategy

• How the organization would be dissolved,

what would be the share of each
stakeholder in case of winding up of the
organization.
 Appendix
• The curriculum vitae of the owners, ownership agreement

• Certificate from pollution board

• Memorandum of understanding, article of association

• All the supporting agreements/documents that can help in marketing the

project viability at large.
 Essentials for Project Report

• 1. The project report should be sequentially arranged.

• 2. The project report should be covering all the details about the
proposed project.
• 3. The project report should not be very lengthy a subjective.
• 4. The project report should justify the financial needs and
financial projection.
• 5. The project report should also justify market prospects and
demands.
• 6. The project report should be attractive to the financial agencies
and investors. 45
 Bollant Industries

• Founder: Srikanth Bolla.

• Idea: Eco-friendly,
disposable consumer
packaging solutions
• Uniqueness: Employs
uneducated and disabled
employees

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• Being born blind was just
one part of the story. He
was also born poor

• They are raising $2-

million (around Rs 13
crores) in funding and
have already raised Rs 9
crores.
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 Feasibility study

• Feasibility study is an assessment of the practicality of a

proposed project.

• Preliminary evaluation of idea to determining if it’s

worth pursuing
• Provides more secure notion that a business idea is
viable

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• A feasibility study aims to objectively and rationally
uncover the strengths and weaknesses of an existing
business or proposed venture, opportunities and threats
present in the environment, the resources required to
carry through, and ultimately the prospects for success

• In its simplest terms, the two criteria to judge feasibility

are cost required and value to be attained.
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 Why to do feasibility Analysis

• Assess Economic Viability of Project

• Protects from large capital investment
• Outline ideas before implementation
• Presents associated risk and return
• Gives objective evaluation of project to lenders

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 Types of feasibility

• Economic
• Financial
• Technical
• Operational
• Managerial
• Marketing
 Economic feasibility

• The purpose of the economic feasibility assessment is to

determine the positive economic benefits to the
organization that the proposed system will provide.

• It includes quantification and identification of all the

benefits expected. This assessment typically involves a
cost/ benefits analysis.
 METHODS

• Economic rate of return (ERR)

• Social rate of return

A vision to build a sustainable company with a workforce

comprising 70 percent people with disability is no mean
task. “Srikanth’s vision is inbuilt in the company. It is not
just a lip service to CSR
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 Technical feasibility

• This assessment is based on an outline design of system

requirements, to determine whether the company has the technical
expertise to handle completion of the project.
• The technical feasibility assessment is focused on gaining an
understanding of the present technical resources of the organization
and their applicability to the expected needs of the proposed system.
• It is an evaluation of the hardware and software and how it meets the
need of the proposed system
• When writing a feasibility report, the following should be
taken to consideration:
• A brief description of the business to assess more
possible factors which could affect the study
• The part of the business being examined
• The human and economic factor
• The possible solutions to the problem
 Factors

• Material Inputs

• Manufacturing Process and Technology

• Plant Capacity

• Location

• Machinery and Procurement

 Financial Feasibility

• Capital requirements
• Financial rate of return
• Overall attractiveness of the investment

• Sources of Financing the project

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 Marketing

• Demand

• Supply

• Distribution

• Prices
 Marketing

• Demand: Bobba estimates the in-home health care sector

to be growing at 25-30 per cent compounded annually. It
will be a $100-billion market in 15-20 years, he says.

• Prices: It provides post-surgery care and senior care using

high-end technology. Among the healthcare packages is a
~9,999 scheme for individuals, including a visits by
doctors and services including blood pressure, sugar
checks and email consultations.
• Supply and Distribution: Here, there are no operating
beds and there’s no real estate. It is about last-mile
delivery. It’s about remote patient care

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 Factors

• Marketing Potential

• Competitors

• Cost of Project

• Economic Trends
 Factors

• Marketing Potential: In-home healthcare is estimated to be

a $3-billion opportunity in India.
• Competitors: With the number of old people rising, the
business can only grow and more players are looking
to enter the segment
• Cost of Project
• Economic Trends:
 Operational feasibility

• Operational feasibility is a measure of how well a proposed system

solves the problems, and takes advantage of the opportunities
identified during scope definition and how it satisfies the
requirements identified in the requirements analysis phase of system
development.

• The operational feasibility assessment focuses on the degree to which

the proposed development projects fits in with the existing business
environment and objectives with regard to development schedule,
delivery date, corporate culture, and existing business processes.
 Elements

• Process
• Evaluation
• Implementation
• Resistance
• Strategies
• Adapt and Review
 Managerial Feasibility

• Purpose: determine if business has sufficient skills/resources

to bring product/service to market successfully

• Non-financial factors important to consider here

• 2 primary issues to consider:
1. Management prowess
2. Resource sufficiency
 Importance of Feasibility Analysis

• Understanding Demand

• Assessing resources

• Marketing feasibility

• Marking a Time line

 Project Management

• Discipline of planning, organizing and managing

resources to bring about the successful combination of
specific project goals and objectives
 Some major issues

• Product Quality

• Risk

• Cost

• Staffing 74
 Story of Entrepreneur

• Startup is like jumping off the cliff and then building a

parachute before you hit the ground.

• Tried with website for alumni for collaborate, help and

connect with friends but it was very costly project

• The experimented with website for vocational training in

city and review for it and make board with friend 75
• Took nearly a month

• Website offers the course, review, location, demo lecture

etc.

• Got order from 10 colleges for the startup

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• Focus shifted from Great product to generating revenues.

• Validation from Student: Zero

• No one cared about the same

77
• Promoted through college festival and web traffic
increased by 300% but no one opted

• Promoted through advertisement and heavy discounts but

got only 11 applicants

• Students bypassed them and gone for group discounts ,

some joined govt colleges 78
 Learning

• Plan and Validate

• Find a great founder
• Don’t fall in love with prototype
• Define your end user
• Advertising is bad option
• Don’t run after review

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 Resourcing

The stage in which the entrepreneur

identifies and acquires the
financial, human, capital and
material resources needed for the
venture startup, etc

Start-up resources
 Financial Mobilization

• Cash Flow Challenges

• Capital Investments
• Lengthy Product Development Cycles

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 Source of Fund

• Short Term

• Long Term

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 Human Resource Mobilization

• Helps in achievements of organization goals

• Employ skills and abilities of workforce efficiency
• Ethical and Social needs of society
• Maintain Quality of Work life

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 Material Mobilization

• Two Categories

• Raw material to produce goods and services

• Managing the administration

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 Resourcing
Apply for loans,
grants and
assistance

Identify potential
investors

Hire
employees
 Basic Start Up Problems

• Poor Planning
• Lack of Govt. Support
• Ineffective advertising
• Fund raising issues
• Location
• Poor Industry Knowledge
• Expansion beyond resources
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 Basic Start Up Problems

• Legal Problems
• Poor Management Skills
• Inability to forecast demand
• Lack of Technical competence

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 Network Analysis

• Graphical representation of project operation and

composed of activities and events that can be completed
to reach the end of the project

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 PERT/CPM
• PERT
• Program Evaluation and Review Technique
• Developed by U.S. Navy for Polaris missile project
• Developed to handle uncertain activity times
• CPM
• Critical Path Method
• Developed by Du Pont & Remington Rand
• Developed for industrial projects for which activity times generally were known
• Today’s project management software packages have combined the best
features of both approaches.
 PERT/CPM

• PERT/CPM is used to plan the scheduling of individual activities

that make up a project.
• PERT/CPM can be used to determine the earliest/latest start and
finish times for each activity, the entire project completion time and
the slack time for each activity.
• Both rely on a logical sequence of tasks
• Organized visually (Charts), tabular or simple lists
• PERT and CPM are similar in their basic approach, they do differ in
the way activity times are estimated.
• For each PERT activity three times (optimistic, pessimistic
and most likely times) are combined to determine the
expected activity completion time and its variance. Thus,
PERT is a probabilistic technique: it allows us to find the
probability of the entire project being completed by any
given date.
• CPM, on the other hand, is called a deterministic
approach. It uses two time estimate, the normal time and
the crash time, for each activity
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 Critical Path Method

• Finding the critical path is a major part of controlling a

project.
• The activities on the critical path represent tasks that will
delay the entire project if they are delayed.
• Manager gain flexibility by identifying noncritical activities
and replanning, rescheduling, and reallocating resources
such as personnel and finances

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 Example: ABC Associates
• Consider the following project:
Immediate
Activity Predecessor time (days)
A -- 6
B -- 4
C A 3
D A 5
E A 1
F B,C 4
G B,C 2
H E,F 6
I E,F 5
J D,H 3
K G,I 5
 Backward LF

6 Example: network
20
ES
Forwar
6 19 d
D
2 5 5
J
1 6
0 A
6 E H 3 23
13
1 C 3
4 7
0 4 5
F 13 5
B 4 I 23
K
2
3 6
G
9 18

9 18
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 Appraisal And Evaluation

• Step by step process of collecting , recoding and

organizing the information about the project result
including both short and long term outcomes.
 Evaluation Criteria

• Customer Satisfaction

• Efficiency

• Commercial Success

• Future Potential
 Techniques of Project Appraisal
and Evaluation
• Non Discounting Techniques: Payback period and Return
on Investment

• Discounting Techniques: Net Present Value, Profitability

Index and Internal Rate of Return