Feasibility Analysis and Writing a Business Plan
Handbook topic · Feasibility Analysis and Writing a Business Plan — assessing feasibility and crafting business plans for innovation-driven start-ups
Before an entrepreneur commits money and time, a feasibility analysis tests whether the idea can work in four areas: the product or service, the industry and target market, the organisation behind it, and the finances. Only an idea that passes all four is worth a full business plan — the written narrative that tells employees and investors what the venture will do and how. This week gives you the structure your Individual Report builds on.
The big question
How do you prove an idea is worth pursuing — and then convince others to back it?
By the end of this week you can
- Explain what a feasibility analysis is, when to do it and why it is not a business plan.
- Apply the four stages of feasibility analysis (product/service, industry/target market, organisational, financial) to a real venture.
- Describe what a business plan is, who reads it and what each of its sections contains.
- Choose the right type of business plan and present it to investors.
- Evaluate a start-up the way a venture capitalist does, using the four-criterion scorecard.
What feasibility analysis is and why it comes first
A venture can fail not for lack of effort but because nobody checked early enough whether the idea could work.
The process of determining whether a business idea is viable: a preliminary evaluation of an idea, carried out to decide whether it is worth pursuing.
Feasibility analysis happens early, while you are still thinking through the prospects for a new business. Its job is to screen ideas before you commit resources to them. A few weeks of questions, conversations and rough numbers are cheap; building a product nobody wants is not.
The analysis also helps you see the big picture. Asking the right questions often reveals a better version of the idea, or a different opportunity altogether. Rent the Runway started as a way to save women money and ended up as a way to give young women memorable moments with fashion — a shift that came out of its feasibility testing.
Why it matters
- Determines viability — it tells you whether the idea can work before you spend heavily.
- Avoids waste — it prevents a substantial loss of time and resources on an idea that was never going to succeed.
- Forces big-picture questions — about customers, competitors, the team and the money.
- Opens alternatives — the answers may point to new opportunities or a better-shaped idea.
Feasibility analysis is not a business plan
- Asks: should we pursue this idea at all?
- Done first, early in the entrepreneurial process.
- Rough, fast and fluid; the idea is expected to change.
- Outcome: proceed, rethink or drop the idea.
- Explains what the venture will accomplish and how.
- Written after feasibility, once there are substantial details.
- A structured document, typically 25 to 35 pages for a full plan.
- Outcome: a road map for the team and a case for investors.
The tutorial is blunt: it is a mistake to write a full business plan too early. If you only discover halfway through the plan that the business is not feasible, the effort is lost. Run the feasibility checks first, then let the plan draw on what you learned.
The four stages, part 1: product/service and industry/target market
Feasibility analysis runs through four areas in order, then ends with an overall judgement. The first two ask whether customers want the product and whether the market is worth entering.
A four-stage screen of a business idea. Spending the time and resources to move forward depends on the idea passing every stage; the final overall assessment decides whether to proceed.
- 11. Product/service feasibility
Desirability — do customers find the product or service appealing? Demand — will enough of them actually buy it? Demand is tested by talking to potential customers face-to-face, running a survey and doing gumshoe research.
Example — Rent the Runway ran three customer tests, from pop-up rentals to PDF catalogues, to see whether women would rent designer dresses, which designers they wanted and what they would pay.
- 22. Industry/target market feasibility
Industry attractiveness — is the broad industry young, growing, fragmented and profitable? Target market attractiveness — is the specific segment large enough for the venture but too small to attract larger competitors?
Example — Embrace discovered that about 80 percent of premature babies in the developing world are born in rural villages, not hospitals — so the target market was villages, not hospital wards.
- 33. Organisational feasibility
Management prowess — do the founders have passion for the idea and understand the markets they will enter? Resource sufficiency — are the 6 to 12 most critical non-financial resources available?
Example — Beyond Meat strengthened its team by bringing in the founder of Honest Tea as Executive Chairman and a former McDonald’s CEO as a board member.
- 44. Financial feasibility
Total start-up cash needed, financial performance of similar businesses and overall financial attractiveness of the proposed venture.
Example — Rent the Runway raised a seed round of just under $2 million to cover initial inventory and start-up costs.
- 5Overall assessment
If the answer is yes in all four areas, proceed to a business plan. If it is no in one or more areas, drop or rethink the business idea.
Three steps to assess product/service demand
- 1Talk face-to-face with potential customers
Show the idea or a prototype to the people who would buy it and listen to their reactions. It is the fastest way to learn what they value.
- 2Conduct a survey
Ask a larger group structured questions to see whether the interest you heard in conversations holds more widely.
- 3Carry out gumshoe research
Like a detective, gather clues wherever they can be found — through conversations with people and direct observation — to judge likely demand.
Characteristics of attractive industries
- Young rather than old, and early rather than late in their life cycle.
- Fragmented rather than concentrated.
- Growing rather than shrinking.
- Selling products and services customers “must have” rather than “want to have”.
- Not crowded.
- High rather than low operating margins.
- Not dependent on a historically low price of a key raw material (such as gasoline or flour) to stay profitable.
Industry data is often published; data on a narrow target market rarely is. The lecture stresses that ingenuity is needed to find evidence about a specific segment — which is why founders in this week’s cases went out and tested the market themselves.
Rent the Runway: feasibility in practice
- November 2008The idea
Jennifer Hyman sees her sister’s wardrobe of designer dresses “dead” after one photographed wear and asks: what if women could rent them instead?
- Before summer 2009Supplier side
Diane von Furstenberg rejects the pitch of renting designer clothes at 10 percent of the retail price but reveals that designers struggle to reach younger women and customers outside big cities. The founders reposition the idea around that problem.
- Summer 2009 onwardsDesigners and customers
More designer meetings, now pitching reach to younger women; then three customer tests: pop-up rentals at Harvard (women could try dresses on), a see-but-not-try test at Yale (about 75 percent rented), and PDF catalogues sent to 1,000–2,000 contacts.
- 9 November 2009Launch
Rent the Runway launches as an invitation-only e-commerce site and gains 100,000 members in two weeks.
The brief asks for opportunity recognition and market choice. Use product/service feasibility to show that customers in your target country want the new product (cite evidence, not assumptions). Use industry/target market feasibility to justify why that country and segment are attractive — then deepen the industry picture with Porter’s Five Forces and PESTEL.
The four stages, part 2: organisational and financial feasibility
A good product in a good market still fails if the team cannot deliver it or the money does not add up.
Organisational feasibility asks whether the venture has the management prowess and the resources to launch successfully. Two factors matter most for management prowess: the passion that the founder or founding team has for the idea, and how well they understand the markets the firm will enter.
Resource sufficiency is tested practically. List the 6 to 12 most critical non-financial resources the idea needs. If critical resources are not available, it may be impractical to proceed.
Non-financial resources that can make or break a launch
- Affordable office space.
- Lab space, manufacturing space or space to launch a service business.
- Availability of contract manufacturers or service providers.
- Key management employees, now and in the future.
- Key support personnel, now and in the future.
- Ability to obtain intellectual property protection.
- Ability to form favourable business partnerships.
| Component | The question it answers | How to work it out |
|---|---|---|
| Total start-up cash needed | How much cash does it take to get the business to its first sale? | Prepare an actual budget listing all capital purchases and operating expenses needed to generate the first $1 of revenue. Then ask whether that amount is realistic. |
| Financial performance of similar businesses | What might this venture earn, judged by firms already doing something similar? | Use industry reports (free or paid) and simple observational research — for example, counting customers at comparable outlets and estimating average spend. |
| Overall financial attractiveness | Does the opportunity have the financial profile of a promising venture? | Look for the five factors below: steady growth, recurring revenue, predictable income and costs, internally generated funds and an exit route for investors. |
Financial factors associated with promising opportunities
- Steady and rapid growth in sales during the first 5 to 7 years in a clearly defined market niche.
- A high percentage of recurring revenue — once a client is won, it keeps paying.
- The ability to forecast income and expenses with a reasonable degree of certainty.
- Internally generated funds to finance and sustain growth.
- An available exit opportunity for investors to convert equity to cash.
The Individual Report brief asks you to discuss resource challenges and to give a funding plan with estimated amounts. Use resource sufficiency to name the few critical resources your venture lacks in the target country (partners, staff, premises, IP protection). Use total start-up cash needed to justify the amount you plan to raise, then match it to angels, venture capital, crowdfunding or platforms from Week 9. State your assumptions; do not present numbers without a basis.
Writing a business plan: purpose, readers and structure
Once an idea has passed feasibility, the business plan turns it into a document the team can follow and investors can judge.
A written narrative, typically 25 to 35 pages long, that describes what a new business intends to accomplish and how it intends to accomplish it.
A dual-use document: who reads it and what they look for
- A clear plan helps employees work in sync, moving forward in a consistent and purposeful way.
- It wins employees’ buy-in to the vision, mission and goals.
- It acts as a road map for executing strategies and plans.
- It introduces the business to potential investors and other stakeholders.
- It must make the case that the firm is a good use of an investor’s funds or of others’ attention.
- It helps “sell” the idea and how the firm plans to pursue it.
| Type | Length | Works best for |
|---|---|---|
| Summary business plan | 10–15 pages | New ventures in early development that want to “test the waters” to see whether investors are interested. |
| Full business plan | 25–35 pages | New ventures that need funding or financing; also serves as a blueprint for the company’s operations. |
| Operational business plan | 40–100 pages | Mainly an internal audience; a blueprint for operations and guidance for operational managers. |
Whatever the type, the plan should give clear, concise information on all important aspects of the venture — long enough to inform, short enough to hold the reader’s interest.
The eleven sections of a business plan, in the order a reader meets them. The executive summary comes first but is written last.
- 1Executive summary
A short overview of the whole plan, no more than two single-spaced pages, giving a busy reader everything needed about the venture’s distinctive nature. Write it last, because the plan evolves as you write.
- 2Industry analysis
The industry you will enter: size, growth rate and sales projections; industry structure; nature of participants; key success factors; trends; long-term prospects.
- 3Company description
Company description and history, mission statement, products and services, current status, legal status and ownership, and key partnerships.
- 4Market analysis
Breaks the industry into segments and zeroes in on the target market: segmentation and target market selection, buyer behaviour, competitor analysis, and an estimate of annual sales and market share.
- 5Economics of the business
How profits are earned and how much must be sold to break even: revenue drivers and profit margins, fixed and variable costs, operating leverage, start-up costs, break-even chart and calculations.
- 6Marketing plan
How the business will market and sell: overall marketing strategy; product, price, promotion and distribution; the sales process or cycle; sales tactics.
- 7Product (or service) design and development plan
Needed if the offer is new: development status and tasks, challenges and risks, projected development costs, and proprietary issues (patents, trademarks, copyrights, licences, brand names).
- 8Operations plan
How the business will run and how the product is produced: general approach, location, facilities and equipment. Describe “backstage” activities (unseen by customers) and “front stage” activities (seen by customers).
- 9Management team and company structure
The founders and key managers, any board of directors or board of advisors, and the company structure.
- 10Overall schedule
Milestones critical to success, such as incorporating the venture, completing prototypes, renting facilities, obtaining critical financing, starting production and making the first sale.
- 11Financial projections
Pro forma (projected) financials: sources and uses of funds statement, assumptions sheet, pro forma income statements, balance sheets and cash flows, and ratio analysis.
New insights always emerge once founders immerse themselves in writing and start getting feedback. Birchbox’s founders used their business plan and a business plan competition to test the idea, and later pivoted the plan when the firm needed to become profitable. Treat your draft as a tool for thinking, not a finished pitch.
| Plan section | What the Individual Report brief asks for | Module tools to bring in |
|---|---|---|
| Executive summary | A short opening that states the venture, the target country, the new product and the funding need. | Write it last, after the rest is settled. |
| Industry analysis | Country context and the industry in the target market. | PESTEL; Porter’s Five Forces. |
| Company description | The start-up, SME or family firm you are taking abroad (not a multinational; different from your Learning Diary venture). | Feasibility analysis: organisational stage. |
| Market analysis | Market choice, segments and competitors. | Industry/target market feasibility; segmentation from Week 10. |
| Product design and development plan | A new product for the target market, its innovation type, and IP protection. | Innovation types and levels; intellectual property (Week 11). |
| Marketing plan | Segments and innovative promotion. | Marketing mix (Week 10). |
| Operations plan and management team | Entry strategy, managing and expanding through networks, resource challenges. | Entry modes (Week 7); network theory; resource sufficiency. |
| Economics and financial projections | A funding plan with estimated amounts: angels, VC, crowdfunding, platforms. | Financial feasibility; entrepreneurial financing (Week 9). |
The brief also requires a community-benefit discussion and a Gibbs Reflective Cycle reflection on the module. Reflection is worth 30 of the 100 marks, so leave it real space.
Presenting the plan and thinking like a venture capitalist
A plan often reaches investors as a short oral presentation. Knowing how investors score a start-up tells you what the plan must prove.
The oral presentation
- Follow directions. If you are given 20 minutes, do not talk for longer.
- Rehearse so the delivery is smooth.
- Keep slides sharp, not cluttered.
- Anticipate questions. A smart entrepreneur knows what investors will ask and prepares answers.
Twelve slides to include in an investor presentation
- Title slide
- Problem
- Solution
- Opportunity and target market
- Technology
- Competition
- Marketing and sales
- Management team
- Financial projections
- Current status
- Financing sought
- Summary
| Criterion | What the investor is judging | Beyond Meat (tutor score) | Go-Jek (tutor score) |
|---|---|---|---|
| Strength of the new-venture team | Founders’ experience, the people they have attracted, and their commitment. | 5 — founder Ethan Brown plus a board strengthened by the founder of Honest Tea and a former McDonald’s CEO. | 3 — a co-founder who built the brand team left in 2016; the remaining co-founders are committed. |
| Strength of the opportunity | How large the opportunity is and how quickly the firm could scale. | 4 — likely a big market; already in several major retailers. | 5 — around 50 percent of Indonesian ride-hailing and 95 percent of online food delivery (company claims). |
| Strength of the industry | Whether the industry is strong and growing, and how hard competition will be. | 4 — food products is strong and growing. | 4 — fast-growing ride-sharing market, but a hard fight against Grab and Uber. |
| Strength of the business model | Whether the way the firm makes money is sound and defensible. | 4 — straightforward: sells through retailers, so must excel at manufacturing and distribution. | 4 — adapting with subsidies, the Go-Pay payment system and new services. |
| Average and decision | Average the four scores (1 = weak, 5 = strong) and decide whether to invest. | 4.25 — fund. | 4.0 — a very good investment, but it must enter another major market, such as India. |
Scores and comments are from the tutors’ scorecard in the tutorial resources. Each criterion is scored 1 to 5.
Before submitting the Individual Report, score your own venture on the four criteria. A weak team score points to the management section; a weak opportunity or industry score points to your market evidence; a weak business model score points to the economics section. The same test helps sharpen the COIL Innovation Pitch video.
Tutorial activities
Keurig Kold: what should the feasibility analysis have shown?
Read the Keurig At-Home Soda Machine case. Keurig, a large and successful coffee-machine company, launched a soda machine that was withdrawn nine months later. Work out which feasibility checks were missing.
- 1.Of the five facts that contributed to the Kold’s failure, which one do you think was the most damaging? Explain your answer.
- 2.Describe the feasibility analysis that Keurig should have conducted before the Kold’s debut.
- 3.Do you think Keurig would have produced the same product if it had followed your recommendations?
- 4.In what ways do you think the product would have been different?
- 5.Why is it so difficult to change people’s behaviour? How would you have convinced people that making soda at home is a good idea?
- 6.Write a 200-word essay on what a start-up can learn about feasibility analysis from the Keurig Kold failure.
Practical application of a business plan: four scenarios
Each group discusses all four scenarios from the tutorial and presents its answers to the class. Answer each one using this week’s material on the purpose, timing and structure of a business plan.
- 1.Andrew Waters is leaving his corporate job to launch an SEO consulting firm. He asks: is a business plan written more for learning and discovering, or for pitching and selling? What would you tell him?
- 2.Josh White wants investors for an e-payment business using online payment kiosks and worries his plan will look hastily put together. What pitfalls should he avoid?
- 3.Ginny Welch is starting a wellness centre and needs a market analysis for a loan provider. She has finished her industry analysis but only knows her customers “seek a healthy lifestyle”. What is her next step?
- 4.Two co-founders will invest $100,000 each; a third had the idea, has no money and will do most of the work. How would you divide the equity? Can this issue make or break a new venture?
Be the venture capitalist: Beyond Meat and Go-Jek
Two start-ups, Beyond Meat and Go-Jek, are pitching to investors. Your team is a VC fund. Use the You Be the VC scorecard to rate each start-up from 1 to 5 on four criteria, average the scores and decide whether to invest. Then compare your scores with the tutors’ scorecard.
- 1.Score Beyond Meat on the strength of its new-venture team, opportunity, industry and business model. What is your average score and decision?
- 2.Score Go-Jek on the same four criteria. What is your average score and decision?
- 3.What questions would you ask each firm’s founders before deciding, and what answers would satisfy you?
- 4.If you had to decide on the pitch and website alone, would you fund each company? Why or why not?
- 5.Where do your scores differ from the tutors’ scores, and why?
Rent the Runway: how feasibility analysis shaped the business
For the group task, choose either Rent the Runway or the Embrace Infant Warmer and answer the questions after the case. This activity covers Rent the Runway.
- 1.List the ways Hyman and Fleiss vetted their business idea before launch.
- 2.How long was it between the initial idea and the launch? What does that tell you about their feasibility analysis process?
- 3.To what degree would Rent the Runway be a different company today without feasibility analysis? Would it be as successful?
- 4.Identify at least two takeaways from the story that are not in the case’s Lessons Learned section.
- 5.What can young entrepreneurs learn from Hyman and Fleiss’ experiences?
Embrace Infant Warmer: feasibility for a life-saving product
The alternative group-task case. A Stanford student team set out to build a cheaper incubator and ended up designing a portable infant warmer for rural villages in India.
- 1.What target market does Embrace seek to serve, and how attractive is that market?
- 2.What examples of primary research by Embrace’s founders appear in the case?
- 3.What actions did the founders take to get feedback from prospective customers, and what did they learn?
- 4.If you were asked to conduct a financial feasibility analysis for Embrace, what issues would you consider and why?
Birchbox: using business school to write and test a business plan
Read the Birchbox case, a tutorial resource on writing a business plan. Two MBA students turned class projects and a business plan competition into a beauty sample subscription business, then had to pivot their plan years later.
- 1.How effectively did Katie Beauchamp and Hayley Barna use their time in college to advance their business idea?
- 2.In what ways is Birchbox’s business approach a win-win for its suppliers and its customers?
- 3.How was writing a business plan and preparing for a business plan competition helpful while Birchbox was still in the planning, testing and prototyping stage?
- 4.What are the most serious challenges facing Birchbox? Which is the most threatening? Will it have to pivot its business plan again, and what might trigger the next pivot?
Cases
Key terms
- Feasibility analysis
- A preliminary evaluation of a business idea to decide whether it is worth pursuing. Done before a business plan.
- Product/service desirability
- Whether customers find the proposed product or service appealing.
- Product/service demand
- Whether enough customers will buy it; tested by face-to-face conversations, surveys and gumshoe research.
- Gumshoe research
- Detective-style gathering of clues about likely demand through conversations and observation, wherever the information can be found.
- Industry attractiveness
- How promising the broad industry is: young, early in its life cycle, fragmented, growing, selling must-haves, uncrowded and with high margins.
- Target market attractiveness
- Whether the specific segment is large enough for the venture but too small to attract larger competitors.
- Management prowess
- The founders’ passion for the idea and their understanding of the markets they will enter.
- Resource sufficiency
- Whether the 6 to 12 most critical non-financial resources the venture needs are available.
- Total start-up cash needed
- All the cash required to prepare the business to make its first sale, set out as an actual budget.
- Recurring revenue
- Revenue that keeps coming from a client once won; a high share is a sign of a promising opportunity.
- Business plan
- A written narrative, typically 25 to 35 pages, describing what a new business intends to accomplish and how.
- Dual-use document
- The business plan’s two roles: aligning employees inside the firm and persuading investors and stakeholders outside it.
- Executive summary
- A short overview of the whole plan, no more than two single-spaced pages, written last.
- Pro forma financial statements
- Projected income statements, balance sheets and cash flows presented in the plan’s financial projections.
Check your understanding
Which statement best describes a feasibility analysis?
Flashcards
References and sources
As cited in the module materials. Check each against the original before using it in an assignment.
- Barringer, B.R. and Ireland, R.D. (2018) Entrepreneurship: successfully launching new ventures. Global edn. Pearson Education Limited. Available at: ProQuest Ebook Central.
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