Chapter 3: Business Development Process

3.1. Introduction
3.2 Business idea generation
3.3 Assessing the Feasibility Study of New
Venture
3.4 Business Plan Development

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 3.1. Introduction
❖ This chapter introduces feasibility analysis, and makes the

case for the importance of feasibility analysis as a way of

testing the potential viability of a business idea.

❖ It also introduces the four stages of feasibility

analysis, including product/service feasibility,
industry/target market feasibility, organizational
feasibility, and financial feasibility.

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 3.2. Business Idea Generation
PROBLEM SOLVING PROCESS

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I. Basic business idea
❖ It is logical to think of a goal for the unit in long run rather
than to look for the immediate tomorrow.
✓ The business owner should think of long-term goal and the
profit when they start a business.

❖ The basic business idea, which is at the top of the hierarchy

✓ it meets the broadest needs of the customers, and has the
long life perhaps from 5-50 years.

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Thus, entrepreneur may think of different business like in;
➢entertainment film,
➢ automobiles,
➢Manufacturing,
➢ services, etc.

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 II. Product line
Is relatively narrow and has a shorter life. The product
line consists of different families of product.
❖ A unit with a basic business idea for example
packaging can manufacture any of the following
groups of the products:

• Glass bottles,
• Plastic packages,
• Metal packages,
• Aluminum packages,
• Paper or wood packages.
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 III. Product range
It includes:
✓ different size of the product with in the product
line,
✓Like, different size of glass bottles can be
manufactured for various applications.
IV. product
Is one item of the product range having different
specifications like
• size,
• material used and
• weight, etc.
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❖ In a dynamic business scheme, one has to carefully assess

and evaluate the basic business idea and the business

opportunities in terms of:
 Its ability to generate quick returns
 Its ability to permit quick changes in the
products/services
 Its ability to achieve the founders long term goals

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 Reasons for generation of business ideas
❖ You need an idea to start a new business
❖ Business ideas need to respond to market needs
❖ Business ideas need to respond to changing consumer
wants and needs
❖ Business ideas help entrepreneurs to stay ahead of the
competition
❖ Business ideas use technology to do things better
❖ Business ideas are needed because the life cycles of
products are limited
❖ Business ideas help to ensure that businesses operate
effectively and efficiently
❖ Business ideas can help specific groups of people (elderly,
disadvantaged, those with disabilities)
❖ Business ideas help to solve natural resource scarcity,
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pollution and depletion.
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 Sources of Business Ideas
❖ Good business ideas are a prerequisite for initiating a new
business venture. Sources:
o Hobbies/Personal Interests
o Personal Skills and Experience
o Media (newspapers, magazines, TV, Internet)
o Business Exhibitions
o Surveys
o Customer Complaints
o Natural scarcities and pollution
o Changes in Society
o Brainstorming
o Being Creative
o Ideas from overseas (Global) Potential Imports
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 Before engaged to the business, it needs detail SWOT analysis
of the selected business.

❖ The SWOT approach compels individuals to think or reason

out systematically and analytically the important factors

strengths, weakness, opportunities, and threats.

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 ❖ Strength: is an inherent capacity, which an organization can

use to gain strategic advantage over its competitors.

❖ Weakness: is an inherent limitation or constraint, which

creates a strategic disadvantage.

❖ Opportunity: refers to any factor that offer promise or
potential for moving closer or more quickly towards the firms
goal.
❖ Threat: is any factor that may limit or impede the business in

the pursuit of its goals.

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 ❖ To be a successful entrepreneur, one major determinant

factor is the choice of a good business idea.

❖ To select the best business idea, the following general

steps needs to be pursued.

a.Identify your problem

b.Define your objectives

c.Identify, develop and analyze the possible alternative

d.Select the best alternative in light of the specific

criteria set to the better fulfillment of the objective.

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 Steps in Business Setting

1. Select the right product

These must be examined with a view to assess:
a.The marketing aspects,
b.Technical aspects, and
c. Financial aspects.

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 2. Prepare detailed project report
This coves the following aspects:
a. A detailed estimate of demand is to be made.
b. Technical specifications of the process should be
carefully studied.
c. The equipment required and their sources are to be
specified.
d. Requirement of space.
e. The total cost of the project to be worked out, the
means for financing it identified.
f. The economics of the entire scheme at projected
operating level is to be assessed.

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 3. Implementation of the detailed project report. It includes:
a. Deciding on form of ownership and registration,
b. Obtaining finance ,Obtaining license, and
c. Establishing necessary infrastructures.
4. Obtained authorizations and sanctions (legalized and
approval), simultaneously for the following pre-
commissioning requirements are:
a. Ordering machinery from suppliers,
b. Obtaining utilities like power and water connections
after constructions of shed, if necessary,
c. Recruitment of staff,
d. Arranging supplies of materials, and
e. Arranging for distribution of the products.
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 5. Commissioning of plant,
At this stage the plant is ready for commissioning trial run to
be made, like:
a.Trial run of machineries,
b.Promotional activity for the product, and
c.Introduce the product to the market and obtain
feedback
6. Ready for commercial production.

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 3.3. Assessing the Feasibility of the New Venture
❖ A feasible business venture is one where the business will

➢ generate adequate cash-inflow and profits,

➢ withstand the risks it will encounter,

➢ remain viable in the long-term and meet the goals of the

founders.

❖ The venture can be: a new start-up business, the purchase

of an existing business, franchise, an expansion of current

business operations or a new enterprise for an existing
business.
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 3.3.1. Elements in Evaluating New Ventures
❖ Size of market/opportunity: This item largely depend on
personal goals. If the goal is to build a massive company,
there is a need to be in a massive market.
❖ Proprietary approach: something that is used, produced, or
marketed under exclusive legal right of the inventor/maker or
in other word- the intellectual property matters.
❖ Technology impact - what is the nature and outgrowth of the
technology?
❖ Financials - is the model articulated for how products will be
sold, who will buy them, how much revenue is projected and
by when?...

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❖ Team - does the team have the requisite skills to move all
aspects of the company forward?
❖ SWOT is a series of steps one has to consider in evaluating a
business opportunity and arriving at a decision on starting a
business or not.

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 3.3.2.Conducting Feasibility study
➢ As the name implies, a feasibility study is an analysis of the

viability of an idea.
✓ It focuses on helping answer the essential question of “should

we proceed with the proposed project idea

➢ Entrepreneurs with a business idea should conduct a

feasibility study to determine the viability of their idea

before proceeding with the development of the
business.
✓ Determining early-on that, a business idea will not
work can: saves time, money and effort.
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 Guidelines of business feasibility study
Description of the Business: Description of the
Product/Service. This is considered as one part of feasibility
study.

Types of Feasibility Study are:-

I. Market Feasibility: includes, Enterprise description,

Enterprise competitiveness/Competitors, Market
potential/potential customers, sales projection, Access to
market outlets, and Future market growth.

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 II Technical Feasibility: Determine facility needs,
Suitability of production technology-existing or new
technology, Availability and suitability of site/Site analysis,
Raw materials, Technical-Hardware and software, Manpower,
and Transportation.
III Financial Feasibility: Initial investment, Estimate the
total capital requirements, Resources to procure capital:
Banks, investors, venture capitalists, Estimate equity and
credit needs, Budget expected costs and returns of various
alternatives/Return on investment.
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 IV. Organizational/Managerial Feasibility: legal structure
of the business or the specific project, Business founders,
The organizational structure of the business,
Management team’s competency, professional skills, and
experience.

VI. Study Conclusions: it contain the information you will

use for deciding whether to proceed or not with creating
the business.

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 Contents of a Feasibility Report
Generally, a feasibility report should include the
following sections:
 Executive Summary
 Description of the Product/Service
 Technology Considerations
 Product/ Service Marketplace
 Identification of the Specific Market
 Marketing Strategy
 Organizational Structure
 Schedule
 Financial Projections
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 3.4. DEVELOPING A BUSINESS PLAN

❖ A business plan is a comprehensive set of guidelines for a new

venture.
❖ is also called a feasibility plan that encompasses the full range
of business planning activities,
❖ A business plan would present your basic business idea and all
related:
✓ operating,
✓ marketing,
✓financial and
✓managerial considerations.

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 THE PURPOSE OF BUSINESS PLAN

1. It can help the owner/manager crystallize and focus his/her idea.

2. It can help the owner/manager set objectives and give him/her a

yardstick against which to monitor performance.

3. It can also use as a vehicle to attract any external finance needed

by the business. Eg. To get fund.

4. It can convince investors that the owner/manager has identified

high growth opportunities. Etc.

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 OUT LINE OF A BUSINESS PLAN

The format for a business plan give answers for the following

questions,

❑ Where are we now?

❑ Where do we intend going?

❑ How do we get there?

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 I. Analysis of the current situation (where are we now?)
1. Identification of the business
a. Introduction
✓ Relevant history and background.
✓ Proposed date for commencement of trading /beginning
of a plan.
b. Names
✓ Name of the business and trading name.
✓ Name of the managers/owners.
c. Legal ident
✓ Company/partnership/sole-trade/cooperative.
✓ Details of share or capital structure.

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 d. Location
✓ address-registered and brief details of premises.
e. Different professionals: devisers, accountants, and
solicitors etc..
2. The key people
a. Existing management

✓ Outline of background experience, skills and knowledge

and names of the management team.

b. Future requirement

✓ Gaps in skills and experience and how they will be filled ,

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 3.The nature of the business
a. Product(s)or service(s)

✓ Description and applications of Key suppliers and Planned

developments of product or service.

b. Market and customers

✓ Definition of target market, classification of customers and trend

in market place.

c. Competition

✓ Description of competitors; strength and weakness of the major

competitors.
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 II. FUTURE DIRECTION (where do we intend going?)

1. Strategic Influence -SWOT Analysis

a. Opportunities and threats in the business environment: in
terms of socio-economic trends, technological trends, legislation
and politics, and Competition.

b. Strengths and weaknesses: in the industry itself.

2. Strategic direction:

1. Objectives- brief list of general and specific objectives.

2. Policies- detailed list of guidelines and rules to be followed.

3.Activities- action plans and timetable of key activities.

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III. IMPLEMENTATION OF AIM (how do we get there?)
1. Management of resources
a. Operation:-premises, materials, equipment, insurance,
management information system.
b. People/Human resource/- employment practices, recruitment,
team management, training etc.
2. Marketing plan
a. Competitive edge- unique selling point of business (Critical
products or service characteristics or uniqueness in relation to
competitors).
b. Marketing objectives - specific aims for product or service in
the market place.
c. Marketing methods- 4ps namely:
product, pricing, promotion, place/distributions.

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 3. Money: financial analysis
a. Funding requirement- start up capital, working capital,
asset capital, timing of funds required, security offered.
b. Profit and loss:-- 3 years forecast, sales variable costs,
profit, overheads, net profit.
c. Cash flow:-- 3 years forecast, receipts, payments,
monthly and cumulative cash flow.
d. Balance sheet - use of funds, source funds.

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