Feasibility Analysis For Social Ventures: Beugré C

Chapter 7
Feasibility Analysis
for Social Ventures
Beugré C.
Copyright ©2017 Routledge, Taylor & Francis Group.

Copyright ©2012 Pearson Education 7-1
Chapter Objectives
1. Explain the nature of feasibility analysis.
2. Explain the importance of feasibility analysis in social

entrepreneurship.
3. Describe the tools of feasibility analysis in social

entrepreneurship.

Defining Feasibility Analysis
• Feasibility refers to an opportunity’s perceived practicability or difficulty.
• It determines whether a business is worth pursuing or not.
• A feasibility analysis is a pre-startup strategic planning tool, utilized in the

pre-business plan phase.
• It entails collecting and analyzing data prior to the new business startup, and
then using the knowledge gained to formulate the business plan.
• Feasibility analysis allows for an informed go/no-go decision on a proposed

new venture before considerable time and resources have been invested.

Questions to Ask in a Feasibility Analysis
• The questions to ask in a feasibility analysis might include the following:
– What do you have to know about your customers, their needs, and this
business?
– Might this concept be viable in other markets?
– What is the potential for this business?
– How much money do you think such a business might make?
• The answers to such questions will provide the necessary information to

assess the viability of the business opportunity.
• As such, a feasibility study could be used by social entrepreneurs to

evaluate their social venture opportunities.

Components of Feasibility Analysis
• Although there is no universal set of criteria for every feasibility analysis,

it is generally accepted that the following four components should be
considered:
– Product/service feasibility;
– Industry/target market feasibility;
– Organizational feasibility; and
– Financial feasibility.

Components of Feasibility Analysis

Outline for a Comprehensive Feasibility Analysis

1. Product/Service Feasibility
• Product or service feasibility analysis refers to an assessment of the overall

appeal of the product or service being proposed
• Before rushing to a new product or service into development, you should

be sure that the product or service is what prospective customers want.
• In evaluating the feasibility of the product, the entrepreneur should

consider two main issues:
– Product/Service Desirability and
– Product/Service Demand.

1. Product/Service Feasibility Analysis
The components of product/service

feasibility analysis are:
Product/Service Product/Service
Desirability Demand
The first refers to the extent to which the product will fill a
particular gap in the market, whereas the second focuses on
how much of the product or service customers will want.

1(a). Product/Service Desirability
• Desirability means that the product or service serves a particular need or

solves problem for the customer.
• For instance, does the product have an appeal in the particular market?
• For social entrepreneurship, it is important to know whether the product or

service will make a difference in the lives of the potential beneficiaries.
• Ask yourself if the social need is truly important and pervasive so as to

attract the support of potential stakeholders, such as donors and/or
government agencies.

1(a). Product/Service Desirability
• The best way for an entrepreneur to discover whether a product or service

is desired in the market is to complete a proof-of-concept test (concept
statement).
• The concept statement is then shown to individuals who are familiar with
the industry the entrepreneur intends to enter.
• Any feedback will help the entrepreneur to refine the product or service or
better position it in the market.

1(b). Product/Service Demand
• The product’s desirability is generally followed by a Product/Service

Demand Analysis.
• The entrepreneur must determine whether there is significant demand for

the product or service.
• This can be determined through primary or secondary data (Library or
Internet).
• To collect primary data, the entrepreneur can use a buying-intentions

survey.
• The purpose of a buying-intentions survey is to determine whether

customers would wish to buy a particular product or use a particular
service, should it become available.
Sample of Buying/Beneficiary Intention Survey

2. Industry/Target Market Feasibility
• Industry/Target Market Feasibility is an assessment of the overall appeal of

the industry and the target market for the proposed business.
• An industry is a group of firms producing a similar product or service.
• A firm’s target market is the limited portion of the market/customers it

plans to go after.

2. Industry/Target Market Feasibility Analysis
The components of industry/target market

Target Market
Industry Attractiveness
Attractiveness
The first component focuses on the industry analysis,

while the second focuses on the target market analysis.

2 (a). Industry Feasibility
• Industry attractiveness is the degree to which environmental (remember the

external environment) and business trends are moving in favor rather than
against an industry.
• In general, attractive industries have the following characteristics:

– Are young rather than old
– Are early rather than late in their life cycle
– Are fragmented rather than concentrated
– Are growing rather than shrinking
– Are selling products and services that customers “must have” rather than “want
to have”
– Are not crowded
– Have high rather than low operating margins
– Are not highly dependent on the historically low price of key raw materials

2 (a). Industry Feasibility
• It is better for a new venture to enter an industry that is attractive rather

than one that is not.
• In social entrepreneurship, gaining an understanding of the social

landscape will provide useful information about the severity of the social
problem, and whether potential stakeholders might be sufficiently
interested in the social venture to provide support.

2 (b). Target Market Feasibility
• Once the entrepreneur has analyzed the industry in which the new venture
will operate, he/she must also understand the target market
• Target market is the referred to a narrower segment of customers with
similar wants or needs.
• A target market is generally attractive when it is sufficiently large at

present and has the potential to expand over time.
• A target market that is small and narrow will probably mean the new
venture will fail over the long term.
• The challenge in identifying an attractive target market is to find a market

that’s large enough for the proposed business but is yet small enough to
avoid attracting larger competitors.
3. Organizational Feasibility Analysis
• Organizational feasibility refers to the extent to which the new firm has the
necessary human capital to exploit the opportunity successfully.
• For instance, does the new venture have a strong management team?
• Does it have enough resources in addition to financial resources?

3. Organizational Feasibility Analysis
The components of organizational

Management Prowess Resource Sufficiency
The first component is about management expertise

analysis, while the second is about the analysis for
sufficiency of general resources to run the business.

3 (a). Management Prowess
• A proposed business should candidly evaluate the prowess, or ability, of its

management team to satisfy itself.
• The management must has the requisite passion and expertise to launch the
venture.
• Related to the new venture management team, it is important to assemble a
group of skilled and dedicated individuals (including employees).
• Two of the most important factors in this area are:

– The passion that the sole entrepreneur or the founding team has for the business
idea.
– The extent to which the sole entrepreneur or the founding team understands the
markets in which the firm will participate.
• Because the startup phase is uncertain and sometimes chaotic, the new
venture team should have the expertise and dedication to tackle early and
unanticipated problems.
3 (b). Resource Sufficiency
• This pertains to an assessment of whether an entrepreneur has sufficient

resources to launch the proposed venture.
• To test resource sufficiency, a firm should list the most critical nonfinancial
resources that will be needed to move the business idea forward
successfully.
• Non-financial resource includes the intellectual property rights

protection, partnerships, key equipment and government support that
will be needed for the venture.
• If critical resources are not available in certain areas, it may be impractical

to proceed with the business idea.

4. Financial Feasibility Analysis
• The focus here is on determining whether the venture has or will acquire
the financial resources needed to start its operations.
• Three elements are important to consider at this stage:

– the total startup cash needed;
– the financial performance of similar businesses; and
– the overall financial attractiveness of the venture.

4. Financial Feasibility Analysis
The three components of financial

feasibility analysis are depicted below:
Total Start-Up Cash Financial Performance of

Needed Similar Businesses
Overall Financial
Attractiveness of the
Proposed Venture

4 (a). Total Startup Cash Needed
• The first issue refers to the total cash needed to prepare the business to
make its first sale.
• The entrepreneur should be able to develop a budget including all items

that need to be purchased to start the venture.
• It is also important to determine sources of funding; whether friends and

family members will be contacted as sources of financial support or
investors will be brought on board.
• The point of this exercise is to determine if the proposed venture is realistic

given the total start-up cash needed.

4 (b). Financial Performance of Similar Businesses
• The entrepreneur may also benchmark existing firms to assess their

financial performance.
• If similar existing firms are profitable, the proposed new venture is also
likely to be financially sound.
• There are several ways to doing this, all of which involve a little ethical
detective work.
– First, there are many reports available, some for free and some that require a
fee, offering detailed industry trend analysis and reports on thousands of
individual firms.
– Second, simple observational research may be needed. For example, by
tracking the number of people who patronize similar products and estimating
the average amount each customer spends.

4 (c). Overall Financial Attractiveness of the Proposed
Venture
• A number of other financial factors are associated with promising business
start-ups.
• Such an assessment should be based on financial projections.
• The following factors pertains to the overall attractiveness of the financial

feasibility of a business idea:
– Steady and rapid growth in sales during the first 5 to 7 years in a clearly
defined market niche
– High percentage of recurring revenue—meaning that once a firm wins a
client, the client will provide recurring sources of revenue
– Ability to forecast income and expenses with a reasonable degree of
certainty
– Internally generated funds to finance and sustain growth
– Availability of an exit opportunity for investors to convert equity to cash

Opportunity Assessment Test
• The four components can be combined to assess the overall feasibility of

the opportunity.
• Table 7.2 presents a scoring of the components along three modalities: low
(1), medium (2), and high (3).

Opportunity Assessment Test
• Assuming that an opportunity scores 1 for all four components, it will

receive an overall score of 4, which will make it unfeasible.
• Everything else being equal, such an opportunity should not be pursued.
• An opportunity that ranks 2 on all four components will receive an overall

score of 8.
• Such an opportunity should be refined to make it more attractive.
• Finally, an opportunity that scores 3 on each of the four components will

receive an overall score of 12, making it an attractive opportunity to
pursue.

Tools for Analyzing Business Opportunities/Feasibility
• The different tools that can be used to test social venture opportunities
include:
– SWOT analysis;
– Outside-in/Inside-out analysis model;
– Bygrave and Zacharakis’s model; and
– Quick Screen model

SWOT Analysis as an Opportunity Evaluation Tool
• SWOT analysis is commonly used in strategic management to assess the

strengths, weaknesses, opportunities and threats presented by the external
environment in which the firm operates.
• Also used in entrepreneurship to evaluate the soundness of entrepreneurial
opportunities.
• The following questions are important to address:
– What social problem does this opportunity address?
– Will this opportunity make a difference in the lives of people and the community?
– Is the opportunity scalable?
– Will the venture be sustainable over time?
– Does the social entrepreneur have the resources or can he/she accumulate them?
– What are the opportunities and threats in the external environment?
• Answering such questions will help the social entrepreneur assess the
viability of the opportunity.
Outside-in/Inside-out Analysis Model
• Proposed by Longenecker and colleagues, and draws heavily on the SWOT

analysis.
• Like the latter, it considers factors that are both inside and outside the firm.
• External factors include the general environment (economic,

political/legal, social, global, and technological) and the industry
environment (competition).
• The industry environment is analyzed using Porter’s five forces model.
• Internal factors include the firm’s resources, expertise, and the skills of
managers and employees.
• This model is applied to existing companies, but it can also be used to

assess the soundness of new venture opportunities.
Outside-in/Inside-out Analysis Model
• The Inside-Out approach is guided by the belief that the inner strengths
and capabilities of the organization will make the organization prevail.
• The Outside-In approach is instead guided by the belief that customer

value creation, customer orientation and customer experiences are the keys
to success.
• The Outside-in/Inside-out model can also be used in conjunction with a

SWOT analysis.
• By understanding the external environment, the entrepreneur can shape the
opportunity.
• The model can also help entrepreneurs assess the internal resources, core
competencies, and skills required to pursue an opportunity successfully.

Bygrave and Zacharakis’s Model
• Bygrave and Zacharakis proposed a model of opportunity evaluation that is

more comprehensive than either the SWOT analysis or the
Outside-in/Inside-out model.
• Their model established a set of criteria used to determine the attractiveness

of a business opportunity and includes seven major assessment areas:
– Industry and markets;
– Economics (generating a surplus);
– Harvest issues (social impact);
– Competitive advantage issues (unique social opportunity and solution);
– Management team;
– Personal criteria; and
– Strategic differentiation.

The Quick Screen Model
• This model can be considered as a simplified version of the Bygrave and

Zacharakis model insofar as it includes only three criteria:
– Market and margin related issues;
– Competitive advantage; and
– Value creation and realization issues.
• Entrepreneurs can measure opportunity on the specific criteria identified
under each category and decide whether to pursue the opportunity,
abandon it, or refine it.
• This model has been adapted by several entrepreneurship scholars. For
example, Barringer and Ireland called it “First Screen” because it is the
initial step that helps to determine whether an opportunity is viable or not.
• It is used along side the four components of feasibility analysis feasibility.
• The final part of the First Screen is “Overall Potential,” which helps the
entrepreneur assess whether the opportunity is viable or need to be refined.

Table 7.3 Adaptation of the Quick Screen model to
social ventures

Tools for Analyzing Social Venture
Opportunities/Feasibility
• This section describes two models for evaluating social

opportunities:
– Kitzi’s model for evaluating social opportunities and
– Kickul and Lyons’s model.

Kitzi’s Model for Evaluating Social Opportunities
• While drawing heavily on Bygrave and Zacharakis’s model, Kitzi’s

assessment tool has been adapted specifically for social entrepreneurship
and includes three major areas:
– Social value potential;
– Market potential; and
– Sustainability potential.
• Each of these criteria is ranked from high to low.
• If the opportunity adds social value, it will also present a market potential.
• Market potential implies that a group of customers or beneficiaries will
need the product or service provided by the social venture.
• The final area concerns the sustainability of the social venture over time.
• A social venture opportunity that passes the test in all three of these areas
should be considered viable.
• This model is simple and easy to apply but most suited to philanthropic SV.
Kickul and Lyons’s Model of Evaluating Social
Opportunities
• Developed by Kickul and Lyons, the social opportunity assessment tool
includes four major categories:
– Social value potential;
– Market potential;
– Competitive advantage potential; and
– Sustainability potential.
• The authors also added an overall category—“overall potential”—which
combines the first four categories.
• Within each of the first four categories, the authors identified five criteria
by which to evaluate each social venture idea.
• Kickul and Lyons also consider investors as customers for a social
opportunity.
• Thus, a social opportunity has market potential if it will attract investors.

Kickul and Lyons’s Model Social Opportunity
Assessment Tool

Kickul and Lyons’s Model Social Opportunity
Assessment Tool

Importance of Feasibility Studies for Social Ventures
• A feasibility analysis has an internal audience and helps the entrepreneur to

focus on the opportunity and the potential to realize it.
• Not every social venture idea has the potential to be transformed into a viable
and sustainable social venture.
• Feasibility analysis should help the social entrepreneur decide whether to:
– Pursue the current idea;
– Refine the current idea to improve its potential for success;
– Abandon the current idea; or
– Search for a more suitable idea.
• A social entrepreneur whose initial opportunity is not suitable should not give
up. As is commonly acknowledged, giving up is not in the DNA of
entrepreneurs.
• Using the information from the feasibility study could help the social
entrepreneur to explore new ideas if the current one is not feasible.

Stakeholder Analysis in the Feasibility Study of Social
Ventures
• An important aspect of feasibility studies that social entrepreneurship
scholars have often overlooked is the analysis of potential stakeholders
who may be interested in the mission of the social venture.
• A stakeholder is defined as any group or individual who can affect or is

affected by the achievement of the organization’s objectives.
• Social entrepreneurs must ask questions such as:

– Who might be interested in the mission of the social venture?
– How might such parties be attracted to the venture?
– What benefits can these parties bring to the venture?
– What are the stakeholders’ expectations?
– Would the venture make a social impact to satisfy the expectations of
these stakeholders?
Stakeholder Analysis in the Feasibility Study of Social
Ventures
• When analyzing a social venture’s stakeholders, the social entrepreneur
should differentiate between primary and secondary stakeholders.
• He or she must also understand what Mitchell and colleagues refer to as

the “identification” and “salience” of stakeholders.
• The “identification” entails the social entrepreneur establishing who the

stakeholders are
• Whereas the “salience” refers to the extent to which these identified

stakeholders will play a critical role in the venture’s success or survival.
• Understanding both identification and salience will help improve

stakeholder relationships.
Thank You for Your
Attention


Feasibility Analysis For Social Ventures: Beugré C

Uploaded by

Copyright:

Available Formats

Feasibility Analysis For Social Ventures: Beugré C

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Feasibility Analysis For Social Ventures: Beugré C

Uploaded by

Copyright:

Available Formats

Chapter 7

Copyright ©2017 Routledge, Taylor & Francis Group.

1. Explain the nature of feasibility analysis.

2. Explain the importance of feasibility analysis in social

3. Describe the tools of feasibility analysis in social

Copyright ©2017 Routledge, Taylor & Francis Group.

• Feasibility refers to an opportunity’s perceived practicability or difficulty.

• It determines whether a business is worth pursuing or not.

• A feasibility analysis is a pre-startup strategic planning tool, utilized in the

• Feasibility analysis allows for an informed go/no-go decision on a proposed

Copyright ©2017 Routledge, Taylor & Francis Group.

• The questions to ask in a feasibility analysis might include the following:

• The answers to such questions will provide the necessary information to

• As such, a feasibility study could be used by social entrepreneurs to

Copyright ©2017 Routledge, Taylor & Francis Group.

• Although there is no universal set of criteria for every feasibility analysis,

– Industry/target market feasibility;

– Organizational feasibility; and

Copyright ©2017 Routledge, Taylor & Francis Group.

Copyright ©2012 Pearson Education 7-6

Copyright ©2017 Routledge, Taylor & Francis Group.

• Product or service feasibility analysis refers to an assessment of the overall

• Before rushing to a new product or service into development, you should

• In evaluating the feasibility of the product, the entrepreneur should

Copyright ©2017 Routledge, Taylor & Francis Group.

The components of product/service

Copyright ©2017 Routledge, Taylor & Francis Group.

• Desirability means that the product or service serves a particular need or

• For social entrepreneurship, it is important to know whether the product or

• Ask yourself if the social need is truly important and pervasive so as to

Copyright ©2017 Routledge, Taylor & Francis Group.

• The best way for an entrepreneur to discover whether a product or service

Copyright ©2017 Routledge, Taylor & Francis Group.

• The product’s desirability is generally followed by a Product/Service

• The entrepreneur must determine whether there is significant demand for

• To collect primary data, the entrepreneur can use a buying-intentions

• The purpose of a buying-intentions survey is to determine whether

Copyright ©2017 Routledge, Taylor & Francis Group.

• Industry/Target Market Feasibility is an assessment of the overall appeal of

• An industry is a group of firms producing a similar product or service.

• A firm’s target market is the limited portion of the market/customers it

Copyright ©2017 Routledge, Taylor & Francis Group.

The components of industry/target market

The first component focuses on the industry analysis,

Copyright ©2017 Routledge, Taylor & Francis Group.

• Industry attractiveness is the degree to which environmental (remember the

• In general, attractive industries have the following characteristics:

Copyright ©2017 Routledge, Taylor & Francis Group.

• It is better for a new venture to enter an industry that is attractive rather

• In social entrepreneurship, gaining an understanding of the social

Copyright ©2017 Routledge, Taylor & Francis Group.

• A target market is generally attractive when it is sufficiently large at

• The challenge in identifying an attractive target market is to find a market

• Does it have enough resources in addition to financial resources?

Copyright ©2017 Routledge, Taylor & Francis Group.

The components of organizational

Management Prowess Resource Sufficiency

The first component is about management expertise

Copyright ©2017 Routledge, Taylor & Francis Group.