TECHNICAL FEASIBILITY Facility needs. Estimate the size and type of production facilities. Investigate the need for related buildings, equipment, rolling-stock, etc. Suitability of production technology Investigate and compare technology providers. Determine reliability and competitiveness of technology (proven or unproven, state-of-the-art, etc.). Identify limitations or constraints of the technology. Availability and suitability of site Investigate access to: raw materials transportation labor production inputs (electricity, natural gas, water, etc.) Investigate potential emissions problems. Analyze other environmental impacts. Identify regulatory requirements. Explore economic development incentives. Raw materials Estimate the amount of raw materials needed. Investigate the current and future availability and access to raw materials. Assess the quality and cost of raw materials. Other inputs Investigate the availability of labor including wage rates, skill level, etc. Assess the potential to access and attract qualified management personnel. FINANCIAL/ECONOMIC FEASIBILITY Estimate the total capital requirements Assess the “seed capital” needs of the business project during the investigation process and start-up, and how these needs will be met. Estimate capital requirements for facilities, equipment and inventories. Estimate working capital needs. Estimate start-up capital needs until revenues are realized at full capacity. Estimate contingency capital needs due to construction delays, technology malfunction, market access delays, etc. Estimate other capital needs. Estimate equity and credit needs Estimate equity needs. Identify alternative equity sources and capital availability - family, producers, local investors, angle investors, venture capitalists, etc. Estimate credit needs. Identify and assess alternative credit sources - banks, government (i.e. direct loans or loan guarantees), grants and local and state economic development incentives. Budget expected costs and returns of various alternatives Estimate the expected revenue, costs, profit margin and expected net profit. Estimate the sales or usage needed to break-even. Estimate the returns under various production, price and sales levels. This may involve identifying “best case”, “typical”, and “worst case” scenarios or more sophisticated analysis like a Monte Carlo simulation. Assess the reliability of the underlying assumptions of the analysis (prices, production, efficiencies, market access, market penetration, etc.) Benchmark against industry averages and/or competitors (cost, margin, profits, ROI, etc.). Identify limitations or constraints of the economic analysis. Calculate expected cash flows during the start-up period and when the business reaches capacity. Prepare pro forma income statement, balance sheet, and other statements of when the business is fully operating.
Posted on: Mon, 10 Mar 2014 13:13:27 +0000
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