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Feasibility Analysis For Social Enterprise

Social Enterprise Timeline

2-4 months 3-6 months 3-9 months Implementation Feasibility Business Plan Conduct feasibility analysis of 1-3 business ventures Pick one social enterprise and write Go / No go decision a detailed business plan and implementation plan Begin implementation by hiring staff, developing marketing materials, and commencing operations Go / No go decision © 2005 Virtue Ventures LLC. Licensed under a Creative Commons Attribution-Share Alike 3.0 License 2

What is Feasibility Analysis?

Feasibility analysis is assessment of the market opportunity, profitability, and fit with organization for a potential business venture.

Tests these kinds of questions…

 In-depth screening to determine viability of business concept:  Matches objectives, criteria, values, culture, image?

       How easy is it to implement?

Feasible with given HR capacity (or can be obtained at reasonable cost)? Feasible with given financial resources (or has access to required resources)? Compatible with risk profile?

Existence of sufficient market size and demand to support business objectives?

Meets revenue requirements?

Opportunity for growth and expansion?

Feasibility Purpose

Feasibility analysis informs a Go / No Go on a venture opportunity using market research and internal assessments.

Feasibility Analysis Process

             Process is dynamic and iterative rather than linear: Define Social Enterprise Team Define and redefine business idea / concept Set Goals for Market Research Define Your Customers Define Your Market Define Your Competition Define Business Model (Operations Structure) Assess social impact Conduct Viability/Profitability Assess Organizational Capacity Assess Risks Assess Opportunities © 2005 Virtue Ventures LLC. Licensed under a Creative Commons Attribution-Share Alike 3.0 License 6

Market Research (1)

 The goal of market research is to clarify potential business opportunities and to validate or disprove initial assumptions regarding potential business opportunities.

 Market research is quantitative and qualitative information about the internal and/or external environment of a potential enterprise.

Market Research (2)

 Quantitative information includes statistical data, financial statements, industry projections, etc.

 Qualitative information includes interviews, anecdotal evidence, etc.

 The external environment includes market size, competitors, target customers, etc.

 The internal environment includes organizational capacity, staff buy-in, risk assessments, etc.

Defining Research Needs

 Market research can become an endless process.. The Social Enterprise Team will need to prioritize which areas and questions it will focus on during the feasibility analysis.

 The team must also decide on the best type of research method to use:  Primary (first hand) information – in person interviews, secret shopping  Secondary – printed materials, internet, reports, statistics, data.

The Social Enterprise Team

Before a NGO selects a business it should develop a team of people conduct market research & feasibility analyses of best opportunities, including:  A Team Leader (project champion/senior manager) .

 2-3 staff members (or volunteers) to conduct research.

People with functional skills:  Financial  Marketing  Program/social impact And:  Committed board members  Industry experts or consultants © 2005 Virtue Ventures LLC. Licensed under a Creative Commons Attribution-Share Alike 3.0 License

Define Idea/Concept

 Develop a brief description of the business idea to clarify the concept  Be aware that opportunities can change during the feasibility process.  Continually re-evaluate your opportunities using the market information you gather © 2005 Virtue Ventures LLC. Licensed under a Creative Commons Attribution-Share Alike 3.0 License 11

Current Knowledge Assessment

  Assess how much you already know about your business idea before starting assessment.

  Answer as many questions in as much detail as possible in the feasibility study OR Fill out “Quick Market Test” tool and score Identify the information gaps  Be specific about where you need additional information and where you have NO information.

Set Goals for Market Research

 The Social Enterprise Team will need to define and prioritize the research needs for each venture.

 List the 3-6 most important questions to research as you assess the feasibility of your chosen opportunity. Include any “deal-breakers” for the organization.

 Be specific about market research (primary or secondary) you chose, some information is more important for the type of venture than others.

Define Your Customers

    Obtain detailed information on your target customer(s).

Remember that you can have several customer levels: Final Customer (user) Influencers   Purchaser Decision-maker  Be specific about every customer segment and develop a separate profile for each.

Understand Your Market

 Obtain detailed information on the specific market you will target.

 Learn about the dynamics of the industry that you plan to work in.

 Tailor your market research to the level of your business opportunity and budget.

Define Your Competition

 Obtain detailed information on top competitors.

 Know your competitors’ strengths & weaknesses in relation to your own.

 What is their market position compared to yours?

Define Business Model

 Obtain detailed information on how businesses and the industry are structured.

 Business models are often similar across markets. Calling a business in another area can help you learn about this aspect of a business.

 Include special design considerations to accommodate needs of clients, to achieve higher social impact or social objectives.

Assess Social Impact

 Evaluate whether the enterprise meets the organization’s social objectives, social purpose and criteria.

 Assess how the social enterprise will help to accomplish the organization’s mission  Determine social impact created by the enterprise  Assess whether social enterprise design maximizes opportunities to create social impact  Identify how social impact will be quantified and measured; and how the organization will be accountable for results.

Assess Organizational Capacity

 Determine the skills and expertise needed for the enterprise  Assess the physical requirements (space and equipment)  Be realistic about your organization when evaluating a business opportunity.

Estimate Viability/Profitability

  Estimate ventures income potential by projecting revenues and expenses. Clarify assumptions used to develop your financial projections.

  Develop worst-case, best-case, and expected-case scenarios can help inform future decision-making processes. Break-even analysis © 2005 Virtue Ventures LLC. Licensed under a Creative Commons Attribution-Share Alike 3.0 License 20

Assess Risks

 Determine the potential organizational risks of enterprise —i.e. reputation, financial loss, weaken or comprise mission  Determine the potential risks of type of business —i.e. business cycle or barriers  Develop simple contingency plan to address risks  Interview key stakeholders to determine the risks specific to the venture opportunity.

Step 10: Assess Opportunities

Opportunity 1 Opportunity 2 Market size Market growth Market profitability Favorable competitive factors Ease of entry (based on investment required) Fit with org. skills/expertise Fit with org.’s equipment/ facilities Fit with org.’s other assets Ease of implementation Likely competitive advantage Overall attractiveness to organization

Opportunity 3 Rank each category:

•

High

•

Medium

•

Low

Develop a Work Plan

The work plan is for the Venture Team to track their progress and to hold individuals accountable throughout the feasibility research process.

• • • • •

Things to Include in the Work Plan Goal of the Research

– What is the purpose of the feasibility research process?

Research Questions

– What feasibility questions are you looking to answer through the research process?

Research Methodology

– What primary and secondary sources will you research to to get answers to the research questions?

Research Responsibility

– Who will be responsible for each research assignment?

Research Deadlines

Sample Work Plan Catering Business

Goal

: To determine if a catering business represents a sustainable venture for the organization.

Research Question 1:

How do customers choose their caterer?

Research Question 2:

How big is the local catering market?